Making it through January without gambling your financial future
January can be a very long month for many South African families seeking to stretch December salary cheques until the first payday of the New Year.
Typically, this is because many companies pay their employees early in December, but this year making it to the end of January is likely to be even more difficult. That’s because most people won’t be able to rely on a full or any year-end bonus to supplement their December salary.
Benay Sager, chief operating officer at debt counselling firm DebtBusters, says data from previous years shows that many consumers find themselves under financial pressure in January and often take out loans to see them through, adding more long-term financial stress.
“Unfortunately, there will be more pressure on consumers to borrow in 2021 because of the impact of the Covid-19 pandemic on the economy. However, there are two sides to each coin: for the household budget, one side is borrowing, and the other side is spending. Consumers should adjust their spending first before borrowing more money.”
Sager says consumers who are worried about whether their finances will stretch until the end of January should consider the following:
Don’t worry, act
Worrying about whether you’ll have enough money to pay the bills, prepare the children to go back to school and put food on the table will increase your stress levels, but won’t solve the problem. On the other hand, checking your bank balance and listing the expenses you need to pay before your January paycheque will give you some perspective on where you stand. The exercise should also give you some idea of where you may be able to save on unnecessary expenses.
To make ends meet and save some money in the short term, some people cherry pick which debts to pay in January and don’t pay others, hoping they’ll be able to make up the missed payments later. The problem with this approach is that while it may provide some short-term relief it ignores the long-term implications. Research shows that on average it takes people who skip December payments two years to catch up. Given the current state of the economy it’s now likely to take even longer.
Worse still, not meeting your financial obligations will negatively affect your credit score. A poor credit score makes it harder to get approval for loans, retail accounts, vehicle finance, rentals and numerous other financial services. It could also mean that you’ll be charged higher interest rates as you are considered a higher risk.
Get help if you need it
There’s another important benefit to taking the time to assess your financial situation – it allows you to get help before you get into irrevocable financial difficulty.
Sager says that South Africa has an effective and efficient debt counselling sector, with a good success rate. Even in the pandemic-stricken 2020, nearly 5 000 DebtBusters’ clients completed the process and received certificates declaring them debt-free. According to Sager, this is an astonishing achievement, and shows that consumers who put their minds to it can lift themselves out of the burden of debt.
“Many people who could benefit from debt counselling leave it too late, potentially getting deeper into difficulty and ultimately risking their homes and cars being repossessed.
“If you think you may be financially overstretched contact a reputable debt counsellor, who will then do an assessment to determine whether or not you are over-indebted.”