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How to create breathing room in your budget to combat relentless price increases

28 July 2022 Standard Bank

With relentless fuel price increases, interest rate hikes and a surge in the price of basic food goods due to the challenging economic climate, coupled with low salary growth, many South Africans are experiencing significant financial pressure and are struggling to make ends meet.

Yet another fuel price increase came into effect at the beginning of July, with motorists now paying R26.74/litre(ULP 95 inland), the highest petrol price the country has ever experienced. Additionally, electricity tariffs have increased by almost 10% across major metros.

Fayelizabeth Foster, Head of Loyalty and Rewards at Standard Bank, says that times are certainly tough, and consumers might want to put some thought into simple ways that could help to create breathing room in their budget to combat relentless price increases.

Maximise your loyalty points
South Africans are well versed with loyalty programmes, both in the formal and informal markets. The 2021 Truth & BrandMapp Loyalty Whitepaper shows that 74% of South Africans, who are economically active, are using loyalty programmes. From banks to medical aid providers, retailers and gyms, loyalty programmes are offered almost everywhere consumers are spending their money.

In the past, rewards points were seen as they were named – a way to reward yourself with a luxury purchase. However, because of the tough economic climate, consumers are now redirecting points accumulated or savings accrued, to help offset the rising cost of necessities or fuel. When times are tough, people are on the hunt for value, which loyalty programmes provide.

Standard Bank’s UCount Rewards programme, which enables members to redeem their Rewards Points into Savings and Investment accounts, has seen a 21% increase in customers redeeming their Rewards Points into these accounts in the past two years. UCount Rewards members can also redeem their Rewards Points towards fuel and oil at Caltex and Astron Energy to ease the stress on their pockets.

Be energy efficient at home
Despite persistent load shedding, the rise in electricity tariffs will result in an even bigger drain on your finances. So, you can look at ways of reducing your electricity and gas usage by being more efficient.

Are your outside lights burning brightly during the day, or are your household members having long, hot showers or baths in winter? Most electric geyser thermostats are set to temperatures that are higher than necessary. Of course, the higher the temperature, the more electricity is required. You can turn your thermostat down to 60°C to help save electricity.

By taking a few practical steps to reduce your everyday energy usage in the home, you can put back an extra few hundred rand in your pocket each quarter.

Cut back on luxuries and kick bad habits
While that daily takeaway coffee may not seem like it’s hitting your wallet too hard, think again. Small purchases, made consistently, add up. Think about it: The average cost of a cappuccino sits at around R25, and if you’re in the habit of buying a takeout coffee daily during the week, it adds up to around R700 per month and R8 400 per year. By opting to be your own barista, and by taking advantage of specials on instant or ground coffee at retailers, you could make those cups of coffee at home for around R1 000 per year.

Regular take-outs can also quickly increase your monthly food bill. An average meal for one person could cost close to R150 for the meal, delivery fee and driver's tip, whereas you could easily prepare a meal at home for four people for the same amount. If you get takeaways once a week, let’s say on a Friday, you are forking out over R600 per month and R7 200 per year.

Meanwhile, smokers or vapers may be shocked at just how much their habit set them back this year. The so-called “sin industries” were targeted in the country’s budget announced in February this year with a packet of cigarettes costing an additional R1.03. Simply making the calculation might just motivate some people to kick the habit in 2022. The R40 a day for a box of cigarettes has always been built into your budget, so put it into a savings account going forward. You will end up saving between R13 000 and R16 000 per year.

Of course, it is important to reward yourself and to be entertained. But there are ways to entertain yourself and your family. For example, cook a meal at home and watch a movie via one of the streaming services. But take stock of the streaming services you are subscribed to. Fortunately, the packages are structured in such a way that you can opt out at any time.

By cutting down in some of these areas, you can save between R15 000 and R30 000 annually. That saving could cover petrol costs or school fees for the year, a well-deserved holiday, or six months’ worth of groceries.

Limit time on the road
Car ownership has never been more expensive. But many South Africans rely on vehicles to travel to their workplaces and schools. If you own your own car, there are some ways of limiting the amount it costs to fill up your tank.

Ever since the arrival of COVID-19, employers have become more flexible with regards to when you’re in the office and when you’re not. If you’re able to work from home, you could potentially save a stack of money in transport costs. If you reduce your travel costs in a month by half, you can potentially save R800 to R2 000 per month. This equates to around R9 600 to R24 000 per year.

Forego the latest device upgrade
Many people opt for a cell phone contract, where you are charged monthly for the device plus a data or airtime package, typically over a period of two years. Many of us have become used to upgrading our devices every two years even if the phone you have been using is still in good condition.

Should you decide not to renew your contract and keep your “old” device for another year or two post the contract expiry, you could be saving up to R1 000 per month or R12 000 per year. There will still be costs involved for airtime and data, but you can manage your data wisely and switch to Wi-Fi where possible to decrease the amount that you’re spending on data.

Launch a side hustle
The new digital environment has made it easier to start up a business and to reach customers. If you do have a side hustle, decide how you are going to utilise your money from your side hustle: are you going to use the funds to build the business up, supplement your income or reduce debts? A side hustle could eventually be turned into a main hustle, one that employs people and contributes to growing the economy.

Think carefully before taking on debt
While many people can’t avoid lending, try to avoid unnecessary lending, considering interest rates are on the rise. Indeed, there are times when consumers need to take on credit, but they can do it in such a way (minimising the cost of servicing the debt) that doesn’t add to an existing financial burden.

For example, many credit cards offer 32 days interest free. If you pay the money lent via the credit card back in that time, there’s no interest charged on that money. If possible, pay in more to your home or car loan. You will be amazed at how even a small payment can shorten the lifespan of those loans.

It is also critical to rather take out loans from reputable organisations. Beware of lenders that will lend money without conducting credit checks and regardless of any financial problems that you may be experiencing. If you are struggling to meet your debt obligations, speak to a debt counsellor.

Applying these simple changes could create additional cash flow in your monthly budget and help you to withstand the price increases and even help you potentially save money that could be used to invest or pay for that long-awaited holiday.

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