ECONOMIC recession can trigger some serious soul-searching when it comes to personal finance. With an economic downturn, everyday people can expect to experience rising costs of living and more uncertainty when it comes to employment.
This means that it’s more important than ever to take stock and get a handle on finances in order to ensure your long-term financial survival.
After a 0.3% drop in Gross Domestic Product (GDP) in Q4 2016, South Africa recorded a 0.7% GDP reduction in Q1 2017.
Two consecutive quarters of declining GDP are the criteria for a technical economic recession, leading to the official announcement of the country’s new troubling financial position in June 2017.
Alongside economic recession, South Africa is also juggling a weak Rand, political instability, Government corruption allegations and a junk credit rating.
Building financial stability
With all this in mind, it’s little wonder that many South Africans are at long last confronting their personal finances head on. Financial nous has never been the Rainbow Nation’s strong suit, both at the national and individual level.
With some of the highest levels of personal debt in the world and the lowest levels of financial literacy amongst developed nations, the population has long had a “spend don’t save” mentality.
With woefully little financial education available (and schools consistently failing in mathematics), it’s difficult for many South Africans to recognise the danger of this mindset and harder still for them to implement effective changes to their approach to personal finance.
How to repay & save
However, with potential financial instability on the horizon, now it is time to get learning and start taking care of debt and nurturing an emergency fund. But is it possible to do both? Absolutely. These steps will help you to repay debts while saving money for the future…
1. Study up
If you’re not especially confident when it comes to money matters, taking some time to get educated on the subject will help you understand more about why making savings and reducing debt is so important.
A thorough understanding of basic finance will motivate you to be smarter with money, while giving you the tools to deal with your finances in a more effective manner.
Online resources like Money Academy (South Africa specific) and the UK-based Money Advice Service are good places to start.
2. Get budgeting
Budgeting is absolutely fundamental both to repaying debt and to saving money. With a tight and rigorous budget, you can find finance to both repay and save simultaneously.
You might need to make some lifestyle changes, but in time, it will be more than worth it for greater financial stability. There are lots of apps which can help you build and manage a budget, this article recommends a few good options.
3. Repay ASAP
Repaying your debts sooner rather than later may, in effect, be a form of saving in itself. That’s because repaying debts early can save you from the interest which applies to debts paid off over a longer period. Before you make an early repayment, make sure that your creditor doesn’t charge early repayment fees which will cost more than the total interest of fulfilling the entire term.
Has the latest recession make you confront your finances? What steps are you taking to get financially stable? Share your tips and thoughts with other readers.
– CAJ News