The ACTUAL cost of living

2018-11-12 13:16

Budget. (Ian Carbutt)

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Salary earners are battling to make ends meet.

Each month many of them have to borrow money from loan sharks at exorbitant interest rates, and they battle to pay back these loans and keep their heads above water.

Debt-review companies say more people are coming to them than ever before.

South Africa’s economic climate is at its lowest ebb since the recession back in 2008, and this has seriously affected the cost of living for consumers.

Many citizens are finding it harder to balance their day-to-day expenses.

Steep fuel price increases, and the knock-on effect of these, and tax increases have hit consumers hard.

Public transport hikes have impacted predominantly the middle to lower-earning classes.

According to a Statistics SA 2017 report, the number of people living in poverty increased to nearly 14 million in the past five years as about half of South Africa survives on less than R992 per month.

The October 2018 Household Affordability Index report, compiled by the Pietermaritzburg Economic Justice and Dignity Group non-governmental organisation, shows the cost of nutritious diet foods in a household food basket is R4 085,12 for seven family members, and R2 337,18 for four family members.

But the average wage for black South African households is R3 000.  

cost of living

Pay your bills first to maintain a good credit rating

Dheran Ghela (pictured below), a local financial adviser, said the economy is not in good shape.

Budget. Photo.Ian Carbutt

“The petrol price is at an all-time high. This impacts further down the chain in terms of price of basic needs of the people.

Food prices have increased, thereby shrinking the budget of everyone from the person in the street to the affluent.

The bottom line is that surplus cash has been seriously reduced, affecting the spending patterns of everyone.”

Ghela advised those who are struggling to make ends meet, despite earning a salary, to try by all means to keep a good credit rating. “Pay your bills first and on time. It is important to keep a good credit rating today as this affects every aspect of our lives from short-term insurance to negotiating credit.

“If you are struggling with meeting repayments, approach your creditor first before you fall behind. Renegotiate your payment plan. Think before you enter any credit agreements, get a second opinion. Speak to your financial adviser to help you restructure your commitments,” he said.

For those stuck in the pattern of taking out a loan every month to get by, Ghela said this is unfortunately a massive problem with no “one size fits all” solution, but he advises people to seek professional financial assistance.

When creating a monthly budget, Ghela said people should list their regular commitments that they need to meet every month and know the dates that the payments have to be made.

“Have a critical look at your expenditure. What can be eliminated that is not a necessity? After about three months, you will know what surplus is available. Rather save towards a purchase than use credit cards or loans,” he said.

Ghela said it is the little simple actions like making your lunch at home and taking it to work, rather buying lunch every day, that will save you money. “Try to shop once, as going to the shop every day is costly in terms of petrol and buying unnecessary items.”

Taking out loans for survival

Ndumiso Mngadi, a local loan shark, told Weekend Witness that despite his 50% interest rate, people are still “desperate” enough to borrow money from him.

Mngadi said he expects his money to be paid back to him the following month.

If his clients cannot pay back the full amount they borrowed, including the interest, he accepts the interest on its own, until they can pay the money, which he reckons is sometimes very hard for his clients.

“There is a woman, who I know earns between R60 000 to R70 000 per month.  She borrowed R10 000 from me at the beginning of the year and she’s been paying me R5 000 every month. She’s supposed to pay me R15 000 to settle the loan, but she can’t and as much as I see that it’s really tough for her, I can’t be lenient as I also need the money to support my family,” he said.

Another local loan shark, who asked not to be named, said most of his clients are employed people with proper paying jobs. “My clients are mostly nurses, police officers and teachers. Most of them live on loans. Month after month they pay up their loan and immediately take out another one.

“It’s scary to see how poor people are and how much they are struggling,” he said.

There is nothing left after pay day

A 30-year-old Ashdown woman who works as a sales assistant at a local company told Weekend Witness that her family has had to cut back on many things to make it through the month.

The woman, who asked not to be named, said she lives with her husband and two children, aged four and seven years old.

They pay about R3 500 for rent on a two-bedroom house, spend around R2 000 to R2 400 on groceries every month, they are paying off two cars, the children’s school fees and also have to make financial contributions to both their families.

“We have had to make very tough financial decisions and sacrifices to survive until the next pay day. Last year we decided to cut down on everything, including the money we spend on groceries so that we could pay off all the debts we had accumulated in our 20s.

“Thursdays used to be our movie nights, but that had to come to an end. We would spend almost R1 000 in one night just for a movie, snacks and dinner. I can’t even remember the last time I went out for a movie but we had to make those choices to get our finances on track,” she said.

The woman said they also decided to take their eldest son to a township school rather than a multiracial school as that was much more affordable for them.

“We are also considering buying a house next year after we realised that we could actually use the money we are currently paying for rent to pay our bond,” she said.

Budget. Photo.Ian Carbutt

Kyle Govindsamy (26), a candidate attorney serving his articles at a local law firm, said his finances are in “disarray”.

“I actually used to have more money when I was unemployed compared to now,” he said.

Govindsamy said he earns a salary of just over R10 000 and recently bought a new car.

“The instalments for my car take half my salary and I spend a lot of money on petrol, but I really need the car as I start work very early and leave the office late. I’m still living at home and have to make financial contributions as an adult.

“I’m the eldest child of four boys at home so I also need to tend to my siblings’ needs. I have clothing store accounts that chow all my money. I can hardly get through the month and never have money to spoil myself for working so hard. It’s tough,” he said.

A harsh Christmas

With the festive season creeping up, chief executive officer of the Intelligent Debt Management Group (IDM) Ian Wason said consumers are likely to tighten their belts a lot sooner than usual in the season due to the increased economic and financial hurdle­s faced by South Africans this year.

He said the value-added tax (VAT)  increase that took effect in April this year, coupled with South Africa slumping into a recession a few months later, as well as continuous fuel increases, are taking their toll on consumers.

Wason said IDM, which comprises two national debt counsellors — DebtBusters and Consumer Debt Help — has seen an increase of inquiries for debt assistance over the past three months.

“From September this year, we’ve been experiencing an unusual spike in debt-management inquiries, up to 20% more than last year this time,” he said.

He said even though retailers are alread­y gearing up to showcase their festive campaigns, consumers are turning to debt-management services for help, and this could impact retail spend significantly.

“We are used to seeing a spike in debt-assistance inquiries after the festive season, but the spike has come prematurely this year.”

He urged people not to become “desensitised” to their personal finance­s during the heavy-spending festive season.

“To avoid the end-of-year and especially New Year money blues, it is important for consumers to take the appropriate measures in order to remain in control of their finances,” said Wason.

Budget. Photo.Ian Carbutt

Track your spending by month


  • Know your income

The first thing you’ll need to get a grasp of is how much money you’re actually bringing in every month. Deduct factors such as income tax, pension plan contributions, and other things that are docked from your pay.

  • Document your expenses, both fixed and variable

These include things such as your mortgage, car payments, student loans, and so forth. These expenses remain relatively constant month after month. Variable expenses are those that either only pop up every few months, or fluctuate in cost month to month such as entertainment, groceries, and so on.

  • Focus on your savings

It’s a good idea to put some money aside every month — no matter how little — towards your savings account.

Financial experts typically recommend setting about 10% of your post-tax income aside for your savings, although the more you can put away the better. You might opt to have a portion of your money transferred out of your checking account and into your savings account automatically each month so you don’t have the excuse of “forgetting” to put that portion aside.

  • Keep all your receipts

Retaining all your receipts for all your expenditure will help you determine how much you’re actually spending every month.

After two or three months of adding these totals up, you’ll have a good idea of the average amount of money that is going towards expenses, and determine whether you need to cut back on spending or not.

  • Set short-term and long-term goals

Setting specific goals can help you pay off any outstanding debt you have, which can eventually free up your finances at some point down the line. Short-term goals can include things such as paying down credit cards, while long-term goals may include paying off your mortgage.

  • Choose an easy-to-use budgeting tool

Putting a budget together requires a resource that helps you organise your finances. By using a budgeting tool, such as a simple monthly budget template on an Excel spreadsheet, you can easily tally up your income, expenses, and figure out the difference between the two after all factors have been considered and identified.

You’ll be able to see if you’ve still got money left over, or if you’re digging yourself into a financial hole. —

Read more on:    pietermaritzburg  |  cost of living

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