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There’s been a lot of talk about our downgrade to junk status, and although we all understand that anything that sounds like garbage is clearly not good news, everyone is waiting to see how it’ll really impact their pockets.

According to most of our economists the average South African will not be much affected by the downgrade in the short term, but in the long term we can expect rising inflation, higher interest rates, and higher fuel prices due to the weaker rand, which means the cost of living will rise.

Wynand van Vuuren, head of claims and legal at King Price, predicts that the knock-on effects will make it much harder for most families to pay for big-ticket items like cars, and home loans will also become more expensive to pay back. SA’s status will affect food prices, and taxes could rise, too.

‘On the up-side, we’re in a rare situation where we can in fact see the future,’ says van Vuuren. ‘We know beyond reasonable doubt that tough times will soon be very real, which is why the time to act is now.’

Van Vuuren advises families to undertake a ‘financial fitness’ session and analyse the reality of their bills, set goals, determine needs vs. desires, tackle debt, and budget.‘Underestimate your income, overestimate your expenses, and save for the unexpected, to ensure you have the cash-flow to spend on priorities such as education, healthcare, housing and insurance, in future.

‘Start saving as much as possible to build a buffer for the difficult days ahead, don’t spend on non-essentials, and take a calculated approach to shopping for necessities.’

When trying to optimise their budgets, many people make the mistake of stopping their ‘rainy day’ plans, like investments, insurance and healthcare. But, says van Vuuren, these solutions are there to keep you going when the going gets tough, and should remain a priority.

‘If things happen… Like burglaries, car accidents and serious illnesses… While you’re trying to save money in the short term, you’ll ultimately find yourself in financial difficulty for much longer.’

Your insurance is one investment that could offer comfort in this time of risk and extreme uncertainty.

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