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Savings and investment critical to achieving financial freedom

In his Budget Speech, Finance Minister Tito Mboweni announced an increase of R15 billion in tax paid by consumers. Fuel levies will increase by 29 cents per litre for petrol and 30 cents per litre for diesel. While these increases consolation for the man in the street who is already under pressure. Within the current economic environment, it is not only Government that needs to cut down on spending. The average South African will need to cut back on non-essential spending if they want to be able to save.




As was widely expected, no increases in personal income tax were announced. Instead, to boost collection of personal income tax, taxpayers who have received nominal increases in tax brackets, resulting in an increase in income taxes, but no increase in real purchasing power. With slow economic growth continuing to put pressure on consumers, it is clear that now is the time for South Africans to curb unnecessary spending, pay back debt as quickly as possible and invest carefully.


The 2018 Old Mutual Savings and Investment Monitor revealed supporting their extended families and high amounts of debt to repay. Consumers should take a conscious look at their expenses, see what they can cut back on, avoid unnecessary spending on luxury items and pay off short-term debt, such as credit cards or retail accounts, which carry higher interest rates, with any spare money they may have.


Sustainability was also a key theme in the Budget, which is not surprising, with carbon tax (tax levied on the carbon content of gas released into the atmosphere) implementation in sound, quality and responsible companies will continue to grow as investors continue to align their personal philosophy


Consumers, especially millennials, are holding companies more accountable for how their behaviour impacts society and the environment. A rapidly transforming world makes responsible investment an imperative, as having a long-term investment view is an essential part of ensuring a sustainable future. Environmental, social and governance (ESG) investment funds have repeatedly demonstrated that the funds can not only meet, but often outperform investors’ return expectations.


While the 2019 Budget may have highlighted a bumpier road ahead for the national economy, this doesn’t mean that South Although it might not feel like it, there is still capacity to save and invest, given that households currently spend 67% of their income on living expenses and consumption according to the 2018 Old Mutual Savings and Investment Monitor. It is essential to differentiate between essential and non-essential spend. It is not always important to keep up with the Khumalos - financial freedom is far more valuable.


ELIZE BOTHA

MANAGING DIRECTOR OF OLD MUTUAL UNIT TRUSTS

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