Budgeting is the best way to overcome financial stress of 2021

As we head into the new year, many South African consumers remain on the backfoot where the financial impact of the COVID-19 pandemic is concerned.

While there may be a glimmer of light at the end of the tunnel in the form of a trail vaccine, as well as a reopened economy, most people are still nervous about the possibility of further lockdown measures, as well as the effect curtailed economic activity has had on their income throughout 2020.

According to the findings of a recent poll by credit bureau TransUnion, South Africans are struggling to keep up with their financial obligations to the extent where the average monthly shortfall is R7000+ per household. To cover these expenses, many are taking radical steps by cashing out investments or using funds that have been earmarked for retirement.

However, these are just temporary stopgaps. The recession that is following in the wake of the extended lockdown period in South Africa has not yet reached its peak by a long shot, and the year to come is likely to be a tough one on most wage earners – not to mention the 30.1% of citizens who are unemployed.

This begs the question – what is the average household to do in order to keep things on an even keel as everything settles back down? The honest answer is that we all need to tighten our belts and focus on essentials for a while.

Here are a few things to consider when you look at your household budget for 2021:

What are my non-negotiable expenses? This includes things like your rent/bond repayments, electricity, municipal payments, school fees, data, and food. What are my expenses that can be trimmed down? Take a look at expenses like medical aid, retirement annuities, household- and car insurance to see if there is a way to restructure it (e.g. to move it all to one umbrella provider), or to lower it slightly (e.g. by bringing your annuity rate down for a while). What are expenses that I can avoid altogether for the time being? Life has to be lived, this is true, but when times are tough there are certain luxuries (even small ones) that need to be placed on the back burner. For instance, instead of buying fruit and veg from a major retailer, you can support a local vendor who may not have export grade produce, but sells it far more affordably. Or, instead of buying five new pieces of clothing for the season, you could rather find ways to reinvent clothes you already have, or add one new accessory to keep your look current.

In short, budgeting remains the best way to overcome the financial stress of 2020. If you feel that your finances are out of control, feel free to reach out to a member of the Libertine Consultants team for advice. We offer a variety of debt and credit services that have been tailored to ease consumer pressure.