Ensure your risks as you manage your budget in tough economic times

Consumers are reeling from price pressures and will have to start spending strictly according to a budget, while treading cautiously to cover their key financial risks, says Sonja du Toit from Sanlam, following the release of the latest Consumer Price Index figures in March.

While consumer inflation edged up from 5,8% in January to 5,9% in February (just under the SARB target ceiling of 6%) this might not be the experience of most consumers, given that people’s inflation experience is based on their own budget and how they spend their income.

However, the reality of price increases is felt across the board, says Sonja. “Not only are consumers still trying to absorb the 50 basis point interest rate increase announced in February, but we are also having to manage our budgets to deal with a monthly consumer inflation increase of 1,1% – with food, petrol and health insurance as the main contributors to the upward pressure.”

Sonja says the CPI shows food and non-alcoholic beverages inflation increased to 5,4%, from 3,5% a mere two months ago. Bread and cereal products increased by 1,8% month on month on average, with super maize meal up 4,0% month on month and white bread increasing by 2,6% month on month.

In addition, the petrol price increased by 39c/l in February resulting in a 2,9% monthly increase in the petrol index. This takes annual petrol inflation to 14,0% for the past year – mainly as a result of the 20,4% increase in the oil price and a 23,7% depreciation in the rand over the period.

Sonja says health insurance fees, surveyed in February each year, carry a weight of 7,9% in the consumer basket and showed an average increase of 8,3%.

She says tough economic times call for a disciplined approach to personal financial management, ensuring that families are not placed at unnecessary risk. “Striking a balance to make ends meet can easily take us down a road of multiple choices and the key is to protect what you have while managing your needs.”

Sonja says families are highly dependent on breadwinners for survival and it is essential that people prioritise their commitments to their families through life cover and disability cover.

“It is certainly no easy task to make ends meet and it’s often easier to sacrifice the intangible benefits in favour of other needs. However, the risks and family trauma can be devastating should a breadwinner pass away without life cover, or if a breadwinner should become physically impaired.”