Here is a practical guide on how you can get through the recession.
South Africa’s economy has entered a recession for the first time since 2009.
“Officially, recessions are defined as situations where the GDP contracts for two conservative quarters, it’s an attempt at trying to describe a situation where things are actually deteriorating,” Economist Azar Jammine told Eye Witness News.
According to Statistics South Africa, the GDP fell by -7% in the 2nd quarter of 2018 following a 2.2% decline in the first quarter. The 0.7% drop in the GDP was led by declines in the agricultural, transport and retail sectors.
Sadly, a recession means the unemployment rate will increase while there will be a decrease in real estate value and the stock market. Entrepreneurs may have a lack of funds available for borrowing or starting new companies.
Businesses might also feel the pinch as consumers might try to save money and not buy as they used to.
Although it might be difficult to avoid the effects of the recession, we can make individual changes that can help us get through it.
Create a budget
One of the first things you need to do is to create a budget and stick to it.
How you use your money during a recession is crucial. You want to make sure you are not wasting and that you are using your money wisely. Sticking to a budget will help you refrain from using your money for things you don’t necessarily need.
Have an emergency fund
In your budget, allocate money for emergencies. According to an expert, your cash reserve should be enough to cover three to six months’ worth of household expenses.
With the economic state of our country, many people might struggle to save up that much, however, the little that you managed to put aside will come in handy on a rainy day.
Pay off debts
During tough economic times, you might be tempted to skip your debt repayments, however, this is a bad idea. It is very important that you continue to pay your debts to avoid the long-term negative effects this might have.
If you can afford it, try to pay more than the minimal amount that is required. The sooner you finish paying off your debt, the more you will save.
Minimise eating out
This might be the best time to improve your culinary skills.
Although it’s nice to eat out, it can cost a lot. Cooking at home will save you hundreds of Rands.
If, however, you still want to eat out, just make sure you minimise the number of times you do it and be mindful of what you order. This might not be the best time to order the most expensive meal on the menu.
Change your lifestyle
Changing your lifestyle is the hardest thing to do, but it is possible. Although it might take time, you need to be committed to it.
Changing your lifestyle might mean downgrading your car to one that doesn’t cost an arm and a leg. It might also mean minimising the amount of money allocated to entertainment etc.
Don’t buy anything you don’t need
Many of us spend money on things we can live without. This is the worst thing to do during a recession.
If you are an impulsive buyer, it might be best to stay away from the shops. Most stores have the option to buy online and have your purchases delivered. You can use that service to avoid the temptation of going shopping and buying things you don’t need.
Create additional income streams
Use your spare time to run another business, or take on a part-time job, as long as it won’t interfere with your main source of income.
There are also businesses that don’t necessarily need you to have a capital. You can become an agent for a healthy or beauty product company, some of which don’t require you to put money up.
Improve your work
There are a lot of job cuts during a recession, but you can minimise your chances of getting the boot by being the best employee.
Get to work on time, do your work with excellence and go the extra mile.
Visit your financial advisor
Financial advisors are trained to help people make better financial decisions. If you don’t have a personal financial advisor, most banks have financial advisors that are available to help their clients at no cost.
“Over this time your Financial Advisor is there to assist. Chat to them about reviewing your current coverage, making sure you are not over insured and look to see if you can reduce or downgrade rather than cancel products. Basic coverage for health, short-term and risk is better than no coverage,” says Financial Advisor Kerry Moss.
She adds “try not take out any further debt. Look at saving to buy rather than financing it.”