Compulsive spending sends households into red

Compulsive spending sends households into red

60% of South Africans admit to impulse buying and with Christmas season debt and rapidly increasing interest rates South African households need to take control of unruly household expenses.

The average shopper in South Africa visit 19 stores a month, twice a week they go to the supermarket and 60% of South Africans admit to impulse buying according to ACNielson, an international marketing research company.

Groceries are one of the biggest culprits of household expenses and ACNielson states that R16 of every R100 spent on groceries in South Africa goes towards alcohol. It is the largest category of spending and growing at 8.7%.

"People only really begin to budget household expenses when finances are already out of control" says Saul Geffen Chief Executive of MortgageSA, South Africa's leading mortgage originator.

"Most households are aware of what money is coming into the house every month, but many have no idea where it is going to.

"This becomes a very dangerous financial position to find yourself in" warns Geffen.

"Pay yourself first" urges Geffen. "With urgent household bills coming in every month it is very easy to get caught up in the here and now and not worry about the future. Before you pay any bills, set aside a certain amount every month into an investment that is not easily accessed.

"Better still, put in a debit order so that you are unable to change it that easily," advises Geffen.

"Calculate all your fixed household expenses such as mortgage, insurance, telephone and internet lines and car repayments; everything that is a set monthly payment," says Geffen.

Shop around for the best deal you can possibly find, this includes household insurance and your mortgage.

"Now, it is the more tricky part of the process, accounting for all the additional, fluctuating expenses" says Geffen.

"If you are serious about cutting household costs you will need to be prepared to plan and organise. For the first two months keep every single receipt that you get throughout the month, including petrol, groceries and dinners out," says Geffen.

"Write down payments made in cash and include seemingly superfluous expenses such as car washes, dry cleaning, gifts and money spent at petrol stations and corner shops.

"Calculate all your monthly expenses against your total monthly income and hopefully, it should be above zero" says Geffen. "Even if it is well above zero most households will be shocked at the amount of unnecessary money their household is hemorrhaging.

"Once this is completed, set up a reasonable budget which makes provision for each of the category" says Geffen. "The more specific the category the more control you will have over your budget.

It might be advisable to even split your grocery budget into sections in the beginning to ensure that 16% of your entire grocery bill isn't going towards alcohol or other unnecessary items," Geffen recommends.

"This doesn't mean that your family should go hungry, there are many alternative cheaper options such as no name brand products that can be substituted to meet the budget," says Geffen.

While it is unlikely that you will always be within budget - the aim of this ongoing exercise is to create awareness of household spending.

"Once your budget is up and running you should be conscious of what money comes in and out of your household and you will be in a far better position to control the outflow" Geffen concludes.

Hello ooba news

ooba (formerly MortgageSA) welcomed the 0.5% interest rate cut announced yesterday by the South African Reserve Bank which will save South African home owners an estimated R259m in home loan repayments each month, but says more cuts are needed.

According to a new poll by South Africa's leading property listings website, nearly a third of home hunters decide that a property is right for them before they even enter the house - and a kitchen is overwhelmingly the most important room when it comes to the buying decision. has entered into a partnership with to provide access to the latest fractional ownership listings which will be available from the 12 December, 2008.

South Africans spent over R10 billion during the festive season last year. This year ooba suggests carefully planning your holiday season spending to avoid a financial hangover in January 2009. "Festive season debt can take months to pay off in the new year," says Jenny Rushin, Provincial Sales Manager for ooba (formerly MortgageSA).

Weak economic conditions, higher interest rates and the global credit crisis have forced banks to be far more picky about who they will lend money and less generous with their lending rates. But Mary Jane Lefevre, Regional Sales Manager of ooba, said that before you apply for a home loan, there are steps you can take to improve your credit status and encourage lenders to look more favourably on your application.