5-ways to help prepare for a fuel price hike
20 July 2016
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On mobile, on digital, on demand, this is Old Mutual Live, the Money Coach edition. Hello and welcome, my name is Chris Gibbons and joining me now from Old Mutual in Johannesburg is John Manyike, Head of Financial Education at Old Mutual. John, welcome, good to have you with us. We’ve just had a petrol price increase and quite a nasty one too, it’s going to hit folk in their pockets. So my question to you, on this edition of Old Mutual Live Money Coach is what can people do to ease the pain?
John Manyike: Hi Chris, thanks for having me and looking forward to the chat today. As you can imagine, many South Africans might be forgiven for feeling a little bit punch drunk at the ongoing increases of living expenses. In particular the petrol price that we’re seeing that has gone up. Of course, coupled with all other rising costs, like electricity and interest rates and so on, it’s certainly a testing time for many South Africans.
CG: What are the options, how do I keep some money in my pocket?
Plan for the year ahead
JM: While many of these costs might seem to be a bit out of control because we have no control over these rising costs. But as you said, there certainly are steps that we can take to limit their impact on us. The first thing, there are five steps we’re going to recommend today. The first one really is about planning ahead. This means we need to list our financial commitments for the year ahead and setting aside all necessarily amounts to meet this.
Some people might say, but how, if I don’t have money…I think this exercise will help people to actually prioritise what are the things that they cannot live without and what are the things that they can do without. Planning ahead and listening your financial commitments and making provision for them, through a budget, is certainly one way to do that because it helps to stick to that plan.
CG: Okay, that’s the first one, you said you had five, what’s next?
JM: The second one, which is also linked to the first step, is around living within your means. For many South Africans, it’s quite hard to actually make a lifestyle adjustment. But if you’re feeling the pinch, it might mean you need to adjust your lifestyle.
You certainly need to make sure you live within your means. One way of doing that is if you are driving to work, you might want to explore all options. Whether you need to be using a train, or some form of public transport, or even a lift club. But somehow we have to live within our expenses, we need to adjust our lifestyle to suit our pocket, to be able to survive these tough economic times.
CG: And seriously look at, as you suggest, sharing ride, carpooling, things like that. Number three?
You need to pay off high interest debt
JM: Then number three, it means we also need to pay off high interest debt. The reason this is so important Chris is because usually when there’s a petrol price hike, it tends to affect the price of transport for many people. For people in the lower income segment, it’s even more difficult because some of them would actually spend almost a third of their wages towards transport costs. In that situation we certainly need to prioritise our high interest debt.
Because if the price of petrol is going to affect maybe the price of food or any other prices, it might actually push up inflation. If it pushes up inflation, you’re most assured that the Reserve Bank will be tempted to increase interest rates. If that happens, then it means that those debts that we have are suddenly going to become expensive. Because your mortgage might go up, if the interest rate goes up. Which means we need to actually focus on paying off high interest debts during that time.
CG: That’s number three, number four?
JM: Number four is also linked to number three and that means we need to charge down our debts. Charging down our debt means paying a little bit more than what is required in order to actually gain some savings there. So we need to work out what are the things that we can do to make some adjustment. Rather put more because if you pay off your debts faster, you actually are working towards your financial freedom, so to speak.
CG: And last, last but by no means least?
JM: I think before we get to the last one, maybe one other thing to add on there. Is that if you’re charging your debt, but it also means that you might have to use cash bonuses or any other cash windfalls. It might be your stokvel payout, it might be your 13th cheque, whatever form of bonus that you can get, to actually put extra on your debts.
CG: Good advice.
Treat saving as an expense
JM: Last one, we’re saying, we always encourage people to pay themselves first. The most difficult part is you’re going through an economic downturn where you owe a lot of people, you pay everybody and you end up with nothing. We’re saying, pay yourself first and by paying yourself first, we mean you need to actually put money aside and save. It means you need to treat savings as an expense.
We’ve just come off the announcements of the Old Mutual savings and investment monitor and we’ve picked up that almost half of the people are saving less than they were saving a year ago. We’re just simply not saving enough in South Africa. It means we’re actually relying on foreign direct investment to actually fund infrastructure development. Which we need as a country to create employment. We really need to focus on our savings because it’s very important for us.
CG: And also, let’s not forget, there are some basic tips for how you drive on the road, do away with aggressive driving.
JM: Absolutely, we need to take our foot off the accelerator a little bit. Because if you’re going to be driving at 140-160km/h, especially those long trips, you’re guaranteed a visit to the next filling station, you certainly need to drive more carefully there.
CG: Don’t use the air conditioner if you can avoid it, don’t be hard on your brakes, keep your car serviced regularly, keep your windows closed. If you show diesel, shop around for diesel prices and travel at a regular speed.
If you’ve got cruise control, use the cruise control. Just think about the way you drive. John, let’s just recap, we’re listening to Old Mutual Live, the Money Coach edition, on demand, visit dogreatthings.co.za. What are the key things we have to remember, those five major points you’ve just made?
The key things to remember
JM: Okay, to summarise the five points in conclusion, we said you need to plan ahead. So that is listing your financial commitments for the year ahead. Number two, we said live within your means, adjust your lifestyle, cut out unnecessary expenses and shop wisely. Number three we said, pay off high interest debts. Number four we said charge down your debt, paying a little bit more. Using your cash bonuses, whether it’s a stokvel payout or whatever means of cash that you can find. Use that to charge down your debt.
Then last, but not least, we said pay yourself first. That means investing your money, that means rather have some money that you can save for future. Whether it’s for your retirement or children’s education, but definitely make sure that you pay yourself first.
CG: This has been another edition of Old Mutual Live, the Money Coach edition. My name is Chris Gibbons, with me on the line from Johannesburg has been John Manyike, Head of Financial Education at Old Mutual. John, if the listeners want more information, where would they go?
JM: They can join our digital community on Facebook, which is On the Money Financial Education Programme or follow us on Twitter, which is OM_OnTheMoney.
CG: Twitter or on Facebook, there you go. Get in touch anytime, if you have any questions for either John or me or topics you’d like us to cover, on Old Mutual Money Coach, please feel free to send them direct to me at email@example.com. We would be delighted to hear from you. Until the next time, thank you for listening, Old Mutual Live, on mobile, on digital, on demand.