Has 2020 been the year that tipped the scales and forced you to learn to live on less, or is it just the latest in a long line of tough years for you?
If so, take heart, you are not alone. World-wide, prices are increasing and incomes are decreasing. More and more people are finding themselves swamped by debt that seems to be growing out of control. At the beginning of the lockdown, some people went without income for weeks, then months and a wave of retrenchments has hit South Africa. Over 2.2 million people lost their jobs in the first part of the Pandemic, and that number continues to grow. This means that many families are forced to live on less.
The last few months have taught everybody, everywhere that circumstances can change suddenly and seriously overnight. Factors beyond your control can have a seriously negative impact on your ability to make ends meet. People everywhere are now forced to learn to live on less, including those already in debt review.
How can you weather this storm that began in 2020 and looks set to be around for some time to come? Let’s look at some advice that can guide you in the months ahead, and also consider a few tips that may help you adjust to living on less.
Adjusting Your Mindset When Your Circumstances Change
One of the common reasons people let their financial situation spiral out of control before seeking help is because it’s hard to adjust the way we think about our debt.
Getting Professional Assistance
Many people feel that asking for help, is a sign of weakness. They would rather suffer, and let their situation get worse than seek professional help with their finances.
This is, of course, different to how they deal with other similar situations. If they are ill, the very same person will not hesitate to go to a professional health care worker for assistance. If they have toothache, they will not hesitate to go to a dentist. If their problems or symptoms lasted more than a day or two, after Googling their symptoms, they will soon pick up the phone and make a doctor or dentist appointment.
Getting financial advice (from a Debt Counsellor, for example) is also a sound course of action when a situation cannot be effectively handled by yourself. What would be a poor decision is getting such advice or help from unregistered individuals who could potentially make matters worse. Always deal with professional, properly trained and registered Debt Counsellors.
The Importance Of A Positive Attitude
Another factor that prevents people from getting the help they need, is an unfounded optimism that in some totally unrealistic, undefined and unfounded way, their situation will just somehow “get better”.
While a positive attitude is helpful, it does need to be balanced with an experienced and realistic view of the likelihood of the situation improving. Most times, a more realistic option requires a mental change. The change to realising that you are now earning less, and must adjust your lifestyle. This is not an easy thing to do.
Sadly, many people who, through circumstance, find their income suddenly reduced, carry on living as if nothing has changed. They often delay in making needed cuts and adjustments to spending for so long, that they make their situation much more difficult to deal with. Credit cards get maxed out, loans are made to try to maintain a lifestyle they can no longer afford. If they were in a financial hole before, they have now dug themselves deeper into the hole, and made it much harder.
A Changed Mindset
The best, but often difficult course of action requires mentally acknowledging that your situation has changed, and you need to adjust to match the situation.
‘The best… course of action requires mentally acknowledging that your situation has changed and you need to adjust to match the situation’ It is a simple truth, that if your income has changed, you will have to adjust your spending and habits to match this new level of income. This may require some drastic changes, especially if your income has dropped drastically. The changes in your spending need to match the change in income. The bigger the drop the more you are going to have to do to offset the change.
If you have been hit by changes in income due to the lockdown or economic conditions, then you need to make the mental change first, before you can make effective adjustments to your lifestyle. Don’t cling to the past and make things worse. Find a professional who can assist you to avoid problems that could wreck your entire future.
Why not speak to a Debt Counsellor, and get free advice on how you can adjust your spending or how you can talk to your credit providers about your situation effectively?
Make A Budget Already
You keep talking about doing it but you never do, why not?
A budget is not hard work, it can be as simple or complex as you want. It can take you 2 minutes or it can take you 30 minutes if you get really detailed. If you know your figures (income, expenses and debt repayments) then it becomes easier each month.
List Your Income
If your income has changed (perhaps less now than in the past) it is important to know what your new monthly “take home” figure is. Knowing this figure is key to success when it comes to budgeting.
Remember to factor in all your taxes and contributions each month so you know how much you actually get to take home.
List Your Debt Repayments
(or single debt review repayment amount if you are already in debt review)
Make sure you know what you have to pay each credit provider – what they are asking you to pay, or what you have agreed to pay back. In some cases you have the option to pay only a minimum amount each month, but be aware that paying only the bare minimum will allow the debt to last a really long time or even grow in size.
List Your Monthly Expenses
Make a list of what you normally spend on food, electricity, mobile phone(s), transport, insurance.
Don’t include your debts in this section. For example. If you are repaying a bond that goes with your debts.
Don’t forget your annual expenses. Add these up and divide by 12. That way you know what you need to save towards these monthly.
You also should consider having a list of things you 100% need and then another list of things you would like to have (wants).
Eg. You need food. You need electricity. You need to pay rent.
You don’t actually need your very affordable subscription to Netflix. You want it and it may keep the kids sane but you don’t actually need it. Simply put your ‘needs’ at the top of the list and your ‘wants’ lower down.
If you can see that your monthly running costs are more than you have available, then you can look at ways to reduce your spending, or set new lower limits for your spending.
Eg. If you used to spend R3000 on groceries as a family, but now realise that you need to cut back, you can set a goal of only spending R2000 and try figure out how you will realistically do that at the shops.
Reduce Your Spending To Match Your Income
If you are now having to live on less, you will have to find creative ways to cut costs.
Transport: Do you have 2 vehicles? Could you sell one? Could you downscale from a fancy vehicle to a cheaper one (with lower servicing costs)? Can you switch to public transport, Uber or even a bicycle?
Entertainment: Can you find ways to reduce your spending in this area? Find cheaper hobbies, Read more, get outdoors and enjoy nature, find free or lower cost options of online services.
Electricity & Water: Increasingly these days this cost is climbing. Can you make many small changes to keep costs down? Habits like turning the lights off, closing the tap, having short showers and opening and closing windows during the day can add up.
Food: Avoid eating out or small takeaways each week. Even a packet of chips and cool drink each day will add up. Make shopping lists before going to the shops, to avoid impulse spending. Plan your meals and buy in bulk to get lower prices. Buy fruit and veg that is in season to reduce costs. Could you even grow some of your own veggies?
Clothing: Only buy what you need (no more retail therapy). Shop at ‘end of season’ sales or at second hand stores.
Quit Bad Habits: Are you spending money on gambling, smoking or alcohol each month? These habits can be expensive.
Save: Rather than buying on credit (with its extra costs) save towards upcoming expenses. The longer you save the more you will realise if you really need it or not.
Big Cuts Means Big Changes: If you need to save a lot you are going to have to change a lot. Can you rent out a room in your house? Can you move in with family or share accommodation? Can you move closer to work? If you have not already considered getting professional help to reduce your debt costs each month, it may be time to talk to a Debt Counsellor. Consider more extreme measures if you need to cut costs dramatically.
Working Together As A Family To Adjust To Living On Less
Working together as a family when living on less can really help reduce your personal stress. Trying to hide debt and loss of income from those closest to you, is very stressful and increasingly impossible to maintain. Rather, when everyone is working together to keep costs down (and maybe not complain as much about what they no longer have) it can be a huge help.
Be sure to have an age appropriate conversation with your kids. Don’t leave them out of the loop, it will help them avoid unrealistic expectations and wastefulness.
If you work together as a family to deal with your changed situation it can help keep your family strong and united by your situation rather than divided and hostile.
Living On Less Does Not Mean A Sad Life
By making the adjustment as a family to your new budget, you can avoid tensions and pressure at home. By wisely cutting out unnecessary spending and shopping, you can live within your means and still pay back your credit providers.
Often a change in income helps you focus on what is really important in life. You could even find that the adjustments you make as a result, will help you spend more time with family and friends building lasting happy memories.