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Another interest rate increase of 50 basis points has pretty much knocked the wind out of consumers and many people are wondering how they can lower their living costs so that they don’t have to go into debt, just to be able to afford basic means of living.
In particular, consumers who took advantage of the low interest rates two years ago to buy houses and cars are now suffering after the repo rate has started to rise since November 2021 to cope with inflation.
Before the latest increase, a third of consumers were already struggling to pay their debts on time and they used most of their salaries to pay debts. Consumers are also feeling the pinch with fuel and food prices soaring, and electricity prices rising even during incessant power outages.
“South Africans now all have to cut their belts thin to cope with rising living costs,” says Peter Olyott, CEO of Indwe Risk Services, a financial services provider. “People want to find more creative ways to reduce their expenses beyond sticking to monthly budgets, saving for goals, managing expenses and finding an extra income.”
The difference between needs and wants
According to Olyott, in challenging financial times people are forced to adapt and prioritize where and on what they spend their money. “In terms of expenses, there are some that are unavoidable, but there are ways to reduce these monthly costs. The first step to creating a successful budget and starting the challenging task of deciding your needs versus your wants.”
A desire is an expense that is not necessary for survival and without which you can live comfortably, while a need is essential for your daily life and work. This includes housing, rent or mortgage, transport, utilities, food and data.
“It is also just as important to make room for savings. We encourage consumers to ask an adviser or financial planner for advice, especially when you want to save on your insurance. With motivation on your part and guidance from an expert, you can make small changes that result in significant savings that will enable you to live a little more comfortably and within your means.”
Olyott says there are at least six effective ways to reduce or optimize spending and help ease your financial burden by focusing on transport, groceries, electricity and living space, reducing luxuries and reviewing your medical aid and insurance.
Save on transport
As fuel prices rise, transportation costs can add up quickly. Olyott says consumers should limit the miles they drive by driving with family, friends or colleagues. However, it is important to also let your insurer know if you operate a carpooling club. If you don’t drive much, consider insurance where the premiums decrease if you drive less.
“Have your vehicle serviced regularly and check your tire pressure to ensure it continues to operate efficiently. Improve your driving habits to avoid hard acceleration and braking, which increases fuel consumption. Also only drive once to do all your tasks so you save petrol and time and do your monthly shopping at larger grocery stores more often.”
Save on groceries
Olyott says it’s a good idea to draw up a weekly menu and a monthly shopping list that will help you avoid impulsive copies. “Look out for special offers and loyalty savings, as well as special offers on non-perishable items. Plan your meals around supermarkets’ special offers, but also make sure you use the items you already have.”
It will also save you money if you rethink your choice of protein, as these are often the most expensive items on your list. Also use staple ingredients to make multiple meals.
Save on electricity
“Theoretically, we should see savings during load shedding, especially when we are without power for up to three to four times a day,” says Olyott. He advises consumers to use energy-efficient light bulbs and replace old appliances with energy-efficient models where possible.
You can also buy approved surge protectors to use for your most expensive electronic devices. This can be an expensive initial outlay, but it can save you thousands of rands.
“Seal windows and doors to prevent heat loss in the winter and loss of cool air in the summer. Cultivate better habits such as turning off unnecessary lights, putting a lid on a pot of boiling water and turning off non-essential items that you don’t use.”
Switching to solar power for lights and heating can be an expensive investment, but it will lower your monthly electricity bill in the long run and keep the lights on during load shedding. Also consider switching to gas for cooking.
Save on your living space
Your rent or home loan, as well as rates, utilities and maintenance, often make up a significant part of your monthly expenses. Olyott says that if you really need to cut your expenses very badly, you can downsize to a smaller house or move to a more affordable neighborhood.
However, before you make the move, keep in mind moving costs, additional expenses such as taxes or new furniture, and potential extra travel time to work or school.
“Otherwise, you can consider renting out a room in your house if you have a big house or find a tenant for your garden apartment. This additional income can help you afford increased expenses, but remember to factor in all the tax implications.”
Cut those luxuries
Olyott says this one is possibly the hardest of all to accomplish psychologically. “Although you should reward yourself with treats now and then, if you’re serious about saving, limit your luxury purchases.
“Leave the daily takeaway coffee and rather make coffee at home or office. Take a lunch box to work instead of choosing a takeaway option and eat meals at home rather than visiting restaurants. Cancel subscriptions you no longer use and buy second-hand items instead of new.”
Your insurance and medical fund
“When looking for ways to cut monthly costs, people often turn to insurance and cancel their policies to ease their financial woes. However, life is uncertain and it is impossible to predict when a life-changing event will affect you and your family and expose you to potential financial disaster.”
