In recent years, the population of South Africa has been poorly rated concerning their financial understanding and their propensity to get into debt. However, the signs in 2018 are showing a slight improvement as can be seen from the Consumer Financial Vulnerability Index formulated by Momentum/Unisa.
What this means in basic terms is that consumers in South Africa are feeling that they are more able to get hold of the financial resources they believe they need in order to support their planned expenditure.
Understanding the power of budgeting
The most critical factor when it comes to taking control of your spending is knowing how to create a budget. It’s something that, unfortunately, most households here in South Africa have yet to adopt.
Keeping a close eye on precisely how much of your hard-earned cash you spend is critical. It not only helps you to check on how much you have left, but equally importantly, it gives you the wherewithal to analyse what you are spending your money on. In other words, it gives you the essential information you need to be able to manage your finances by highlighting any unnecessary expenditure.
Budgeting is very simple. All you have to do is to forecast what you will be spending your money on. You can make a start by noting all of your past expenditure for a given period of time.
This should include everything you spend taking into account your food shopping, any regular bills you have to pay (gas, electricity, water etc.), and any other items of extraneous expenditure such as a social night out with friends, or a buying a new pair of shoes.
You should then split this out into a week by week or month by month running total. You then can then introduce any money you earn into the scenario. By subtracting your expenditure from your earning capacity in a forward timeline, you will be able to see if you are spending more than you should be.
How to get help with creating your first budget
If you would like some help with creating a budget, there is plenty of assistance you can obtain. To give you an idea about starting your own personal budget, why not take a look at “What the average South African budget looks like” here. There are also many different tools you can download, such as the Old Mutual calculators which we recommend checking out.
Options for obtaining additional finance
Once you’ve completed your budgeting exercise, you may well find that you need to be able to access additional funding to help you cope, either to spend more in a carefully managed way or to consolidate and lessen any debt.
There will be several options open to you, and you can get help with evaluating which is best for you by educating yourself about the pros and cons of personal loans versus short-term loans and credit card overdrafts. We recommend reading this guide as a starting point in your education.
Don’t ignore the small print
You need to bear in mind the importance of so-called “small print” when considering taking out any sort of loan or credit. This is the detail that will reveal the interest you will have to pay, the period across which you can repay the debt, and what will happen if you should default.
It’s this small print that can get you into trouble if you are not aware – so make sure you fully understand it before proceeding.
