Finance Minister Enoch Godongwana’s national Budget, revealed last week, made it clear that while South Africa has a primary surplus (income vs expenses without debt costs taken into consideration), the truth is our country is buckling under massive debt costs.

South Africa’s debt-service costs – the money needed to repay debt as well as the interest on that debt – will average R366.8-billion a year over the next three years. In short, if South Africa were an individual, her financial planner would be saying something along the lines of “Whoa, you’ve got too much debt; you need to cut expenses and start living within your means”.

While the Finance Minister and National Treasury certainly have their work cut out for them in terms of managing the fiscus and getting debt under control, managing a personal budget can be much simpler.

Farzana Botha, segment solutions manager at Sanlam Savings, notes that the past three years have seen increasing pressure on consumers’ wallets, particularly since incomes have not increased in line with inflation. Last year alone, the rising cost of living, higher interest rates and the worst year of rolling blackouts served to keep a lid on salary increases while consumer inflation reached a 13-year high of 6.9%.

Salary decline

The South African Reserve Bank reported that growth in the nominal remuneration per worker in the private sector remained unchanged at 5.7% year-on-year, and the average wage settlement rate in collective bargaining agreements reached 6% in the first nine months of 2022, proving that nominal wage increases lagged on actual inflation trends during 2022. BankservAfrica’s data reflects a 6.9% year-on-year decline in the real average salary recorded in 2022.

Managing your budget means taking control of your spending by comparing your income (money you earn) with your expenses (money you spend). Botha says a good starting point is to go through your bank statements in detail. Most online banking applications allow you to look separately at the money that comes in and the money that is paid out. “Pay close attention to the money that is paid out, especially all the small and often unnecessary purchases – these can add up quickly!” she warns.

Changes to your spending patterns can include reallocating money usually spent on unnecessary items to meeting short-, medium- or even long-term financial goals.

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“The word ‘budget” often has negative connotations of limiting or depriving ourselves. Instead, reframe your mindset from this towards a ‘spending plan’ that includes small rewards. This mindset change can make you more likely to stick to the plan,” Botha says.

If you are in a family or relationship, you need to work together to agree on a family spending plan, discuss ways to share expenses and setting joint goals. Behavioural goals such as swiping your bank card only three times a week or using a cash-only system to control spending can help you achieve your goals quicker than you imagined possible.  The envelope #cashstuffing trend took TikTok by storm last year, racking up more than 820 million views.

Michael Emery, Ambledown Financial Services’ marketing executive, notes that however good your intentions are, some of the biggest blows to a monthly budget are unexpected and unavoidable expenses – such as car repairs or medical treatments. By paying a little extra each month in the form of insurance, you gain a safety net that will protect you from significant unexpected costs.

Medical scheme

“If you have a medical savings account with your medical scheme, it’s important to know what your limits are so that you can plan accordingly. Most medical schemes only allow for an upgrade once a year, but downgrades are typically available at any time.

“Before you downgrade to a plan with a lower monthly premium to save costs, make sure that you know what benefits you’ve got and what you’ll be trading in for the downgrade. Compare plans and be sure to check whether you’ll incur any penalties or waiting periods with a downgrade,” he says.

Tyrone Lowther, head of Budget Insurance, says once you have trimmed down your expenses, you can start channelling the extra money you have into paying off your debt faster, starting with the debt that carries the highest interest rates. This is called the snowball method. As you pay off one debt, take the money you were paying towards it and add it to your next biggest repayment.

As the cost-of-living crisis continues unabated, Lowther advises that you stockpile if possible. “You can save thousands every month by looking out for and taking advantage of discounts and specials. By buying more, at a lower price, you’ll be able to stretch your rand and shrink your monthly shopping bill,” he says. BM/DM