Prices are not escalating, they're rocketing. A quick glance at my article on inflation over the past three years confirms this. Escalating is a generously understated assessment of current economics. What this means is that prudent financial planning is now even more necessary than ever before!
Automobile Association Spokesperson Gary Ronald has warned motorists that they can expect the fuel price to peak at about R13.50 to R14.00 per litre this year, with a chance of the pump price spiking to R15/l depending on politics and the US economy. With many of us already sitting with tightened financial belts, this is of high concern. The natural reaction is to increase our debt when things get too tight...
Fuel costs in early 2009 were, when at the lowest point, in the region of R5,70 per litre. Three years on, we're paying more than double that. If the above predictions are accurate, we'll be paying triple, in just three years. This money either has to come from somewhere (we plan for it) or cut the expense (wiser spending).
PLANNING AHEAD
Whilst the media releases information that will hopefully illicit panic, I hope this information will incite planning! The petrol price increase and the 8% increase in electricity means that our budgeting and financial plans need to be tailored to the new economic factors that effect our daily spending habits.
Our personal financial situations will only suffer if we don't engage with our portfolios and allow ourselves to be flexible with our goals. It may mean that paying off your bond will take a few years extra, but if you're aware of it, you can make the necessary adjustments to your spending plans.
CLEAR DEBT FAST
The Reserve Bank has reported that the household debt to income ratio was 76% in the third quarter of 2012. This means that most of us are in debt, to some degree, which could indicate that we're using our credit cards to fund our lifestyles.
The light, shining in the darkness, is this: improve your ability to spend within your means and save accordingly to cope financially without having to rely on credit cards, overdrafts or any other form of debts. Debt only becomes a trap if we keep going downhill, if we have a plan to move up and out of debt, we will be empowered to make better, sound financial decisions.
BREAKDOWN YOUR EXPENSES
The first place to start is to break down your expenses into three categories:- Neccesities
- Niceties
- Not-just-yets