Tips to reduce your living costs after another interest rate hike

Reducing your expenses are sure to become an ever-increasingly popular topic in the country, after yet another repo rate increase of 50 basis points on Thursday.

A third of consumers already battle to pay their debts on time and most of their salaries go into paying off debts.

South Africans are feeling the financial pinch with fuel and food prices skyrocketing, electricity prices climbing even during incessant rolling blackouts and now the interest rate added another few rands to home and car loans, as well as other more expensive credit.

“South Africans are collectively tightening their belts to cope with the rising cost of living,” says Peter Olyott, CEO of financial services provider, Indwe Risk Services.

“People want to add more creative avenues to reduce their expenses on top of sticking to monthly budgets, saving goals, managing expenses and picking up a side hustle.”

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Needs and wants in cost of living

Olyott says during challenging financial times, people are forced to adjust and prioritise where they spend their money.

“When it comes to expenses, there are some that are unavoidable but there are ways to reduce these monthly costs. The first step to creating a successful budget begins with the challenging task of deciding on your wants versus your needs.”

A want is an expense that is not necessary for survival and that you can comfortably live without, whereas a need is essential for daily living, working and moving around. These include housing, rent or bond, transportation, utilities, food, and data.

“It is also just as crucial to make room for savings. We highly recommend reaching out to an advisor or financial planner for advice, particularly when you want to save on your insurance. With motivation from you and guidance from an expert, you can make small changes that result in significant savings, enabling you to live a little more comfortably within your means.”

Olyott says there are at least six effective ways to reduce or optimise spending and help ease your financial burden by focusing on transport, groceries, electricity, living space, reducing luxuries, and reviewing your medical aid and insurance.

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Transport

As fuel prices increase, transport costs can quickly add up and Olyott says consumers should try to limit the kilometres they drive by carpooling or ridesharing with family, friends or colleagues. Also let your insurer know if you carpool.

If you do not drive around much, consider insurance which reduces the premiums if you drive less.

“Regularly service your vehicle and check your tyre pressure to ensure that it continues to run efficiently. Improve your driving habits to avoid harsh acceleration and braking, which increases fuel consumption. Consolidate errands to save both petrol and time and do less frequent but larger monthly grocery shops.”

Groceries

Create a weekly food menu and a monthly shopping list, which helps you avoid impulse buying, he says. “Look out for specials and loyalty savings and stock up when you see non-perishable items on sale. Plan your meals around supermarket specials but also ensure that you use the items you already have.”

He says it is also a good idea to rethink your choice of protein, as this is often the most expensive items on your list. Also use staple ingredients to make multiple meals to reduce cost of living.

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Electricity

“In the midst of load shedding we should enjoy theoretical savings, especially when we are without power for up to three to four sessions a day,” Olyott says. He advises consumers to switch to energy-efficient light bulbs and where possible, replace old appliances with energy-efficient models.

You can also buy approved surge protection devices to use with your most expensive electronic devices. This may be a costly initial outlay but it could save you thousands of rands.

“Seal windows and doors to prevent loss of heat in winter and loss of cool air in summer. Adopt better habits such as turning off unnecessary lights, putting a lid on a pot of boiling water and unplugging non-essential items that you do not use.”

Switching to solar for lights and heating can be a costly investment but it will reduce your monthly electricity bill in the long term and keep the lights on during load shedding. Also consider switching to gas for your cooking equipment.

Living space

Your rent or home loan, as well as rates, utilities and maintenance, often make up a significant portion of your monthly expenses. Olyott says if you really have to cut your expenses very heavily, you could downsize to a smaller home or move to a more affordable neighbourhood.

However, before you make the move, consider moving costs, additional expenses, such as levies or new furniture and potential extra travel time going to work or taking kids to school.

“Something else to consider is renting out a room in your home, if you have a large house or getting a tenant into your garden or granny flat. This additional revenue can help you to offset increased costs but remember to calculate all the tax implications at the same time.”

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Reduce extravagances

Olyott says this one is possibly the hardest of all to stomach psychologically.

“While you should reward yourself with occasional treats, if you are serious about saving you need to limit your luxury purchases.

“Cut back on your daily takeaway coffee and rather brew a pot at home or the office. Take a packed lunch to work instead of choosing a takeaway option and eat dinners at home rather than frequenting restaurants. Cancel subscriptions you do not use anymore and buy second-hand items instead of something new.” 

Insurance and medical aid

“When looking for ways to cut monthly costs, people often turn to insurance and cancel their policies to ease their financial difficulties. However, life is uncertain and it is impossible to predict when a life-changing event will affect you and your family, exposing you to potential financial disaster.”

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Finding alternatives to put food on the table

Dov Slowatek, CEO and founder of South African cashback platform, SavvySaver, says the cost-of-living crisis is triggering a major shift in consumer behaviour. Recent data shows that consumers are resorting to new cost saving strategies, such as cashback and discount platforms, as food prices and essential household items are reaching alarming heights.

“Consumers have reached a crisis point of trying to stretch their budgets to accommodate skyrocketing costs and are looking for tangible budget friendly remedies to close the affordability gap.”  

PricewaterhouseCoopers (PWC) says that nearly 99% of consumers are planning to adopt behaviours that will help them save money, while the Nielsen Global Outlook Report 2023 says that the cost-of-living crisis has pushed consumers towards discounters (49%), chasing promotions (36%) and buying in bulk (50%), while 56% are keen to take advantage of loyalty schemes.

“The SavvySaver cashback programme has seen a sharp increase in membership in tandem with escalating food costs, with members earning thousands of rands back in cash,” says Slowatek. 

The cashback platform has seen an increase of 230% in signups over the last three months, which demonstrates the severity of the effects of food price inflation on the average consumer.

Consumers are being buffeted from all sides, from the annual increase of 13.6% in food and non-alcoholic beverage prices in February this year, the highest reading since April 2009 to the impending technical recession, consumers are scrambling to put food on the table. 

According to the annual Truth & BrandMapp survey results which highlights ongoing loyalty trends, South Africans want the cashback loyalty benefits the most.

Slowatek says unlike rewards from credit and debit cards, cashback rewards are a 100% cost-free offering to consumers, providing consumers with shopping flexibility and a means to manage financial constraints.

Consumers are rewarded at all major retailers nationwide which is different to traditional retailer loyalty card programmes. He says the process is quick and simple: consumers upload a photo of their till slip on the SavvySaver app or online platform and can receive cashback immediately across a wide range of items provided by brand partners on the app.

“Cashback rewards enable consumers to get money back while they shop for items they would be buying anyway. This means a cash injection, giving consumers more mileage on their spending capacity, relieving some of the shopping pressures of escalating costs.”

Consumers can also pay it forward, through campaigns with non-profit organisation SA Harvest which provides food to organisations across South Africa that feed those in need. Donating your cashback is also in the pipeline.