What goes up…
By: Ilan Preskovsky
“The health of the stock exchange frequently has less than nothing to do with real-world personal finances.”
This article, I must warn you in advance, is going to be something of a bummer. Considering the subject matter and how it negatively affects the vast, vast majority of us, this is pretty unavoidable. It will also, I hope, offer at least some rays of, well, hope – or at the very least some idea of practical steps that can be put in place to improve things.
You don’t have to be an economist to understand that the cost of living tends to rise rather than fall over time, and South Africans are probably more acutely aware of this than most. Along with the usual economic forces that affect people all over the world, we also have a currency that has gone from being nearly equal to the US dollar to being just short of R20 to the dollar in the space of thirty short years. And though it would be insane to suggest that, overall, our Jewish community has been as badly affected by these trends as South Africa’s massive and constantly growing destitute class – not least because of the truly exceptional support systems we have in place – the cost of living a Jewish life has gotten ever more wildly out of control as the years have gone on.
But, however bad things had been even through the 2008 worldwide economic crisis and a Jacob Zuma presidency that kicked off around the same time, nothing could have prepared us for catastrophic effects of Covid19 in 2020 – and that’s without getting into the deaths it directly caused and the mental illnesses that it exacerbated. The worldwide economy nearly collapsed, the rand took a swan dive off the highest cliff it could find, countless people lost their jobs, and the price of even the most essential items seemed to go up a rand every time you so much as passed your local supermarket. Worst of all, though, is that even after lockdowns ended and the global economy started to rapidly and steadily improve to the point that stock exchanges the world over sky-rocketed to levels unheard of in years, the pinch that regular people were feeling only continued to increase. And we’re not imagining it either. A quick glance at Stat SA’s consumer price index between 2017 and 2024 is sobering, to say the least. The price of white bread increased from R13,41 to R18,54. That’s roughly 40% in seven years. 2,5kg of Sugar went from R37,18 to R63,98. A 73% increase in the same time period. 1kg of tomatoes? R16,04 in 2017 and R35,75 in 2024. Roughly 125% for those keeping track at home. And these are just the most basic of basic necessities. It’s even worse when you start looking at anything even slightly more extravagant.
Quite why prices are so thoroughly out of control is well beyond my pay grade, but it’s not hard to understand what it means. It means that the health of the stock exchange frequently has less than nothing to do with real-world personal finances. It means that there is something wrong with the whole system. It means that virtually everyone, save for the insignificantly tiny minority of the mega-wealthy, are far worse off financially than they were a mere few years ago. Exponentially, even. It’s all but impossible not to feel the pinch, even if it hurts some more than others.
A Community in Crisis
To get a better understanding of the situation in terms of our community, I spoke to Saul Thomson, CEO of the Johannesburg Chevra Kadisha, and Lauren Silberman, CEO of Yad Aharon and Michael. Needless to say, neither organisation needs much of an introduction, and both are perfectly situated to see just how dire things have gotten: the Chev for the general welfare of the community and Yad Aharon for providing basic food parcels to those who are in such dire straits that they’re not sure where their next meal is going to come from. Though the Chev are clearly working on a much wider scale, what Silberman has to say is probably even more frightening. Being in horrible financial trouble is one thing, being food insecure is quite another.
Silberman notes that the biggest change over the past five years or so, since the onset of Covid, is that “the demographic of people who come to us has changed vastly these past few years. In the past, the people we helped were indigents, the sort of people you would traditionally think of needing a hot meal. What we see now, though, are families with both parents working and drawing salaries, who have the school fees of their children subsidised, and often get welfare from the Chev, still being unable to come out to such a degree that they can’t afford basic groceries. It’s heartbreaking.” Thomson certainly sees a similar shift at the Chevrah Kadisha. “Since Covid, there has been an increase in the number of community members requiring help,” he explains, “During Covid, when we were experiencing a drastic increase in need and were assisting with our Emergency Relief Fund, the growing numbers of those needing help included younger families. Our expectation was that the need would normalise over time. [But] as a result of macro-economic factors such as a struggling economy, inflation, and high interest rates, it has been very difficult for the people we assist to get back on their feet. We are keeping families afloat where a breadwinner was suddenly retrenched or a once-thriving business is now barely keeping its doors open.”
To put things in an even starker perspective, the simple numbers are staggering. Yad Aharon and Michael assist some 750 families a week or about 1700 individuals, while the Chev, according to Thomson, “reach several thousand people with nearly R80m in welfare assistance. This is almost 22% of the Chev Group budget.” This is why both organisations are always in such need of donations – their only revenue source – and why their application processes are as thorough as they are.
Changing the Things You Can Change…
Thank G-d for these incredible support systems, but it’s far better for people to be financially secure than to rely on welfare. Obviously. And obviously, there are many, many times when such things are completely out of one’s hands, but that needn’t always be the case. To further understand this, I turned to two different financial educators, Gary Kayle, CEO of Worth Financial Education – a financial education business that “builds financial behaviour solutions for banks and insurers, to improve the cash flow of customers and to bring their debt to reasonable levels” – and Jonathan Penn, a chartered accountant and certified financial consultant who has worked for years as a financial coach, to shed some light on how to take control of one’s finances in difficult times. Interestingly, despite their differences, both actually ended up taking a fairly similar approach to it.
In many respects, it’s the sort of approach that is at the heart of coping with everything that life throws at you and can be best summed up in those famous lines from the Serenity Prayer: “G-d, grant me the serenity to accept the things I cannot change; courage to change the things I can; and wisdom to know the difference.” When it comes to financial struggles, especially, it’s worth understanding that if you’re not “coming out” at the end of the month or if you’re drowning in debt, you’re the rule, not the exception. As Kayle puts it, “If you have credit cards, bond payments, car payments, owe your mother in law some money, and things just aren’t working financially… take a deep breath: you’re normal.” This is clearly the case. Even ignoring the particulars of South Africa and without getting into the whole “late-stage capitalism” argument, there’s no denying the massive rise of wealth inequality on the one hand, and an increasingly shrinking and struggling middle-class on the other. Now, whether it spurs you take political action to “fight the system” or to shake your head in weary defeat; whether you find solace in the fact that we’re all in the same boat or frustration at the same fact, you can’t deny that this is the reality in which we (almost) all find ourselves.
It is clearly, however, not an option to just bury one’s head in the sand and hope for the best. Not a good option, anyway. If the situation is what it is and looks set to only get worse – at least for the foreseeable future – both Kayle and Penn paint a clear picture that if we can’t change the situation, we have to change our approach to it. We can’t change inflation, out-of-control food prices, the cost of education, or how if someone sneezes in China the markets in New York and the petrol prices in South Africa take a swift walk off the nearest tall building. We can, however, change how we manage our debt, our spending, and our attitude to money. Easier said than done, I know (boy, do I know), but it has to be a good sight easier than changing how the world economy works. One would hope.
Wrangling Debt
Kayle and Penn once again agree that when it comes to personal-finance crises, ballooning debt is at the heart of the problem, especially after the pandemic. Penn makes this particularly clear: “The worst part of it is the debt. If you previously had no debt, suddenly you have debt. If you had a bit of debt, now you have a lot of debt. And if you had a lot of debt, you’re now having your house taken away from you.” Kayle notes that, as of very recently, the average debt to income ratio for South Africans is at 80% (as in 80% of their income is spent on enabling debt), and according to FNB, accounts with salaries deposited into them are at R0 within 5 days. This very much borne out by what Saul Thomson sees going on at the Chev: “Debt is a significant problem. We have seen cases where people have tried maintaining their lifestyle for the last three years with decreasing income, having to use available credit or savings. They are now approaching the Chev for financial assistance as a last resort, with a significant monthly deficit and overwhelming debt. The troubling reality is that these are people in the autumn or even winter of their lives, where they should be building wealth for retirement but are instead struggling to get through the month. Often people have mounting debt and find themselves trapped. The average new client this year was 60% more indebted than the average last year. We do not anticipate that this trend reverse for some time.”
The simple solution, of course, would be to stop living beyond your means and to reduce your debt to zero. It’s a solution that’s so simple, though, that it’s basically unworkable. As Kayle bluntly puts it, “If your goal is to be rid of debt, your goal is to be broke.” Why? Because it’s not human nature. “There’s nothing exciting about working like mad just to not be broke,” Kayle explains, “It’s why it’s imperative to focus on building your wealth; where debt elimination is part of the plan.” Indeed, it’s this basic understanding of the way people view their money that is clearly so central to Kayle’s whole philosophy – and the money coaching programme that he has developed for corporate clients and financial institutions to equip their clients to achieve catalytic and game-changing results. His approach may come down to a lot of cold, hard facts, but behind it all is someone who clearly understands the simple human impulses and drives that make most of us really quite terrible at managing our finances, no matter how substantial or otherwise those finances are. “The simple truth is,” Kayle explains, “most people simply don’t have the bandwidth to deal properly with their financial situation. With so much going on in a person’s life, they don’t even want to think about it, let alone talk about it.”
But talking about such things is absolutely crucial, no matter how difficult, especially in a family system: “It is vital to have those conversations, but it is so, so difficult. People often feel like they let their spouse or kids down and the truth is that debt creep tends to come from good intentions. You don’t want to say ‘no’ to a new phone or a holiday or a big party and you end up going more and more into debt just to keep up. So, when you have a conversation, try and do it slowly and with care. Be clear with what’s happening and why and that the family has to pull together.”
It’s clear from talking to Kayle that before actually getting into practical steps to manage your finance, the correct mindset has to be adopted, and that this is where much of the work truly lies.
Finding a Solution
That said, no matter how serious and responsible you are about your finances, there are clearly no easy answers to be had when it comes to actually dealing with frequently incredibly harsh realities. If there were, organisations like Yad Aharon and Michael and the Chevrah Kadisha would not be so desperate for donations to keep up with demand. Again, Kayle and Penn agree, however, that prevention is always better than a cure – even if taking decisive action if you’re are already in deep water can still be very effective. Penn uses the following metaphor to explain it: “When people come to me their house is already on fire, so now we have to salvage the most important things and will have to make difficult decisions. I prefer to look at it that even before buying the [metaphorical] house, you need to look at whether you can afford the house in the first place.”
By the same token, it’s why Kayle emphasises the importance of educating young people who are just starting out. His programme for students involves educating them on basic, but not-always-understood facts, like: once you start earning, “every financial institution will be in a race for your bank account”, or that when it comes to yearly increases “people don’t understand inflation – people think they have more money when they get an increase, but bosses won’t pay you more for the same work”, as well as basic tools like knowing how to budget and setting up savings and retirement funds. It is worth understanding, though, that such education programmes are not the same quick-fix scams that promise the world and usually deliver nothing – all while taking even more of your hard-earned cash. As Penn puts is, “There is no panacea [for financial problems]. If anyone tries to sell you one, they’re swindling you.” Financial education is, as both agree again, about educating you and empowering you to be able to put the work in to take control of your finances.
This won’t suddenly end inflation, make the cost of even the most basic of necessities any cheaper, or multiply your pay cheque, but it will at least give you encouragement to deal with it.
