South Africans are about to feel the effects, added stress and anxiety from the recent interest rate increase by the Reserve Bank.

When Reserve Bank governor Lesetja Kganyago raises the interest rate, banks also raise theirs and pass it on to your credit card account, overdraft facility, revolving loans, housing, car and any other type of loan you can think of.

This means you pay more on all the loans. Even consumer loans and retail accounts go up.

According to a statement from Standard Bank soon after the announcement, "the prime lending rate increases from 9.50% to 9.75%. This will have an effect on the disposable incomes of consumers, especially as the festive season approaches".

This drives up the cost of living and consumers' ability to repay credit. Although budgets have been under pressure, consumers tend to ignore individual increases in the cost of living, such as a R20 increase on a tank of petrol or 60 cents added to a pack of cigarettes.

However, the cumulative effect of these increases is significant. What many people are not aware of is that as the consumer cost of living goes up, so do the costs of suppliers. These costs are then passed on to consumers, thus making daily living costs more expensive.

The interest rate increase will also place additional pressure on the automotive sector and on the car-buying public.

If a consumer has vehicle finance that is on a prime-linked rate, for example, and is paying off R100000 on the car loan over an average term of 72 months, they will now pay an additional R12 a month. They will pay an additional R36 a month on an average loan amount of R300000 over the same term.

Motorists are encouraged to carefully consider the effect not just on the instalment, but everything when thinking of buying a new car, including running and servicing costs.

An estimation on a R600000 home loan would see the consumer paying about R98 more on average monthly, while those with a R1-million home loan would see their bond repayments rise by R164.

In order to better absorb the rising cost of living, it is recommended that consumers examine their budgets and try to cut out any inefficiencies. A good start would be to try and pay off the most expensive debt first, such as retail accounts and cancellingnonessential services.

The reality is that now is the time for consumers to tighten their belts. The ideal situation would be for consumers to have manageable debt with significant savings in the bank, as then an increased interest rate would be good news.

This is a good time for consumers to reflect on their finances and make a commitment to get on a path to financial stability. So fasten your financial seat belt, pay off debt, stick to your budget and save money.

Thedream@winniekunene.co.za