Don't cancel your policies to boost disposable income

In 2015, many South Africans have had to do more with less due to a number of factors which reduced disposable income. A substantial number of the country’s taxpayers were affected by the increase in personal income tax as well as the interest rates increases.

Recently, the South Africa Reserve Bank (SARB) once again increased interest rates and many economists have not ruled out the possibility of yet another increase early next year.

Lee Bromfield, CEO of FNB Life says what they usually see during tough economic times is that people downsize or cut-back on some of their regular expenses to create more financial room.

“Unfortunately some people sacrifice in areas such as life or funeral insurance to boost their disposable income. This is NOT advisable because you forgo benefits when cancelling a policy, especially when you have been paying premiums for a number of years.

“Most policies have waiting periods and if you cancel and reapply you often start at zero again. Additionally, whole life policies get cheaper over time for the policyholder and often, when you reapply you might get higher premiums. Even though cancelling your insurance may seem like the easiest option to take, it is a decision which should never be taken lightly.”

There are a number of options which could help people retain their life or funeral insurance policy even if interest rates go up, by adopting some of the following useful tips:

Bulk shopping for basic goods

Retailers always have special deals which could save you a lot of money when you buy in bulk. Try to buy basic goods that will last you at least two months. You’ll be amazed how much you could potentially save.

Maximise loyalty schemes

Use store cards and rewards programmes offered by banks to your advantage. Try to accumulate as many points or discounts by being disciplined about where and how you shop. For instance, if you earn more points by using your bank card, do exactly that, consistently.

Make subtle lifestyle changes to save money

If you and your partner work along the same route, why not travel in the same car and save on petrol. If you use public transport to get to work, consider buying monthly bus trips which come at a relatively lower cost than most modes of transport.

Entertain at home

Going out to have a good time or to enjoy a meal is a habit for some people but reality is that you could do the same thing at home and save a lot of money.

“South Africa’s economy is predicted to remain fairly tough in the short term so it is important to make smart financial decisions until things improve. With better discipline and willingness to compromise, you can avoid being forced to make drastic financial decisions such as cancelling life or funeral insurance,” concludes Bromfield.