On June 6, 2017, Business Day reported that South Africa is now officially in a technical recession, after revealing a drop in the GDP (gross domestic product). GDP decreased by 0.7 % during the first quarter of 2017, and the rand has weakened significantly against major trading currencies like the American dollar, the euro and the British pound. A technical recession is indicated by two consecutive quarters of negative economic growth, and refers to a negative economic output.
Confusing statistics aside, this does have a significant impact on you – the consumer. According to Statistics SA deputy director-general of economic statistics, Joe de Beer, there’s a clear link between the fall in household consumption expenditure and the decline in trade. Household consumption expenditure is down by 2.3%. This is concerning, since the South Africa economy has been unable to gain momentum since the 2007/2008 global recession. The declining economic activity means the country is a move away from job creation, with unemployment currently standing at 27%.
While South African consumers have heeded to the ailing economy by being frugal, they still have a long way to go, and need to be cautious about their spending and savings habits.
Old Mutual advises that you tighten your financial belts for a rocky financial year ahead. Here are a few recommendations from them:
1. Be honest about your financial health
This is a tough one for many compulsive spenders, but you need to be realistic about your financial health. So have a good look at all your statements, and request a credit report from one of the credit bureaus. This will give you an idea of what your credit profile looks like and alert you to any negative listings your creditors may have registered.
2. Budget, budget and budget
Having a budget will help you to live within your means, and that’s why it is vital that you record all spending. If you want to reach personal financial freedom, a budget is invaluable. Keep your eyes focused on your goals and be disciplined about staying on course. Be determined and change poor spending habits to better your chances of sticking to your budget.
3. Tackle bad habits
Pay off your most expensive debt first. Your credit cards or store cards generally carry higher interest rates than your bond. The benefit is that the debt-free date is clear – and we all love to see the end line and feel a sense of satisfaction when reaching a goal. However, be warned that the zero balance on your credit card and store cards may tempt you to start incurring debt again. Do your best to resist this temptation!
4. Set goals and stay committed
Determine what your goals are and set financial objectives for the short, medium and long term. Goals must be realistic to be achievable. Prioritise goals in order of importance, estimate how much you need to save for each, and commit to a time frame. Be emotionally connected to your goals, as this will keep you disciplined during difficult times such as the festive season and holidays, when you may be tempted to break your savings habits.