Many South Africans find themselves broke before mid-month leaving many people’s savings on life support.
There might be a budget in place for many South African’s before their salaries hit their bank accounts, but there are approximately 76% of people that find themselves staring at empty wallets before the middle of the month. We make jokes on how the small pocket within our jean pocket was created to hold our salaries, but the financial stress has pushed many into a corner of debt that can be hard to overcome.
Unexpected costs putting holes in many people’s budget
The responsibility of having to shoulder everyday living expenses is becoming harder to bear. A recent survey by World Wide Worx revealed that a large amount of our money goes towards paying off bonds, groceries, credit cards and loans. Unexpected expenses are a growing trend that can put a hole in a budget. However, the concerning part of the survey revealed that as many as 20% of South African households are relying on credit cards to pay for everyday expenses.
“Credit cards are convenient when it comes to building a healthy credit report when used correctly. It can also help you take care of important purchases. However, if you find yourself relying on a credit card for everyday expenses this is a red flag that you are on the brink of getting into debt that can be costly in the long run,” says CEO of MiWayLife Craig Baker.
With the announcement by the South African Reserve Bank of cutting the repo rate to 25 basis points, effectively making borrowing money cheaper, South Africans should tread carefully when borrowing money to supplement their budgets to cover expenses. Therefore, it is essential to think ahead when it comes to making your money work for you. “Setting a realistic budget is something that you can do to stay on top of your budget. For some people this could mean using the 50/20/30 rule, that is; dividing 50% of your income on necessities like housing and bills, 20% on financial goals like paying off debt, saving for retirement and contributing towards life insurance. Finally, 30% can be allocated to take care of wants such as entertainment. The key is to stay within your means,” says Baker.
62% of South Africans are at financial risk
Having a plan B is essential when it comes to managing your finances. This can be in the form of a savings account or an emergency account that is purely dedicated towards those unexpected expenses that pop up. However, a report by FMI revealed that 62% of South Africans will not be able to cover themselves financially for three months, should they run into a bit of difficulty. This means that should 62% of people lose their jobs tomorrow they will not be able to stretch their finances to more than three months.
Women are more likely to feel the brunt of financial strain. According to the survey conducted by World Wide Worx, 59% of women had the financial responsibility of taking care of their children along with family members compared to 56% of men. Should they be faced with a situation where they lose their job, fall critically ill, or even pass on it could leave many families financially vulnerable.
Having an emergency fund is only winning half of the battle when it comes to protecting your financial future, but it is a start. Baker points out that, “having a life insurance policy can give you peace of mind knowing that your loved ones will be financially protected when you are no longer around. At MiWayLife we understand that South African families are diverse and that there are people taking care of extended families which is why we have created an insurance policy that can cater for them under one premium to make it more affordable.”
Becoming financially conscious about your everyday spending and setting up a budget can help reduce financial stress. Always remember to never stretch yourself further than what your budget can allow room for.