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This is especially key when looking at the increased cost of living due to the petrol price and value-added tax (VAT) increase which became effective on 1 April.
“On an individual level, 1% may not initially seem significant per VATable item or service, but the fact is that the increase will impact almost all of your financial obligations, including insurance premiums, cost of data and airtime, and clothing. Don’t underestimate how these costs can add up over time,” says Lizl Budhram, Head of Advice at Old Mutual Personal Finance.
Budhram cautions against “consumption creep”, a term that refers to the way a relatively small increase in spending can make a big impact on your overall savings and financial health.
The 2017 Old Mutual Savings & Investment Monitor found that metropolitan working black middle income consumers were consuming more and saving significantly less.
“We’ve seen a drop in savings, as a percentage of income of black middle income consumers, from 15% to 14%. At the same time spending on consumption (for example entertainment, eating out, shopping) increased to 56% of income. This trend, coupled with this month’s petrol and VAT increases, could result in tough financial times for consumers who don’t cut back on their spending now,” Budhram adds.
“If you fail to make the proper adjustments to your budget and financial plan, you could end up taking strain or missing your longer term financial targets, especially if you have extra responsibilities like supporting extended family members. If you don’t have a financial plan, now’s the best time to speak to a financial adviser who can help you make sense of your money.”
If you’ve not taken action yet, it’s not too late. Budhram offers five tips to help.