It was announced earlier this year by then Finance Minister, Malusi Gigaba, that as of 1 April 2018 Value Added Tax (VAT) would be increasing by 1%. The increase has hit many people’s pockets harder than anticipated with everything from bonds to medical aids and gym memberships to insurance policies having increased. Yet, salaries and incomes have not increased, so it’s easy to understand why our already stretched budgets are wearing even thinner.
So, just how are we meant to cope financially? Here are a couple of suggestions on how to survive the VAT increase:
Re-look at your budget
Take a look at your monthly budget and review it with a fine-tooth comb. Paying for essentials like bonds, school fees, medical aid, water, and rates and taxes are essentials that cannot be missed and this is where you will see and feel the VAT increase most commonly. There may just be marginal increases in these fees, but they will all add up at the end of the month.
When reworking your budget make sure you understand how much is now needed for essentials with the new increase, this will then give you a clear picture of how much you have left for non-essentials and spoils.
Consider eating in more
Eating out at restaurants or from take-aways and convenient stores, is a daily occurrence for many. However, the VAT increase from 14% to 15% will be added onto your bill for these types of purchases. Consider eating out less and saving more by packing your own lunch. The saving might seem marginal but this change could save you a good few hundred Rands over a month or so.
Familiarise yourself with the zero-rated VAT items
The Government announced there would be 19 zero-rated VAT items, meaning that no VAT increase would be added to them. Familiarise yourself with these items and make sure they feature in your shopping trolley. The current list of zero-rated food items includes:
- Brown bread
- Maize meal
- Samp
- Mielie rice
- Dried mielie
- Dried bean
- Lentil
- Pilchards in tin
- Milk powder
- Dairy powder blend
- Rice
- Vegetable
- Fruit
- Vegetable oil
- Milk
- Cultured milk
- Brown wheaten meal
- Egg
- Edible legume
Avoid Credit
It can be tempting in times like these to expand your store credit or take out a new credit card but credit remains a false sense of security. Most financial advisors will guide clients away from credit to avoid having to pay the usually high interest rates they prescribe. Rather pay cash for items you want or save money over a few months to be able to afford the luxury at a later stage.
Don’t let the VAT increase take you down, surviving it is completely do-able. Be smart with your money and stick strictly to your monthly budget.
Date Published: 25 May 2018
