Economic Crisis: Reducing Cost of Living has Become Necessary to Avoid Loans

The economy of South Africa has suffered a great blow with the COVID-19 pandemic, floods and the Russian invasion to Ukraine. All these factors together created the perfect storm for an already fragile economy. As it is usually the case, this crisis affects the most to lower income sectors, making it necessary for many South Africans to start reducing the cost of living in order to avoid asking for loans to get by.

One of the most visible effects of any economic crisis is inflation. And today, South Africa is experiencing levels of inflation not seen since 2017. According to the Department of Statistics of South Africa, inflation is at a level of 6,5%. The rise in price affects all sectors, starting with the price of fuel, and in turn impacting the cost of transport and food.

This rise of the cost of living together with high rates of unemployment (especially among the youth) is posing enormous challenges for many South Africans: making ends meet is becoming more and more difficult. Despite this challenge, there are certain actions we can take in order to cut down expenses and face this crisis.

Keeping a Record of our Expenses

Often we hear people say, “I don’t know where my money goes”. Well, you should. Registering our daily expenses will give you a better understanding of how well you are managing your money. It would be wise for you to draw up a budget where you could detail how much money you need for food, rent, insurance, paying off debt, and so on. This will help you visualize how much money you actually have to spare.

Another thing you should keep an eye on is your credit card bills. Are you spending more than you can afford? If you are, try to establish a plan to cancel those bills. Also, in order to avoid overspending, pay with cash. When you pay with credit, you are more likely to spend more than you should. Plus, if you are unable to pay the credit card bills in time, you will have to deal with high interest rates.

Cutting Down Expenses

Once you audited your spending habits, you are ready to cut down those unnecessary expenses. Do you eat out or order meal delivery service often? Consider eating at home and cooking homemade food. A good idea would be to know how much money you usually spend on things like eating out, going to the movies, buying clothes (you don’t actually need) and start using that money for paying off personal loans you might have or your credit card bills.

This does not mean that you should forget about indulging yourself for good. This is about navigating a crisis and tidying your economy up. Once your finances are back in order, you can set out some amount of money for giving yourself a treat. Moreover, there is always a way to make extra money. Depending on your situation, you could consider asking for a raise or looking for a better paid job. If you are young, and you are looking for your first job, you could take online courses to make your resume more appealing. Also, you could start your own business on the side. Think about what your abilities are and if you could put them to use to make money. For instance, there are people who are great at knitting and not only do they sell their designs, but they teach others how to knit. Moreover, you don’t even need a physical location since you can sell these courses online!

As the iranian-american economist Roubini puts it: desperate times require desperate measures. A lot has happened these last few years. The COVID-19 pandemic was a great blow not only because of what it meant in terms of the economy, but also, and mainly, because of the many lives that were lost. We are still experiencing the aftershocks of the pandemic, and we’re facing new challenges. However, despite the crisis and the soaring inflation, there are steps we can take to navigate this crisis and avoid asking for loans we do not actually need.

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