DURBAN - A recent study by Debt Rescue, a South African debt counselling company, has revealed that 73% of South Africans will not have enough money to carry themselves into the new year.
According to Debt Rescue’s latest Quarterly Survey which polled over 1 200 South Africans, this is due to the festive season frenzy, which saw many buying presents and often times putting them on credit (60%).
Neil Roets, CEO of Debt Rescue, said: “This is a worrying signal especially as 75% of South Africans’ income goes towards servicing debt and almost 40% of credit-active consumers have impaired credit records.”
Roets said that all of this was set against the backdrop of rising electricity, fuel and food prices as well as a higher interest rate while unemployment is at an all-time high.
Excess buying during the holiday season was often the reason that put consumers on the back foot, and many were already over indebted, he said.
According to the South African Reserve Bank, 75% of “our” income goes towards servicing debt, and according to the National Credit Regulator almost 40% of credit-active consumers have impaired credit records.
“Debt often leads to more debt and for many South Africans 2022 will begin with their budgets under strain. It will be hard to manage given the typical January expenses like school fees, uniforms and back to school items that need to be incurred,” Roets said.
December and January were arguably the most expensive times of the year, he added.
“While some may have been lucky to have received a bonus (23%), Debt Rescue’s survey showed the majority rely on salaries to get by, which more often than not isn’t enough.
“This is also the reason we are seeing the TransUnion Q3 2021 South Africa Insights Report showing that although credit card origination fell year-on-year (YoY) in the last quarter (-23% in Q2 2021) outstanding credit card balances continued to increase by around 14.4% YoY in Q3,” Roets said.
The report revealed that the younger generation was incurring more debt by using their credit cards, he said, and warned that getting into debt from a young age is a dangerous habit to start.
“It can begin with a credit card, then a store card, personal loan and continue from there. Given the latest interest rate hike, this credit is costing them more too.
“Instead young people should get into the habit of budgeting as early as possible, using their income to cover everyday living expenses.
“Of course the challenge is that these living expenses have increased dramatically during 2021, while salary increases are often not in line with rising inflation,” Roets said.
The best way to get an understanding of your financial situation was by budgeting, he added. From this you are able to see exactly how your money flows, and where you can make changes.
* Divide your budget into three sections. Your income, which includes all forms of funds that you receive. Your living expenses, such as food, rent, transport, school fees, insurance, etc. Your minimum monthly debt repayments, such as your bond, vehicle finances, credit and store cards and personal loans.
* For your January budget, remember to add in the extras such as school uniforms, stationery and textbooks.
* Always prepare before going shopping, with a list of necessary items, to avoid buying items that you already have or don’t need, or even worse, that you forget and have to make another trip for.
* Analyse your bank statement to see which expenses can be cut.
* Try to leave your credit card at home. If you do take your credit card, ensure you settle it as soon as possible.
* If your budget allows, set aside money for a rainy day such as your vehicle service or any unexpected expenses.
* When planning a purchase: establish if it is a want or a need. Determine if it can be purchased cash. If it is going to be a credit purchase, look at the total cost of credit, including monthly fees and the effect of the interest rate.
* Remember that a budget is not cast in stone. Revise it monthly, to see if any changes are required. As with most things, the more you practise, the better you get.