South Africa is in the midst of an economic downturn and 2020 is expected to be another challenging year.
Taxes and inflation are on the rise and disposable income is increasingly hard to find.
Here are eight money-saving hacks to help you get through the year.
1. Work out a monthly budget
The easiest way to manage your finances is to spend and save according to a carefully calculated monthly budget.
Do this by working out your average monthly expenses and income.
2. Calculate what you spend using six months of figures
Get the most accurate figures by adding up everything you’ve spent in the past six months and dividing the figure by six.
Determine your income by adding your regular salary for six months plus any other income sources, such as interest from investments, dividends, cash gifts and child support.
Once you know your expenses and your income, cut your expenses until your budget is in the black.
3. Try the 50-30-20 budget rule
The 50-30-20 budget assigns a fixed percentage of after-tax income to three categories – needs, wants and savings.
By dividing your income into three groups, you should be able to cover essential expenses, enjoy a few luxury items and save.
The budget allocates 50% to essential expenses, such as utilities, food, medical-aid contributions, school fees, insurance premiums and bond repayments.
Of the remaining income, 30% is set aside for non-essential but nice-to-have items like entertainment, gym memberships, DSTV and streaming subscriptions.
The last 20% is earmarked for savings, investments and debt-reduction payments.
4. Consider a cash-only diet
Credit cards are convenient but they can be expensive.
If you’re unable to pay off the full amount at the end of the month, you start paying compound interest. This means you pay interest on interest.
Avoid using your card by drawing a budgeted amount of cash each week to cover all of your spending.
5. Exploit loyalty and rewards programmes
Almost all large retailers and most banks, medical-aid schemes and insurance companies offer rewards programmes.
Some allow you to earn points on purchases, which can then be redeemed.
Others offer cash back on fuel, free movie tickets or gym memberships, and access to discounted goods and services.
According to a Sunday Times survey, the Pick n Pay Smart Shopper, Clicks Clubcard and FNB’s eBucks Rewards are rated the best among the top 10 rewards programmes in South Africa.
6. Get a handle on grudge purchases
Grudge purchases can eat through the bulk of your monthly budget.
We may not like paying for security or to insure our lives, homes, household contents and cars, but we need to.
Although grudge purchases are essential, it doesn’t mean we shouldn’t look for ways to cut costs.
Evaluate monthly contributions
When it comes to insurance and medical aid, start the year by re-evaluating your needs.
Assess whether your monthly premiums and contributions match the benefits.
Consider downgrading the cover, rather than surrendering it.
Consolidate your insurance
Cut costs by using a single provider for all your short-term insurance needs.
You can negotiate a lower premium when you cover your car, home and contents with one insurer.
Request comparative quotes
Shop around for the best possible deal, whether it’s for armed response, short- or long-term insurance or medical aid.
Times are tough for businesses too. It’s the ideal time to find the best value for money.
7. Be a smart investor
Saving means different things to different people. It can mean dropping coins into a piggy bank or setting up a money-market fund.
Whatever your savings strategy, there are wise ways to help you accumulate wealth.
Capitalise on tax breaks
Maximise savings by making full use of the tax breaks available on pension funds, provident funds, retirement annuities and tax-free savings accounts.
In some cases, contributions are tax deductible. In all cases, capital gains are not taxed.
Use a direct debit to save
Auto-saving is the easiest way to grow your wealth.
All it takes is setting up one or more debit orders on your current account.
Funds are then automatically transferred into a savings account, unit-trust fund, money-market account and/or exchange traded fund.
Before you know it, there’s a lump sum you can either spend or allow to grow.
8. Consider unexpected expenses
Sometimes, however well you’ve budgeted, you need funds for an unexpected expense.
When this happens, a short-term loan may help tide you over.
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