The Impact of Inflation on the Cost of Living

Consumer inflation rose in July as the consumer price index (CPI) came in at 7.8% year on year compared to 7.4%  year on year in  June (Stats SA). The July headline CPI was above the upper limit of the South African Reserve Bank’s (SARB’s) 3%-6% inflation target band.

Food, electricity and fuel prices were key drivers for the inflationary overrun.

As prices continue to increase in South Africa, so does the cost of living. As consumers spend more of their money to live, in the end they have less disposable income to pay for their monthly debt obligations.

The cost of living is worsened by the interest rate hikes. The  South African Reserve Bank (SARB) increased interest rates to try to lower inflation. This is a global trend as central banks globally attempt to slow inflation.  The SARB raised the repo rate by 75 basis points to 5.5%. The prime lending rate is now at 9%.

South African consumers are faced with rising prices and wage increases that are below inflation. This means that consumers will experience a decrease in the purchasing power. Their disposable income will buy fewer goods and services as inflation continues to soar.  

As the cost of living goes up, consumers are pressed to spend more of their wages on paying for rent, mortgages, and groceries. In the end consumers will struggle to service their debt and end up defaulting on their obligations as they have less money to pay their debts.

All hope is not lost. There is good news. While inflation bites and food, electricity and fuel prices are rising every day, which you have no control over, you can control how you budget and but these items.

Here are a few things that you can implement to curb inflation and save money on things like grocery shopping.

Budgeting

Tracking your income and expenses is an effective way of managing your money, understanding where your money goes.

Shop around before buying

It is very important to do your research before making any purchases to find out which supermarkets have specials. Then have the grocery shopping list based on the specials. You can take this further by planning your meals as well.

Eliminate on wasting food

Before buying any food, take a pretty good look at what is in your pantry before heading to the shops to replenish the food stocks. This will help in eliminating the number of trips to the shop and thereby save on groceries. So try by all means to use what is available.

Change where you shop

Its time to buy groceries from shops where they keep prices low for their customers e.g Shoprite or have good loyalty programs like Clicks.

Shop generic products

Generics are cheaper when compared to name brands. The taste and quality of the generics is just as good as the name brands.

At Debt Sage, we assist with the debt review solution should the cost of living continue to increase to cushion consumers as inflation bites. We can assist by reducing consumers monthly installments to reduce the monthly debt obligations. That way one can continue to service their  debt.