Financially Speaking July (#1) 2008

It’s not earth that’s in peril, it’s us. And it’s not the markets that are in peril, but us.

Dear Client,

Monthly financial advice:

As we continue into this climate of escalating direct costs (fuel, travel, interest rates, electricity, food) and the resultant higher inflationary cycle, we all know that we might have to reduce our spending. However we need to be careful as to what we just stop doing with our money and instead, look at where we can reduce costs. By this I mean that your first thoughts should not be to stop your savings programs, in whatever form they might be; bank accounts, retirement annuities, discretionary unit trust investments, medical aid cash accounts, extra money to your bond etc.

When interest rates and inflation is on the increase, we often find that the stock market becomes cheaper. In other words the listed price of equities – listed shares that you invest into via your unit trust funds – might become cheaper to buy. So these are actually times to buy or keep buying, not to stop buying.

There are a few other things we can become aware of that wastes our money or where we should reduce costs. These things should be our first measures to attempt to cope within our income:

  • Reduce your driving speed. Most of us travel too fast – admit it. Doing 80 in a 60 zone, 130 in a 120 zone etc. Without being legalistic here, your fuel consumption rises exponentially with speed. Most of the fuel used above 75-odd km/h is used just to overcome air resistance. On the highway, become patient enough to now drive at 115 or 120, in town at 60 or 70.
  • Then the resultant speeding fines of the above point are such a waste of money. Over this past year I have been caught twice at the top of Van Reenen’s pass where you have to suddenly do 80km/h. It has bothered me to have to pay R1000 out for that. Pay attention to speed limits and we won’t waste money on fines.
  • Don’t do that trip in your car that doesn’t really have to be done. We can stay at home sometimes, we don’t always have to be out doing something every day of the weekend.
  • Get up into the ceiling and turn your geyser down 10 degrees. Chances are its too high anyway.
  • Don’t use the hot tap for a quick bit of cold water. This brings cold water into the geyser, thereby reducing the temperature and causing the thermostat to kick in.
  • Turn your heaters down just that little bit.
  • Reduce your entertainment bill, especially that of eating out.
  • Spend less on presents and parties. An area of huge overspending.
  • Be aware of the length and necessity of cell phone calls.

Just some thoughts…… Use them or lose them.

We definitely are going to continue to need to be cost-aware as incomes will not rise as fast as costs over the next one to two years.

Until next time

Please note that all the views expressed in this publication are based on my opinion and no action or advice is implied or intended.