How to free up cash to survive rising prices
From food to data and bank charges: Small tweaks result in huge saving
For many Sowetan Money readers food, next to transport, is now one of the biggest items in their budget over which you have some measure of control, but indications are you may have to rein in this spend more as your budget will stay under pressure.
Economic data forecaster Trading Economics estimates that food inflation in South Africa will trend around 4.3% for the year ahead and be at about 4% at the end of the year.
The good news is that if food prices increase by around 4% in the year ahead, the increases won’t exceed the general inflation rate which is expected to increase from 4.2% to around 4.6% this year if the country’s investment status is downgraded by Moody's, according to economists at Momentum Investments.
They also expect economic growth to remain weak, which does not bode well for inflation-beating increases and alternative streams of income which could ease the pressure on your budget. If you aren’t able to increase your income, the only other option is to tighten your belt.
It is estimated that debt-laden South Africans spend approximately 65% of their monthly net income on debt repayments – leaving very little for necessities like food, electricity, transport and other essentials.
In fact, many people unwisely take on debt to pay for food and transport, says Sebastien Alexanderson, CEO of National Debt Advisors. Using debt to pay for your lifestyle will only lead you deeper into debt.
People are now buying bread and milk on their budget account and that is very disturbing.Sebastien Alexanderson, CEO of National Debt Advisors
Alexanderson says statistics from the National Credit Regulator show that unsecured loans and credit cards – the most expensive forms of debt - are the fastest growing types of debt. “Our own analysis shows that the number of people using these high-interest products to buy food is on the increase.”
“People are now buying bread and milk on their budget account and that is very disturbing,” he says.
Without increases in your income, “it is imperative that consumers look at other ways of saving, to free up money for essentials”, says Alexanderson.
So what can you do?
Ann Wilson, best-selling author and founder of The Wealth Chef, says food and groceries is one of the easiest spend categories that you can really get a grip on and save loads of money that you can direct elsewhere, for example towards blitzing your debt, and saving and investing.
You can save a lot of time and money and cut out food wastage, if you invest just a little time in meal planning, Wilson says.
“Most of us already eat a certain set of meals over and over again. So, if you consciously choose to plan your meal preparation and shopping, you’ll end up saving both time and money,” she says.
Once you’ve got your meal plan done, make a shopping list – and stick to it, she says.
“Planning your shopping, preparing a shopping list and sticking to it has been proven to have the biggest impact on reducing emotional spending and impulse buying. A huge amount of food waste happens because of ad hoc buying and throwing things in the trolley just because. Not only is it devastating for your wallet, it’s also devastating for our planet,” says Wilson.
You can similarly plan school and work lunches, and cut down on fizzy drinks and juices, which could also positively impact your health, Alexanderson says.
Another saving you can make is buying generic and store-branded products, from food to pharmaceuticals, and you will barely notice the difference, he adds.
If you go shopping without a list and with your tummy growling, you’re likely to spend over 50% more than you would’ve if you’d had a list and a little snack beforehand.Founder of The Wealth Chef Ann Wilson
Both Wilson and Alexanderson agree you should never shop on an empty stomach.
“If you go shopping without a list and with your tummy growling, you’re likely to spend over 50% more and buy more stuff that you’re going to waste, than you would’ve if you’d had a list and a little snack beforehand,” says Wilson.
Another huge benefit of meal planning is you can cook in bulk and freeze meals in measured portions to save time, money and food wastage.
Doret Jooste, CEO of Money Management in FNB Retail, says by making a few small changes in financial or spending behaviour can free up a significant amount of cash every month.
Lowering your electricity consumption – by switching off your geyser and using energy saving lightbulbs - will always save you money, Alexanderson says.
Jooste says data and airtime is a big spending item for most people and managing your data/airtime spend can free up some extra cash. “Most telco providers offer special deals now and then and it’s important to take full advantage of these if you can generate some savings.”
He and Jooste both suggest saving money on bank charges by using your own bank’s ATM and digital channels.
Jooste also suggests that if you have debt you attempt to consolidate it in a single loan with a lower interest rate. Just be sure you do not extend shorter term loans in the process.
“These small tweaks to financial behaviour can result in significant changes over the long-term,” she says.