Budget and buy local to survive difficult economic times

Budgeting and buying local are crucial during the current challenging economic period. “Buying local goods and services will support the Namibian economy. When planning your spending, remember to replace at least one product on your grocery list with a Namibian one,” says Bärbel Kirchner, account director of Team Namibia.

With increasing fuel, food, and other living expenses it is essential to plan and prioritise income and expenses. According to the 2009/2010 Namibia Household Income and Expenditure Survey by the Namibia Statistics Agency, Namibians spend most of their income (47%) on food and housing. Transport and communication account for around 18% of total annual consumption.

Of late, Namibia is experiencing a technical recession with the newest economic growth figure at -1.7%. With inflation being much higher (approximately 6.4%) than the economic growth rate, it means consumers are earning less money.

So, how can one survive these difficult economic times?

“Now, more than ever before, it is time to get control over your finances. Budgeting is the best way to plan and manage your personal and family finance,” says Kirchner.

FNB Namibia, a member of Team Namibia, echoes this sentiment. “In this sagging economy, we need to micro-manage our money on a personal level and watch every cent. This is not only applicable to the population in general but as we have seen – even Government has tightened their belts in these tough times,” says Elzita Beukes, communications manager at FNB Namibia.

The sole purpose of a budget is to formalise the financial management of a family and to encourage members to think about their incomes and expenses. “Some households spend money as it comes in, leaving nothing for the future or unforeseeable expenses,” says Jacquiline Pack, executive officer for marketing and corporate communication services at Bank Windhoek, a Team Namibia member. This unplanned practice may force families into stressful financial situations.

The first step in budgeting is to know one’s income. “It is important when drawing up a family budget that you are familiar with the household members’ needs and preferences,” explains Pack. “Involve the entire family in the budgeting process,” she says. “It is important that as parents we place a greater emphasis on handling money because so much can go wrong later in life because of the mismanagement of money,” says Beukes on why the whole family needs to make contributions to the budget. 

The final take-home pay, after deductions like tax, is called net income. The leftover amount is the figure the family should use in their household budget.

Secondly, it is helpful to keep track of and categorise spending. FNB Namibia offers a useful budgeting tool on its website under the tab called calculators. The family should start by listing all fixed and variable expenses such as rent and groceries. Then they should record daily spending in a notebook or smartphone app.

In step three and four, it is important to set financial goals and then plan the budget accordingly. The household budget allows for planning in terms of saving and generating extra income. The family could use past spending habits to predict variable expenses and then break down the expenses even further. “It is wise to try and achieve an expense over income ratio of 90% because this leaves room for eventualities that may occur along the way,” advises Pack.

Having documented the income and spending, it should be clear where there is money leftover or where the family needs to cut back. They can evaluate spending and adjust habits accordingly. Lastly, the household should review the budget regularly to be sure they stay on track.

“If we want Namibia to improve, we need to buy local goods and services as this will help to strengthen the Namibian economy,” advises Kirchner. When a consumer buys local, significantly more money stays in the community.

“By replacing imported goods and services with Namibian products, consumers help to develop the Namibian market,” she says. “If we buy locally, the increase of demand can cause businesses to stabilise and grow,  resulting in increased employment. Ultimately this means that if we do not buy local, we as Namibians will pay higher social-economic costs such as crime and poor health, which the taxpayer ultimately carries,” Kirchner explains.

“Team Namibia would like to encourage Namibians to replace imported products with Namibian goods when planning their spending for the coming month-end,” comments Kirchner. “By buying local goods and services, Namibians help to make our communities a better place to live in,” concludes Kirchner.