Focusing on the negativity won't deliver any results. The only solution for South Africans now is to take a closer look at their household spending and future financial planning. This will help us to absorb the ever-increasing cost of living, build and protect your wealth. 

Phillip Kassel, Certified Financial Planner at Liberty takes a look at the most prominent announcement from the budget speech. He also encourages South Africans to check in with their financial advisers to restructure their financial plans and reveals the possible solutions you and your financial adviser should be covering.

Kassel says, "It is important for consumers to educate themselves on the changes that pose the biggest risk to their wealth accumulation. The increase in taxes will hit lower-income earners the hardest. Now is the time for us to educate ourselves on the changes, in preparation for our meetings with financial advisers."

The 1% VAT increase - Manage the financial knock

"What many of us don't realise is that the easiest way to clear the budget deficit would be to actually increase VAT by 2%. However, government seems to have applied its mind to the situation. The tax-paying public was saved from a harder financial knock in that VAT was only increased by 1%," explains Kassel.  What your financial adviser should be telling you: It's time to tighten your purse strings.  Not only will VAT reduce your spending power, you also need to deal with an increase in Estate Duty and Inheritance Tax. High-net-worth individuals in particular must revisit and adapt their succession and estate planning. Lower income earners on the other hand, need to significantly restructure their monthly budgets to reduce spending and increase savings. How might the lower income earners achieve this?

Top bands of income remain unchanged

The fact that the top bands of income have not changed in the new tax year means that higher income earners will technically see a reduction in their earnings. In the past, income bands were moved slightly in order to accommodate inflation to avoid the so-called tax-creep. Kassel says, "This is effectively a ‘salary decrease’ for those in the affected income bands."

What your financial adviser should be telling you:  It's time to pay yourself first by increasing your savings and investments. Now isn't the time to be buying new cars and flashy fashion accessories. You should batten down the hatches and focus on building wealth not deteriorating it by spending recklessly.  

Sin and sugar tax could further dent your budget 

Smokers and drinkers are accustomed to paying more for their vices every year. However, the introduction of the sugar tax, in addition to existing Sin Taxes, will also impact households that consume large quantities of sugar. Government initially implemented these taxes to encourage us to live a healthier lifestyle. 

What your financial adviser should be telling you: Perhaps it is time that we heed the call for a healthier lifestyle. Review your lifestyle and perhaps adopt a healthier approach to living. From a tax viewpoint, you will save more money by living healthier and cutting out the luxuries and vices. These savings can be channelled into Tax-Free Savings Accounts, Endowments and Retirement Annuities.

Higher estate duties for wealthier individuals

For the wealthier amongst us, there will be a higher estate duty of 25% for estates greater than R30 million. There is also an accompanying increase in the rate of donations tax for amounts over R30 million, effective 1 March 2018. 

What your financial adviser should be telling you: This definitely requires portfolio reviews on the risk side, especially to ensure sufficient liquidity in the estate on death, as well as succession planning. You need to ensure that your wealth is distributed according to your personal requirements. Revisit everything related to inheritance Tax and Estate Duties in order to maximise on tax-deductibility.

Kassel concludes, "The only way to benefit from the new tax regime is to really put those New Year’s resolutions to the test. Make significant changes to your lifestyle, adopt a healthier outlook, be more frugal and speak to your financial adviser about your financial future."