Let’s Talk Finances – by Hans Myburgh, registered financial advisor and Northmead resident.

On February 28, the world watched as missiles rained down on Iran as the United States of America and Israel launched attacks on the country’s alleged nuclear facilities and leadership.

As a result, on March 2, Iran announced the closure of the Strait of Hormuz, a significant oil shipping conduit, creating a major global energy crisis.

Hoping that it may be an April Fool’s joke, South Africans are bracing for a steep fuel price increase, which will come into effect at midnight on April 1.

Central Energy Fund (CEF) predictions indicate that the looming price adjustment will be the single biggest increase in the country’s history, more than doubling the previous record.

In July 2022, prices jumped by R2.57 per litre following Russia’s invasion of Ukraine. Current recovery data indicates that motorists will be paying between R4.68 and R5.20 per litre more at the pumps, with diesel skyrocketing between R8.52 to R8.64 per litre.

Adding further to financial pressures, Eskom’s electricity tariffs will rise to 8.76%,up from 5.36%.

These increases will not only sting individual budgets, but the knock-on effects will ultimately filter down to every expense and household, Myburgh explains.

“Everything is getting more expensive at once,” he said.

“Price increases push up transport costs, which ultimately drives up food prices and services, taking significant chunks out of your monthly budget. You are not necessarily spending more, but it feels like it.”

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With mounting pressure on households, Myburgh has the following survival tips to shoulder the burden:

Face reality
Rising living costs are not temporary.

Fuel and electricity increases, global conflict and economic uncertainty are now part of everyday life. So the cost of living will continue to spiral upwards.

“The question is no longer how do we wait this out? Rather, how will we adjust?”

• Don’t use tomorrow’s money to fix today’s problem
“Before you touch your retirement savings or long-term investments, stop,” he cautions.

“Those funds are not ‘extra money,’ they are your future income.”

Under the recently introduced two-pot retirement system, over R40b was withdrawn by the country’s workforce.

Millions of South Africans accessed their savings, with SARS expected to collect over R10b in tax.

“This trend is very telling; it shows that households are under strain,” said Myburgh.

“Using long-term savings to solve short-term problems comes at a cost when we reduce retirement capital and interrupt compound interest, which amounts to unnecessary tax payments.”

• Fix your cash flow first
Myburgh said that in times of global instability, cash flow is king.

Ensure this track spending, identify where costs crept in and separate essentials from non-essentials,

“You do not have to trim down all expenses, but you need to be intentional when spending,” he said.

• Adjust do not overreact
Do not make drastic lifestyle changes, but look at making minor adjustments.

This can be achieved by combining trips to reduce unnecessary travel, reviewing grocery spending, delaying non-essential purchases and reassessing contracts and subscriptions.

“Simple changes, consistently applied, can make a real difference,” said Myburgh.

• Be careful with debt
“When costs rise, many households quietly increase their reliance on credit; that is when things become dangerous.”

Debt adds pressure on top of rising expenses and removes flexibility.

He suggests focusing on paying off expensive debt and avoid new debt unless absolutely necessary to create breathing room.

• Create a buffer
No matter the amount, having access to cash reduces financial stress and gives you options.

“The real issue is not always income; it is a lack of margin,” said Myburgh.

In closing, he said that increases in household expenses are out of our control, but consumers can control their decisions.

“Households that navigate the current pressures successfully are not the ones who earn the most, rather the ones that remain disciplined, avoid emotional decisions and adjust early,” he said.

“Everything in the world is getting more expensive; control is your greatest financial advantage.”

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