Economic recession means an uncertain financial future for every quarter of society, from the average South African to those at the top and those below the poverty line, nobody is unaffected by a shrinking economy and fiscal turbulence in one way or another.
With South Africa entering yet another recession in early 2017 (the first since the global financial crash in 2008), it’s time for the population to focus on their finances and take appropriate action to safeguard their financial futures. If you’re worried about money, these top tips could help.
This latest drop in GDP, calculated at 0.7% in Q1 2017 following a 0.3% drop in Q4 2016, has plunged South Africa into its seventh recession in 56 years. The factors behind the economy’s downward trajectory are numerous and complex, including political instability, distrust of government, a 3.7% drop in trade, a 5.9% drop in trade and widespread negative growth rates across the secondary and tertiary sectors.
The big picture may be complicated, but what about the little guy? How will the everyday South African be affected? And how can individuals take steps that will safeguard their financial future during a recession?
Typified by job losses, a rising cost of living, rising debts, diminishing access to traditional finance (prompting a turn to more flexible finance sources like Wonga.co.za), difficulties with banks and reduced consumer spending, the recession can hit the everyman (or woman) on a variety of fronts. These tips could help you weather the storm…
1. Tighten your belt
As market analyst Mark Schussler explains in this new podcast, tightening your belt and getting savvy about your budget is a key part of weathering a recession. With job losses becoming more common and opportunities dwindling as the cost of living rises, cushioning yourself with savings is essential. Find as many ways as possible to cut non-essential purchases, swap luxuries for essentials and save money in as many areas of daily life as you can.
2.Find fresh sources of income
From taking on a lodger, to setting up a side business or taking on a part-time evening job in addition to your 9-5, maximising your income and ensuring you are saving the proceeds wisely will help you protect yourself during a recession. Jobs and extra income will be more difficult to come by, but if you can find an opportunity, grab it with both hands.
3.Insure your income
It’s very tricky to know what is in store for the economy over the coming months and years. You may feel like your job is safe, but recessions can be very turbulent times for businesses – many of which will be forced to make cuts. If you are concerned about losing your job, insuring your income to make sure you can continue paying your mortgage is a shrewd move.
Are you worried about the effect the recession will have on your finances? Have you taken any steps to protect yourself? Share your thoughts and tips with other readers below.