Challenging economic conditions often come with a lot of uncertainties, and consumers will find themselves hard-pressed, but it’s still important to make room for saving and continue practicing prudent financial habits.
“The continuous rise in basic living essentials such as food and electricity, consumers need to relook their budgets and cut off unnecessary expenses in order to avoid over stretching their finances. As the cost of living escalates necessary lifestyle adjustments must be made to ease the pressure on finances. These may involve having to cut unnecessary expenses on non-essentials such as entertainment,” says Eunice Sibiya, FNB Head of Consumer Education.
Sibiya shares tips that will help you cut unnecessary expenses during tough times:
Review your bank statement: your bank statement is the first financial document that you have to look into when you want to cut expenses. Therefore, you need to review your statement with great attention because it can help you identify expenses that may be causing leakage in your pocket. Once spotted, act quickly by getting rid of such expenses.
Create a solid budget plan: look at your budget plan to determine where to cut off unnecessary expenses as well as where you need to allocate more funds. This will give you a good indication as to where you need to start cutting off. It will be helpful to thoroughly check your budget plan every month to ensure that you stick to it.
Define needs vs wants: knowing your needs vs wants is crucial in ensuring that you cut unnecessary expenses. Once you have defined your needs, it will be easier for you to drop such expenses and channel the funds towards saving or creating an emergency fund. As an example, if you can’t afford to buy a car now rather wait for when you can afford to purchase a car without having to stretch your finances.
Minimise credit: more often, credit eats up a reasonable amount of your income. Therefore, during these challenging times, it will be in your best interest to desist from taking on more credit to create more room for saving. If you have to take credit, you need to ensure that it will not set you back from meeting your financial goals.
Live within your means: while this might be challenging for a lot of people, it is advisable to spend less than you bring in a month. Any additional expense that is not from your income will potentially get you into debt which will further derail you from meeting your savings goals. For example, if your income is ZAR10 000 and your total expenses amount to ZAR12 000, this is a sign that you are living beyond your means.
“One of the best ways to avoid unnecessary spending is to translate the rands spent into the hours you worked to earn that income. If you spend what you earn a day on impulse purchases, it will be best to relook your spending behavior as this will seriously set you back from achieving financial freedom,” concludes Sibiya.