While the increase in VAT will mean added pressure on many consumers, it is important to remember the bigger picture. Ultimately, government revenue collection measures including VAT play a crucial role in fueling the growth and development of South Africa, as well as in assisting government to deliver public services.
The VAT hike will, however, affect the pockets of all local consumers.
Here are a few handy tips you can consider to offset these increases:
- Rank your money. Pay your essential bills such as your bond, school fees, insurance, investments, as well as your water, rates and levies on time every month. This way you will be able to identify how much money you have left for the rest of the month with the comfort of knowing that your day-to-day bills have been paid.
- Avoid purchasing on account. While you may be tempted to purchase goods on an account or increase your purchasing limit at the fashion retailer, always remember that the money that you are spending is credit and is not money that belongs to you. Meaning, you will have to pay it back - do you really want to be drowning in debt?
- Stop spending and start saving towards an emergency fund. A way of removing the temptation of spending is to invest your money in the medium to long term to beat inflation. You will have a winning strategy if you consider a combination of a fixed deposit account or unit trusts and a small kitty of savings in reserve invested in more flexible deposits. This combination will provide you with the security of an investment earning real returns combined with the flexibility of being able to access your money relatively quickly in the event of an emergency.
- Have a budget and stick to it. Do not let your expenses derail you from your budget. If you realise that you have been a bit on the generous side of spending, then identify what your necessities are for the remainder of the year and only purchase items that you have listed as necessities. Follow this as an ongoing pattern for the rest of the year.
- If you have an additional income from e.g. a hobby, you should really nurture it and try to find ways to grow your income from this source. Job loss is a real risk in a declining economy and you need think about having an alternative source of income.
- Start preparing your lunch for work the night before and limit buying treats at work like take-way coffee every day. Limit expenditure on luxuries and focus on necessities. This will result in huge savings.
- Consider moving somewhere more affordable and/or somewhere closer to work if you are paying high rental every month. This way you will save on rent and/or transport costs and use the savings to pay off your debt or redirect it towards saving or investing.
- Ensure that the instalments on your insurance policies and provisions remain up to date. Avoid being convinced to pay for any extra cover, ‘special cover’ or ‘gap’ cover at the moment.
- Pay your outstanding debt as fast as you possibly can. Do not take on any new debt, or stand surety for anyone else’s debt, even if they are a family member or close friend.