With all the interest rate increases over the past year, money in your pocket has become scarcer than hens’s teeth.
While many South Africans wonder when the next increase will come into effect, the reality is higher rates do reduce your disposable income because you pay more on borrowed money or servicing your debts.
This has a knock-on effect on the household budget because you have set income that perhaps changes once a year, regardless of rates fluctuations.
One usually has to make certain changes or even sacrifices to stretch those rands, so let’s consider a few ways to help make your money go further.
Draw up a budget
If you are not already using a budget, now’s a good time to start. You cannot spend or save without a plan. A budget is a type of financial plan that you can use to guide your monthly spending, so it’s important to have one and stick to it.
Add up all your household income. Then list all your expenses, and deduct them from your income. This will show you how much money you have left after all your financial obligations have been met.
If you have a surplus then you are doing well and have extra money to spend on entertainment or luxuries. The best thing you could do though is to put some of it aside and save.
If your budget shows a shortfall though, it means that you either need to earn extra income or you need to revaluate your spending patterns. Set an example and encourage your family to participate. If you have children, it will teach them sensible spending habits from a young age and help establish a sense of financial independence.
Pay debts first
Debts such as home loans, vehicle finance, personal loans and store accounts, should be paid off first. The more you repay and the quicker you can settle the debt, the less interest you will have to pay. This will save lots of money.
You could also consider taking out a personal loan to consolidate all your smaller debts. Whatever your decision, try to keep a clean credit record because it will effect on your future credit applications.
If you are considering a loan of any sort, ask yourself whether you really need it because it will cost you.
If you decide that you cannot do without it, first check that you can afford the repayments and that you have extra cash to cover any further rate increases.
Finally, consult a reputable authorised financial services and credit provider whom you can trust.
The bottomline is: you have to make smarter financial decisions and spend wisely. In time, interest rates may climb again or they may even be reduced as consumers in general ease their spending behaviour.
Either way, make sure that you are prepared.
Yolande van Rensburg is head of communication and public relations at Capitec Bank