South Africans today are under pressure with multiple goals competing for limited financial resources, many find themselves sinking into debt. Photo: Pixabay

South Africans today are under pressure with multiple goals competing for limited financial resources, many find themselves sinking further and further into debt. 

In fact, recent research revealed that South Africa has 25 million active credit consumers, more than 10 million of which are behind on their payments.

"Unfortunately, too many South Africans are not cutting their patterns according to their cloth and are not adjusting their spending to try live within their means, and this is setting them up for more hardship in the future," said Eric Streso, Chief Executive of Eric Streso Financial Consultants.

As consumers, he says we are bombarded with adverts for the latest and greatest ‘must-have’ items on every platform, often offering credit that just seems too good to miss out on. Unfortunately, many South Africans get stuck in the ‘keeping up with the Joneses’ mentality and are not fully aware of the consequences of getting into too much debt.

To make matters worse, says Streso, our economy is not growing very fast, and unemployment is rife. "People are trying to maintain their standard of living but find themselves in a position where this isn’t possible without borrowing more and more. And an over-indebted population is detrimental to the economy in the long term," said Streso.

He says this is why South Africans need to consider having a financial adviser help manage and control their debt, to stay on top of their finances. “Lowering or eliminating debt is a crucial aspect of any personal finance plan. Debt plans are tailored to the unique financial needs of each client. A financial planner will help to negotiate payment terms with creditors, to improve cash flow, and help clients become debt free and gain financial independence. “Clients can also better control their money and make better decisions about debt payments.”

Most importantly, he says having a debt plan in place motivates clients to stop living beyond their means and gain financial responsibility and independence.

There are several other ways financial planners can help put a plan together to help clients better manage their debt. “Firstly, by creating a budget. Let’s face it, dwindling income, high costs of living, and an unstable economy are three of the top reasons South Africans are struggling with debt. A financial planner can examine your expenses and pinpoint areas where you are spending unnecessarily. They will help create a workable budget that allows you to cover your key expenses while freeing up resources to either save or reduce debt.”

Streso said, "Next, they can help clients with investments. Too often, investments are the first casualty when an individual becomes over-indebted, and while cancelling an investment may free up cash in the short term, it is at the expense of long-term financial security. A financial planner can help identify good investments that are suited to your specific circumstances. Whether an annuity, retirement fund or other investments, having a planner advise you will help to avoid any pitfalls or bad investments".

However, perhaps the most compelling benefit of having the counsel of a financial planner is that they will help you to create a sustainable financial plan. 

"While reducing debt, investing wisely and saving money are all important, a sustainable financial plan looks beyond the now, to ensure you are taken care of in the future. All of us want to know that we are in a financially secure position, and along with our families, are taken care of in the future. A long-term plan will most likely include consolidating debt, investing over the long term, and starting a ‘rainy day’ fund to take care of any unexpected emergencies," concluded Streso.  

Eric Streso, Chief Executive of Eric Streso Financial Consultants

PERSONAL FINANCE