FNB’s guide to budgeting in 2016

With January already behind us, 2016 is shaping up as a challenging year for most South Africans.

“This year could be testing for consumers as interest rate hikes and price increases on everyday goods are set to have a detrimental effect on your pocket,” said Eunice Sibiya, head of consumer education at FNB.

“There has never been a more pressing time to be financially prudent and to start employing sound financial tactics to get you through the year.

“The truth is, if you want to survive this slump you will have no choice but to draw up a water-tight budget and stick to it.

“The only way to ensure that you get through the year with your finances intact is to decrease your expenses, pay off your debt, and curb unnecessary spending so that you don’t find yourself taking on more debt to survive,” continued Sibiya.

If you follow the below tips – you could surprise yourself and come out unscathed at the end of the year.

Steps and tips:

•  Revise your budget:

Your budget this year will change due to an increase in basic expenses.

The knock-on effect of the drought is that food prices will increase significantly, as such your groceries will cost you more.

“If you have credit cards, a car, a home, and personal loans, all these will be affected by interest rate hikes and you need to be prepared.” said Sibiya.

Build a buffer into your budget assuming that interest rates will go up, for instance by another one per cent.

See how much extra cash you will need to cover this increase as it will affect repayments such as your car, home loan, credit cards and personal loans.

When you think of it this way, it becomes more essential to spend on only the most important things because as the year continues and the rates rise, your debt will be harder and harder to cope with.

•  Manage your debt to free up cash:

“Eliminating your debt is one of the best ways to make sure you keep your head above water in 2016,” said Sibiya.

The only way to do this is to live within your means and to diligently pay off your debt.

“It will be tough, but it will only get tougher later on this year if your disposable income is used to service debt and raising prices,” warned Sibiya.

“The quicker you can get debt under control, the better your budget will look.”

•  Minimise your expenses:

Cut down on non-essential expenses, these are expenses that you don’t actually need.

Review your cellphone and gym contracts, TV channels options, clothing accounts and entertainment expenses.

Try outdoor exercise, rummaging through second hand clothing shops or organising dinners with friends where everyone brings a dish.

“It may seem boring to cut out on expenses that you believe add value to your life but there are alternatives to everything and cutting down on unnecessary expenses doesn’t have to mean the end of having fun. Simply plan a different and cost-effective way of living your life,” said Sibiya.

Start saving for the festive season now.

Holidays may seem a distant memory and the next festive season break too far away to even start worrying about it, but now is the time to start thinking about putting money away.

“The up side to possible interest rate increases is that the money you save and invest will work harder for you,” said Sibiya.

“Now is the time to build savings into your budget.

After all the discipline that you will have exercised this year, a well-deserved break at the end of the year will be the perfect way to reward yourself.”

Being disciplined and sticking to your budget plan may be viewed as difficult and painful, however it is necessary.

“Insignificant expenses like eating out and buying new clothes too often will only leave you worse off than when you started.

“It may seem like a big sacrifice to live within your means, but in the end it is the only way to ensure that you remain financially sound this year,” added Sibiya.

Other articles you may be interested in:

Your guide to financial fitness in 2016

Is this the year to start a business?