Cities across Africa such as Luanda, Angola and Chad, N’Djamena are ranked in the top ten most expensive cities for 2018, according to the Mercer’s 24th Cost of Living survey. Smart money management could be the key to financial success if you live in these places. With the unemployment rates hovering around 26 percent and a period of deceleration and stagnation in the continent’s GDP growth in 2017, households in the African continent are feeling the financial squeeze more than ever. The 2017 Unisa/Momentum Consumer Financial Vulnerability Index (CFVI) report showed a decline in its overall index to 48.4, indicating South Africans were ranked as being very exposed and financially vulnerable. Families and individuals are looking to themselves for ways to tighten their belts and more effectively manage their income. So where do they start? Well it can be as simple as getting to know their finances and the terms attached to them. Check out a few tips below that can help you take control of your money today.
Don’t Underestimate The Power Of Budgets
One thing that has been noticed: budgets are missing in most households across Africa, particularly South Africa according to certified financial planner Richus Nel. Tracking your spending is the first step to understanding exactly how you are spending your money, and can get you on the track to improving your efficiency. With the magnitude of personal budgeting and tracking apps and tools available to consumers today, keeping abreast with your finances has never been easier. Once you have figured out where your money is going, you can then evaluate your habits and necessity of that item.
Plan For The Future – Now
According to the South African Savings Institute, households in South Africa were saving approximately only 0.2 percent of their income in December 2017, while the household debt remains high at 72.5 percent. Having some level of savings can mean financial security and provides a cushion for households in the event of emergencies. In addition, your savings is essential in your retirement plans. Only one in ten South Africans can maintain their original standard of living after retirement while 8 out of ten people worry constantly about having enough money to retire. Providing for your retirement now is just one of the ways to achieve financial success and prosperity.
Take advantage of handy savings tips such as efficient habits to reduce electricity usage (electricity prices keep soaring in South Africa) and aim to establish an emergency fund of covering approximately three times your monthly salary. This will provide a funding source for daily living should you become unemployed. Most banks now offer multiple saving options including Tax Free Accounts, notice savings accounts and regular savings accounts.
Get Comfortable with Your Finances
One of the driving forces behind Africa’s climbing household debt and debt default issue is that people are not familiar with their finances or the financial tools available to them. In the World Bank’s Findex Report for 2017, almost half of respondents choose to borrow informally or from friends and family rather than using a form of credit or a financial institution.
With South Africans being big borrowers and poor savers, a shocking percentage of the population do not possess a basic level of financial literacy and this could make all the difference. In the 2016 OECD/INFE International Survey of Adult Financial Literacy Competencies, South Africans were ranked last. Knowing the nature of your financial instruments including your mortgages or credit cards will help you make the right financial decisions for you and your family and engage in financial behaviour that can lead to financial security.