Consumers can definitely look forward to a better 2010 as South Africa and the rest of the world are slowly but surely emerging from the worst recession since the notorious thirties of the previous century, says Willem Barnard, marketing manager, of Sanlam in Limpopo.
The international financial instability over the past months caused many an ordinary salaried worker serious problems. High prices, increasing unemployment and a big drop in real estate prices were the order of the day.
Economists agree that the worst is, thankfully, over and that the consumer will have a better time of it from now on. But this will not happen overnight and everyone will still have to maintain a strict financial discipline in the foreseeable future.
The only consolation is that interest rates have dropped, which brought relief to consumers with large home and car loans and bank overdrafts. It is, however, highly improbable that rates will be further lowered soon. The expectation is that rates may rather start to rise again in the new year.
In the light of this, consumers will still have to put a damper on their desire for a shopping spree and steer clear of any new debt, especially to finance consumer spending. Many a company has cut their expenditure to the bone in an attempt to survive the current recession and consumers may well follow their example.
The end of the year usually means that it’s time for a holiday. It may be wise to choose cheaper accommodation closer to home and not to go overboard on extravagant parties and expensive Christmas presents. Concentrate on home entertainment and practical gifts. You can always go overseas again another time.
For many people, the year-end also means big bonuses and thirteenth cheques. The wise consumer will rather use this money to pay off existing debt, start a study fund for the children, take out an annuity or put the money into unit trusts.
Although it is still a buyer’s market, it makes financial sense to rather improve your existing home than bury yourself in debt for your dream house. Resist the temptation to treat yourself to that new car in the dealer’s window and rather keep your trusted old family car for another year.
The new year is also a good time to have another look at your personal finances. Do you have sufficient life insurance? What about your pension and medical funds? Is your nest egg in the bank large enough to cover those big, unforeseen expenses?
It may be a good idea to contact your financial consultant so he can analyse your finances and suggest changes where necessary. Consultants are well trained to suggest solutions that are personalised to fulfill every individual’s specific needs.
Make a special effort to save more in the new year. South Africans are infamous for running up debts and not saving enough. There is no better time than now to turn this situation on its head.
Consolidate your debt so you pay a lower interest rate. Pay your most expensive debt off first, such as your overdraft, credit card debt and personal loans. It you have to borrow money for essential expenses, it will be better to use your home loan for it as this is currently the cheapest way to borrow money. But pay it back as soon as possible when your financial situation has improved.