Many different things could be keeping you up at night. Perhaps an important business meeting in the morning or your partner decided to pick a scary movie for date night. Now, there is another horror that South Africans have to face when they rest their heads on their pillows – inflation has become a nightmare for South Africans.
Inflation refers to the general increase in the price of daily goods and services for the average citizen of a country. South Africans are currently facing a significant decrease in purchasing power in their money. A hundred rand does not go as far as it used to, and it can buy you even less than it could just a few months ago.
There is a multitude of reasons that have caused a rapid rise in inflation and a weakening of South Africans’ hard-earned money. The primary reasons for the increase in inflation are often attributed to the pandemic, oil prices, the Russian-Ukrainian conflict, poor resource management and South Africa’s government’s failure to fully re-establish the pre-pandemic economy thus far.
Unfortunately, inflation can be impacted by various macroeconomic realities, but it will affect the prices and accessibility of all goods and services for all South Africans. From the food you eat, to the petrol in your tank, and your kid’s school fees, to the cost of the latest iPhone, everything is impacted when consumers’ purchasing power is weakened by inflation.
As with any challenge, there are preventative measures that you can implement to try and escape this nightmare, without having to give up on your dreams of financial security. Here are five steps you can implement in your daily life to combat the scourge of inflation:
Know Your Budget and Stick to It
Unless you have just been promoted, received a raise, or got a new high-paying job, you will probably feel like you are struggling to get through the month more often than before. Even if you are one of the lucky few earning more, you might not be doing as well as you had hoped. The first step in combating the terror of inflation is knowing precisely what you are spending.
Creating and sticking to a budget is critical for maintaining financial security during inflation and economic downturns. A budget should not just include what you are planning to spend but what you are planning to save, invest and not spend. It might be worth downloading an app or hiring a professional financial planner to make this process easier, especially during high inflation periods.
Reduce Any Unnecessary Spending
As mentioned, budgeting your money is not just about what you spend but what you do not spend. On top of saving and investing portions of your monthly income, you should focus on reducing unnecessary expenditures. Even if you are only cutting down on pointless spending during challenging economic periods, that is an essential step for maintaining your lifestyle in the future.
Identifying opportunities for saving money and capitalising on them will go a long way in maintaining your financial well-being – despite rising inflation rates. Saving money extends to finding cost-effective alternatives or spending less frequently on certain items. However, it is essential to remember that if you have a favourite sandwich place, you should still visit it every now and then!
No Debt Is Good Debt
Inflation harms many of your personal, professional and lifestyle endeavours, as well as your investments in your future. Eventually, interest rates will increase, and you will earn less on your investments while you will owe more interest on all your payments. During periods of inflation, try to reduce your use of credit cards, personal loans, store cards and overdrafts.
Consider Additional “Gigs”
One can take many steps to reduce expenditures, but earning extra income is difficult if you currently have permanent employment. You might get a slight raise in the next financial year or a Christmas bonus. However, this will only make it so much further. Consider adding additional gigs, side hustles or freelance work that capitalise on personal skills, ventures and hobbies to increase your disposable income.
Make Smart Investments for the Future
This one may seem obvious, but it is easier said than done. It is much easier to spend money than to save it and knowing how to use that money well can be equally tricky. If you can collect additional income – and are living without debt – then you should build up an emergency fund and start making well-informed and smart investments for your future.
Universal Insurance Administrators are at the forefront of South Africa’s insurance and financial risk industry. We provide a diverse range of policies and plans to help ensure that all South Africans and their businesses are covered during difficult financial times. Contact us for more information about the incredible products and services we offer at Universal Insurance Administrators today.
