With January already behind us, 2016 is shaping up as a challenging year for most South Africans; now is the time to review your budget.
“This year could be testing for consumers as interest rate hikes and price increases on everyday goods are set to have a detrimental effect on your pocket,” says Eunice Sibiya, Head of Consumer Education at FNB.
There has never been a more pressing time to be financially prudent and to start employing sound financial tactics to get you through the year. The truth is if you want to survive this slump you will have no choice but to draw up a water-tight budget and stick to it.
“The only way to ensure that you get through the year with your finances intact is to decrease your expenses, pay off your debt, and curb unnecessary spending so that you don’t find yourself taking on more debt to survive,” continues Sibiya.
If you follow the below tips – you could surprise yourself and come out unscathed at the end of the year.
Steps and Tips below:
1. Revisit your budget
Your budget this year will change due to an increase in basic expenses. The knock-on effect of the drought is that food prices will increase significantly; as such your groceries will cost you more.
“If you have credit cards, a car, a home, and personal loans – all these will be affected by interest rate hikes and you need to be prepared,” suggests Eunice.
Build a buffer into your budget assuming that interest rates will go up, for instance by another 1%. See how much extra cash you will need to cover this increase as it will affect repayments such as your car, home loan, credit cards and personal loans.
When you think of it this way, it becomes more essential to spend on only the most important things because as the year continues and the rates rise, your debt will be harder and harder to cope with.
2. Manage your debt to free up cash
Servicing growing debt will be one of the best ways not to drown yourself in 2016.
“Eliminating your debt is one of the best ways to make sure you keep your head above water in 2016,” says Sibiya.
The only way to do this is to live within your means and to diligently pay off your debt.
“It will be tough, but it will only get tougher later on this year if your disposable income is used to service debt and raising prices,” warns Sibiya. “The quicker you can get debt under control, the better your budget will look.”
Try not to take on any unnecessary additional debt, as this will only serve to escalate the problem.
3. Minimise your expenses
Cut down on non-essential expenses, these are expenses that you don’t need to actually live your life. Review your cellphone and gym contracts, TV channels options, clothing accounts and entertainment expenses.
Try outdoor exercise, rummaging through second hand clothing shops or organising dinners with friends where everyone brings a dish.
“It may seem boring to cut out on expenses that you believe add value to your life but there are alternatives to everything and cutting down on unnecessary expenses doesn’t have to mean the end of having fun. Simply plan a different and cost-effective way of living your life,” says Sibiya.
4. Start saving for the festive season now
Holidays may seem a distant memory and the next festive season break too far away to even start worrying about. But, now is the time to start thinking about putting money away.
“The upside to possible interest rate increases is that the money you save and invest will work harder for you,” says Sibiya. “So now is the time to build savings into your budget. After all the discipline that you will have exercised this year, a well deserved break at the end of the year will be the perfect way to reward yourself.”
Being disciplined and sticking to your budget and plan may be viewed as difficult and painful – however it is necessary.
“Simply put, insignificant expenses like eating out and buying new clothes too often will only leave you worse off than when you started. So it may seem like a big sacrifice to live within your means – but in the end it is the one way to ensure that you remain financially sound this year,” concludes Sibiya.
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Article source: http://mype.co.za/new/your-2016-budgeting-guide/61385/2016/02