Increased cost of living is causing families to panic, write Maya Fisher-French and Neesa Moodley-Isaacs
I recently undertook an exercise to see how much my monthly bills had gone up over the past few years and was shocked to discover our household was spending nearly double on groceries than just four years ago.
At first I was in denial. I thought I had simply lost control of our food budget and was clearly spending too much on luxuries.
So I spent a month being frugal – looking out for specials, avoiding Woolworths’ expensive fruit and vegetables, and finding creative ways to cook for less.
After a month of careful budgeting, I was faced with the reality that food was now costing us 80% more than it was four years ago.
A quick survey of friends and interactions on Twitter confirmed everyone else was facing similar increases – some people were even reporting a 100% increase in groceries.
Over the same period, petrol has increased by 80% and electricity has more than doubled. My children’s school fees have risen by an average of 11% a year, which means they’ve gone up 50% over that time.
The only thing that has not increased in double digits each year is our household income. It’s unsurprising our household, like most others, is feeling the squeeze.
According to the SA Reserve Bank, the average middle class family spends nearly half of its budget on food, transport costs and electricity, and over the past four years, the costs of that portion of the budget has increased by about 80%, but the average salary has only increased by 40% – representing a funding gap of 40%.
It is perhaps not surprising many households are falling further and further into the debt trap.
Ian Wason, the chief executive of DebtBusters, said: “People are struggling to pay for basic necessities such as transport, food, electricity, education and water, and are resorting to buying these items on credit.
“Upper-middle income earning South African consumers with secured assets such as home loans and vehicles are starting to feel the pinch and will eventually begin to default on their payments.”
DebtBusters saw an 85% increase in the amount of debt counselling applications last year. Figures from the National Credit Regulator show the number of impaired credit accounts rose by 2.2?million last year – and there are no signs of slowing down.
Wason said applications for debt counselling are already up 30% this year. On average, DebtBusters clients spend more than 100% of their net income repaying their debt, excluding living expenses when applying for debt counselling. This is up 85% from January last year, largely due to “payday” loans.
According to Santie Schindehutte, a mediation manager at the National Debt Mediation Association, payday loans are becoming increasingly popular.
“This is where people take a short-term loan for R1?000 to R3?000 to tide them over until payday, but then they simply access the short-term loan facility again, keeping themselves in debt,” she explained.
It is not unlike consumers who use store cards to buy groceries on credit and who are eventually unable to afford their store card repayments.
Schindehutte pointed out that accessing credit through personal, unsecured loans is not the answer.
“In three to six months, these consumers are in the same position of not being able to make ends meet and are also no longer able to access any credit,” she said. With such pressure on households, we have to find ways to preserve the little money we have.
Shop with awareness
Historically, bulk buying was cheaper and many consumers still believe if they buy a product in bulk it will cost them less. But that is no longer the case and it is the most popular package size that tends to be better priced, so always check the unit price labels provided by most major retailers.
Comparing what you pay per unit is one way to compare like with like. We changed our washing powder based on this analysis.
Bite the bullet
Schindehutte advises you revise your budget and cut out luxuries until you are able to manage your expenses.
“Get rid of the second cellphone, disconnect the satellite TV subscription for a few months and use that time to pay off your debt so that you free up cash in your budget to pay for necessities,” she says.
DebtBusters says if rent is becoming unaffordable and you are close to the end of a rental lease, find a cheaper place to live.
Consider moving in with family or friends to reduce your accommodation costs while you work on improving your finances.
Check if your lease allows you to sublet. You can get a flatmate to share the rent. If you are a homeowner, you can rent out an extra room in your house.
Find out if your local municipality offers free energy audits.
This will help you identify if there are problem areas where you can reduce energy costs. Use fans instead of air conditioner to cool your home and hang up clothes to dry instead of using a dryer.
Not only is this less expensive but hot air wears out your clothes more quickly.
If you need to replace your washing machine, get a front-loader – it will save you up to 50% on electricity costs as well as save water.
Use public transport to cut your petrol costs. Access the Gautrain or the bus rapid transit system in your city for safe transport to and from work. It will reduce your petrol costs and preserve the environment at the same time.
The average smoker buys a pack every two days for about R24, on average.
That works out to R4?368 a year for 10 cigarettes a day. Kick the habit, save money and improve your health.
If you have been smoke-free for at least a year, you can ask your life assurer to review your insurance premiums on the basis of a reduced health risk.