Beating the budget blues: Five questions answered by experts

South Africans are buckling under financial stress, with annual consumer inflation jumping to 7.4% in June, from 6.5% in May, mainly driven by rising transport and food prices. 

The cost of food and nonalcoholic beverages increased by 8.6% year-on-year in June, the highest annual rate since March 2017, when the country was recovering from severe drought.

Add to that load-shedding, sky-high petrol prices and a huge hike in the cost of electricity, and many consumers are in an extremely difficult place.

TimesLIVE spoke to experts for answers to some of the most pressing questions.

1. When should I go into debt review?

As prices rise, disposable income dwindles and money becomes tight. When should one be proactive and where can people go when there is more month than money and debt is spiralling out of control?

Consumer journalist and consumer rights champion Wendy Knowler said people need to act before defaulting.

“Reach out to your credit providers, explain your circumstances and ask for restructuring of your loan so you pay less every month.”

Debt review, said Knowler, is a viable option for those so deeply over-indebted that they can longer keep up, despite the brutal wants-vs-needs exercise and dramatically adapting their lifestyles.

“They’re skipping payments, paying for food with what’s left of their credit card limit, receiving letters of demand or having judgments against them,” she said, warning that this situation makes them a target for unscrupulous debt-counselling companies cold-calling consumers to mis-sell debt review as a means to reduce their monthly repayments.

“Many fall for the lure and quickly discover all their debts have formed part of debt review and they are no longer in control. They can’t escape debt review until everything is paid off,” she said, adding that during this time they are unable to apply for new credit.

Knowler said only registered debt counsellors can offer debt-review advice and are legally required to be registered with the National Credit Regulator (NCR).

To check on a debt counsellor, call the NCR on 0860-627-627.

2. Should I ditch my private medical aid?

A huge expense, and one consumers may be tempted to cut, is medical aid. It’s a difficult decision that needs careful research and consideration, and is something that will depend on affordability, medical and health needs, said independent broker Shana Colley.

“You need to consider that a hospital plan is medical aid, in the sense that it insures you for many of the big accidents and incidents,” she said, explaining that the numerous products — medical aid, hospital plans, gap or top-up cover and health insurance — all come with varying offerings, exclusions, rates of cover and requirements, and range hugely in price.

“You need to do a proper needs and financial analysis to determine your requirements. People with medical aid should consider downgrading to more affordable options rather than cancelling their medical aid, because once you do, you can reapply, but may get hit with underwriting such as a three-month waiting period, 12 months of condition-specific exclusions and a late-joiner penalty if you are over 35 and have had a break in cover or no previous medical aid,” Colley said.

In cases where families have conditions — for example, one child is ill or has special needs and requires more comprehensive cover, while others are healthy — there are solutions.

“You can divide things and have one parent and the child requiring more extensive medical cover on one medical aid plan and the other parent and a child, or children, on another option, such as a hospital plan,” Colley said, explaining how she advises families according to their needs and budget.

“You need to see medical aid as a form of insurance (not to be confused with medical insurance) and forced savings, which are given to you up front in January. Don’t be tempted to immediately use it on over-the-counter medicines and cheaper items. Rather keep it for bigger expenses like tests or specialist consultations.”

Colley said some cheaper hospital plans are not hugely helpful because their cover only kicks in after several days in hospital and many surgical procedures, such as tonsils, colonoscopies, gastroscopes and appendectomies, will not be covered. She said hospital cover should be from the point of admission.

3. How can I save on petrol?

With petrol at a premium and insurance costs, licensing and maintenance to factor in, transport is an area where budgeting can make a big difference.

Sunday Times motoring editor Denis Droppa suggests the most sensible car for an average family is a low-mileage second-hand or demo model, as new cars depreciate faster.

“A one- or two-year-old car will still have a few years of its warranty and service plan left, providing peace of mind and saving you money in running costs. Aim for a compact hatchback, sedan or crossover. There are several that fit the bill in terms of decent space for four and they provide good fuel economy, without feeling underpowered,” he said.

Droppa’s recommendations are: Suzuki’s Baleno, Vitara Brezza and Ertiga; VW’s Polo Vivo and Polo; Kia’s Rio, Sonet and Pegas; Nissan’s Magnite, Micra and Almera; Toyota’s Urban Cruiser, Starlet and Corolla Quest; Hyundai’s i20 and Venue; the Mahindra XUV300; Mazda2; Ford EcoSport; Opel Corsa; Renault Kiger turbo and Mitsubishi Xpander.

He warned people against using gimmicks to save petrol.

“Don’t try using any of the so-called ‘fuel-saving’ devices. They don’t work and could damage your car’s engine.”

Droppa recommends regular servicing and wheel alignment and tyre pressure checks, as these all impact on consumption.

“Use your aircon sparingly, as it places additional load on the engine, and reduce the vehicle’s weight by removing unnecessary items. If you mostly do city driving, consider driving with only half a tank of fuel and drive with a light foot. The gas-guzzling effects of ‘stepping on it’ are well-known,” he warned.

“Drive efficiently, at the lowest speed and in the highest gear road and traffic conditions allow, without labouring the engine. Many vehicles have economy modes to optimise fuel thrift, so use them to your advantage,” he said, advising motorists to wait out the rush rather that battling through traffic.

4. What are the best recipes for a tight budget?

Sunday Times food editor Hilary Biller has a number of tips for stretching the budget. She recommends a grocery list be drawn up before stepping into a supermarket and that you don’t deviate from it. She said drawing up a meal plan might be a painful chore, but it makes shopping quicker and planning and budgeting easier.

“Don’t shop when you're hungry because you’ll come back with many extras. And avoid shopping with children who have a knack of persuading you to buy extras that aren’t on the list,” Biller said, adding that sticking to a regular supermarket makes the outing quicker and aids in avoiding the tempting chocolate and sweet aisles.

“Watch out for retailer specials and make sure they are really specials, like checking weights before buying. And stock up if the budget allows.”

She said keeping a selection of staples on hand makes putting an affordable meal together more convenient and saves the need for convenience-store dashes.

“Think mealie meal, flour, canned beans and pulses, canned tomatoes, rice, polenta and tinned fish. I often make double mince for a dish and then freeze half of it. A good way of bulking up mince dishes is to add lentils,” Biller said.

“Eggs are one of the cheapest proteins and can be used in myriad dishes beyond breakfast. The price of cooking oil is rocketing and with the international conflict, it’s going to keep going up. Reduce the amount of oil. Often we use way too much. Try cooking onion and garlic in a little water before adding other ingredients. When pan-frying foods, before adding oil, fry the food, like chicken, in its own fat. And check the price of oil before buying. I’ve noticed canola oil is cheaper than sunflower oil. Consider using coconut oil. It’s cheaper and solid, so you can scoop out the exact amount you need.

“Up your intake of seasonal vegetables and fruit. Cut back on protein and load up with a selection of colourful veggies.”

5. Should I rent or own?

The cost of a home is another area where huge savings can be made. Consider reorganising living arrangements, such as moving in with parents or having parents move in with you. Savings can be made and costs shared.

Grant Smee, MD of Only Realty Property Group, said another consideration is renting rather than owning.

“If you own a town house, you have your bond costs, insurance, maintenance, levy, rates and taxes to consider. If you rent a similar unit in the same complex, you will pay a lot less for the same thing,” he said.

“The adage is to buy where you wouldn’t want to live and rent where you do,” he said.

“For example, in Cape Town you can buy a place in Kuils River, where the rental yield is fantastic. Then you can rent a R4m spot in a lifestyle estate for about R25,000 a month.”

Another consideration, according to Smee, is to rent in a multi-use space, where extras such as a gym, Wi-Fi, pool, club house and other shared facilities are included in the lease deal.

TimesLIVE

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