Cutting the coffees, tossing the takeaways and pulling the plug on your pricey TV package can save you quite a bit of money, but when things are really tight you need to make big budget decisions to save more. We took a look at some of the expensive items in the family budget and found 5 areas where you can cut the costs by more than R1 000 a month, freeing up much needed funds. Be warned, these are big changes. Before taking the leap, take your time thinking about what these changes might mean to you and your family, and do the sums to see how much you will save.
1. Save on medical aid: Switch from a comprehensive plan to a hospital plan
Medical aid is an expensive budget item and although you want the best care you can afford, sometimes comprehensive medical plans just have to come out of the budget. The good news is that there are alternatives that can ensure you and your family are covered for medical emergencies and hospitalisation. We priced moving from a medical aid plan to a hospital medical aid plan for a family of four.
|Medical aid comprehensive plan (Bestmed network option)||Hospital plan medical aid (Fedhealth network option)||Monthly savings|
|R6 970||R3 365||R3 605|
This is based on zero employer subsidy, if you receive an employer subsidy the savings may be less but should still be more than R1 000 a month.
You could also switch to a network option if you are not already on one. Network options require you to use specific doctors, specialists and hospitals, and are much cheaper than non-network options. For example, the difference between premiums for a family of four on Discovery’s Classic Saver plan and Classic Saver Delta plan (network option) is R1 809.
Top tip: Medical aid members can take out gap cover policies to cover all or some of the shortfall between what a healthcare provider charges and what their medical aid covers.
Other ways to save on medical cover
Investigate low-cost healthcare options such as a primary care health plan and/or hospital cash back insurance. For a family of four we found a primary care health plan for R2 275 a month and a hospital cash back insurance policy for R567 a month
2. Save on housing costs: Downsize your house or consider co-living
You love your house, but home loan repayments are just too high. And there’s all the maintenance costs, security and insurance! Downsizing and moving to a smaller, more affordable place is an option.
|Home ownership cost for a R1.6 million home||Home ownership cost for a R1.1 million home||Monthly savings|
|R15 096||R10 297||R4 799|
We assumed a 20-year bond and an interest rate of 9% and added in rates’ estimates.
Top tip: Don’t forget about the costs involved in buying a house as you will need cash on hand to pay these.
Other ways to save on housing costs
- Co-living: If you share a home with family or close friends and share expenses, you can save significantly.
- Rent out a room: Rent or Airbnb a spare room or garden cottage in your home to earn some extra money to put towards housing costs. You could even rent out a room as office space.
- Rent out your house and rent a cheaper property to live in – just make sure the rent on your house covers your bond, rates and taxes or levies etc.
Top tip: Take care when selecting tenants. Check their references, ask for payslips and do a credit check!
3. Save on education costs: Move your children to a government school
Government schools, for the main part, cost less than private schools. And many offer a good education and have decent facilities. The lower fees can make a big difference to your budget, and if necessary free up some funds for extra tutorials and extra lessons. We priced a mid-range private school and ex-model C school for a Grade 8 pupil.
|Private school fees (per month)||Government school fees (per month)||Monthly savings|
|R5 666||R2 500||R3 166|
Other ways to save on education costs:
- Private school fees vary greatly, and we found low-fee private schools priced at R39 000 a year, so there are options if you look around or don’t like the government schools in your area
- Online or home schooling can save money and is also an option to consider
4. Save on car costs: Downgrade your car
Your car needs to be safe, reliable and cost-efficient to run and maintain. It doesn’t need to be the newest or most expensive make and model.
Downgrading to a cheaper model or to a used car is a great way to save money. You can use inspection services for used cars, such as Dekra, to make sure you don’t buy a lemon.
In our example below we compare the monthly repayment on three different VW Polos, to see how much you could save by moving to a less expensive option.
|New car, top of the range, monthly payment||New car, bottom of the range, monthly payment||Used car monthly payment||Monthly savings|
|R5 922||R4 617||R3 471|
Top of the range model to a used car:
Top of the range model to a bottom of the range model:
Bottom of the range model to a used car:
* The new car prices are R372 000 (top of range) and R290 000 (bottom of the range). A 2017 model, 55 000km, average price is R218 047 according to Autotrader.
- Check the outstanding amount on any car loan or finance and make sure you can sell or trade in your car for at least this amount or you will have to pay in the amount you still owe
- Visit car dealer blogs like Autotrader for tips on buying second hand cars
Other ways to save on the cost of car ownership
- If you are a two-car household, consider selling one car and using ride hailing services like Uber when necessary – especially if you work from home
- It might be cheaper to sell your car and Uber or Bolt, but do the sums first!
5. Save on savings: Reduce your pension fund/retirement savings contributions
Okay, we know there is a lot of advice to never do this because it can be damaging in the long term – but sometimes there is just no other choice.
How much you save is up to you, although your employment contract may stipulate a minimum that you may have to invest each month and you may not be able to reduce your contribution if you are already only contributing the minimum.
Top tip: Speak to a financial adviser or your HR team before you make any changes. They may be able to help you find other ways to save while keeping up with retirement savings.
And when you are able to, increase your contributions so you make up for the savings lost when you contributed less.
Before you make any decisions
These are big changes! Evaluate your options and consider booking a one-off session with a financial adviser before you make any final decisions. They will be able to offer you an independent view and expert advice on your options to see if there are any other ways to save.
You can make big budget decisions and save big amounts
When you need to save a lot you will need to make big budget decisions. As you can see from our calculations, they really can add up to a lot, which means a lot less financial stress when things are really tight. Good luck!