South African Investor contributor, Chris Hart is convinced that South Africa will be declared a junk economy before the end of 2016. He is also convinced that before 2019, you can expect the rand to hit R60 to the dollar.
This proves that the markets are going crazy! Tough times are ahead, which means that you need to start saving up more money now instead of making more debt.
With the repo rate unchanged at 7%. This means the prime lending rate stays at 10.50%. This is still quite high, which is why you need to make sure that you increase your savings and reduce your spending right now.
We’re certainly not out of the woods yet, when it comes to inflation. In the short-term inflation will increase dramatically which means you’ll be spending more and getting less. By increasing your savings, you’re getting a higher return on interest. By increasing your debt, you’ll be paying higher interest rates.
So, you need to start paying more towards your highest interest bearing debts like credit cards and personal loans. Once these are paid off, put as much money away as possible. In the next few months, this cash will come in handy when you need it for essential items like groceries, petrol and general day-to-day living expenses.