With the rapidly rising cost of living, it may not be clear how much money South Africans need to survive, both while earning a living and in retirement. JustMoney.co.za, which helps South Africans to inform themselves about personal finance, researches some basic expenses and their current costs. There’s also general advice on stretching those rands and staying afloat.  

Gareth Price, founder of both Cloudworx and Investmint, and CFO at BackaBuddy, says that people have different ideas about what it means to survive financially.

He explains that, in general, households should prioritise the basics, such as food, rent, transport, electricity, education, burial insurance, debt repayments, basic hygiene and medical products. He believes that, on average, these costs add up to R7,000-R9,000 per month. 

“If you want to move into the middle class, school fees and rent become more expensive, and you may choose to purchase a car rather than relying on public transport. On top of this, you may take out medical aid and perhaps invest in a savings plan. Here, you’re looking at an income of between R35,000 and R45,000 per month,” says Price.

He notes, however, that the vast majority of South Africans earn less than R3,500 a month, with only the top 1% earning around R45,000. To put this into context, a state old age pension grant offers a maximum of R1,890 per month, or R1,910 if you’re older than 75 years.

Putting a value on retirement

Christelle Louw, advisory partner at Citadel, says that to retire sustainably and securely in South Africa, you will need at least 20 to 30 times your required annual expenses as accumulated capital over your lifetime.

According to Statistics South Africa’s employment report for the fourth quarter of 2021, the average worker’s salary in South Africa is R23,982 per month. This amounts to R287,784 annually, which would require a minimum of R5,755,680 (R287,784 multiplied by 20) for a sustainable retirement. 

Louw adds that financial independence is only achieved by 6% of the population, and that 94% of South Africans will not be able to sustain their income from their savings. This means that their lifestyles will have to be adjusted downwards during retirement, such as living in a smaller home.

Shafeeka Anthony, marketing manager of JustMoney, says that the Covid-19 pandemic, job losses and price hikes for household goods and services have exacerbated many people’s already perilous financial situations. South Africans have numerous concerns, from security, electricity and transport, to quality education for their children.

“It is absolutely vital to assess your financial situation honestly, and to put a plan in place. Getting back to basics and focusing on essentials is the only way that most people will cope with their present needs, let alone growing  investments for when they can no longer work.”

Anthony offers the following advice, based on tried and tested fundamentals:

1 – Work out a budget: Track money coming in, versus your regular monthly bills and variable expenses – those that change from month to month. Bank and credit card statements are a helpful place to start. Soon you will see where your money goes, and where you can cut back. 

2 – Forget brand loyalty: Draw up a weekly shopping list and buy your supplies where you will get the best value. Try out a different grocery brand, you may be pleasantly surprised at the savings. Avoid popping into convenience stores for a few items, this comes at a price. 

3 – Reduce your debt: Firstly, debt is acceptable if it takes a form such as a home loan to purchase your own property. Debt is bad it you borrow money to buy the latest gadgets. If more than a third of your income goes to paying your debt, and you find yourself taking out loans to get through the month, get help before a legal process is started against you. Professional debt review companies will advise you on debt relief and protection from creditors.

4 – Save: It is essential to save, even if it is only a small amount every month. For example, stop buying coffee take-outs, and cancel a gym membership that you hardly use. Allocate these amounts to a separate account, and you will be surprised at how these add up over a year.

5– Build an emergency fund: An emergency fund of at least three months’ income will help mitigate the need to take on debt, or liquidate investments during cash-strapped times.

6 – Check your medical aid: Read over your medical aid plan to ensure it still meets  your needs. Inform yourself about, and use, the benefits.

7 – Maintain Insurance: It’s always best to prepare for life’s unexpected events. Shop around to get the best deal, but do insure your property and vehicle with a reputable company that should pay out when required.

8 – Grow your income sources: Many people are taking on additional part-time work, from book-keeping to teaching English. Online learning has also made it easier to build your skills and qualifications. Explore new ways to boost your income.

9 – Stay money-motivated: Checking how well you manage to stick to your budget at the end of every month is  the most important part of the exercise. Plan for a little treat if you come in on target.

“When we have become used to living a certain way, and enjoying a certain standard of living, the idea of making changes may feel very uncomfortable at first,” says Anthony. “Taking on debt or eating out regularly may seem completely normal. However, making some changes  is the only way that many people will be able to cope with the rising cost of living, and still have funds left over for retirement.

“When planning how to adapt and trim expenses, it helps if you think of the process as taking control of your life. Focus on your long-term goals. Being debt-free is great for your bank balance and your mental health and you are better positioned to realise your dreams.”

JustMoney provides busy and digitally savvy South Africans with easy access to financial products, services and information. This is done by partnering with trusted financial brands and offering articles, money management tools and a full range of financial products and services. See www.justmoney.co.za.