Tighten your belt for the budget speech

Given the background of slow economic growth, rising government debt, stubbornly high unemployment and the threat of a credit-downgrade of South Africa’s sovereign debt to junk-status, it was no surprise that the budget speech of 2016 focused on two key themes: 1) fiscal discipline and 2) the National Development Plan (NDP) as the master plan for tackling the country’s challenges.

The theme of fiscal discipline is also very relevant for SA parents in 2016 despite the personal income tax relief of R5.5 billion for lower and middle-income earners. Financial discipline is crucial because parents still have to deal with the rising cost of education and living -  rise in food prices, fuel levy increase, electricity costs and interest rates that could rise again.

Read more about why schools should teach kids about money.

These are stressful and challenging financial times for parents. Parents must invest more time and effort on the foundation of good money management – budgeting. They must examine carefully their household budgets with an eye on reducing non-essential expenses.

Whilst the budget speech contained ambitious fiscal consolidation targets and a strong commitment to structural reforms to stimulate growth and create more jobs, the reality is that 2016 will be a financially challenging year for most parents.

To remain financially well, parents have to pay attention to the following financial habits:

  • Analyse and reassess current financial position;
  • Stop spending on non-essentials;
  • Consider second hand text books, uniforms and lift clubs;
  • Find ways to generate more income;
  • Use any extra cash to reduce debt;
  • Avoid taking on more debt; and

If falling behind debt commitments, approach lenders to restructure payments.
In the current economic environment, parents need financial accountability partners. Financial advisers can fulfil this role. Therefore parents need to consider using the services of a qualified financial adviser to help them manage their finances and navigate the difficult year ahead.

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