As we near the end of another financially turbulent year amid the Covid-19 pandemic, consumers continue to subsidize their income with short term credit. The latest statistics on credit usage for 2021 paint a worrisome picture.
Based on recent studies by TransUnion and the NCR, South Africans are relying more on credit than ever before to help pay their basic monthly living expenses.
South Africans have seen their credit card balances increase by almost 20% in the past year. And unfortunately, this is mainly to manage the rising cost of food and groceries.
The NCR Unsecured Credit Study found that consumers are using their credit cards and store cards to fund their short-term needs. Store cards are used to purchase clothes and groceries, while credit cards are used to pay for education such as school fees, rent, clothing and groceries. However, 16% of these cardholders are more than 3 months in arrears.
According to TransUnion’s latest Consumer Pulse Study for Q3 2021, only 47% of South Africans are confident that their household finances will fully recover within the next 12 months.
Consumers feel they have no choice but to rely on their credit cards and store cards to help pay for basic monthly living expenses. However, many are struggling to afford the debt they’ve accumulated over the past 2 years.
The latest TransUnion Industry Insights Report (Q2 2021) highlights a decrease in past due to credit cards and store cards and a rise in past due to personal loan accounts. Consumers are prioritizing their repayments on credit cards and store cards instead of personal loan repayments to gain access to their balance again each month.
This is not surprising given the current cost of living today in South Africa. The price of fuel increased by R1.48 a litre this October, a shocking increase of 31% since Jan 2021. And food prices also continue to rise. The most notable increases are in vegetable oils, cereals, dairy, sugar and meat. Many simply cannot keep themselves or their families fed without using credit every month.
Consumers are aware that their finances are deteriorating and they’re relying more on credit and debt to help cope with a reduced income and the increasing cost of living.
Here are 4 tips to help you get your finances under control.
1. Save on your grocery bill
Food has gone up. A 30kg bag of maize meal has increased by R31.71 over the past year, according to the latest household affordability index release for Oct 2021. And sugar, meat and potatoes price increases don’t look any better.
Plan meals ahead of time
Making a shopping list before going on your grocery run is important to help stay within your budget. To make it easy, create a weekly or monthly meal plan and then shop according to what you need for those ingredients.
You can take it a step further by planning your meals according to the best grocery deals/sales on offer. That way you end up saving a little more.
Use what you have
Make a habit of checking what you have in the kitchen before going to the shops. Plan your meals around what you have instead of buying new items every week or month.
Buy per weight
It’s easy to be misled by the prices of goods. To help you find the best price available look at the cost per weight. Products, generally frozen goods, are charged per gram/kilogram. Find the product that offers the lowest price with the most weight.
2. Save on fuel costs
Despite many still working remotely, fuel increases add an unwelcome cost when filling our petrol tanks.
Avoid hard acceleration
Harsh acceleration will increase fuel consumption. Avoid driving at high revs to save on fuel.
Reduce aircon use
As we’re approaching summer we’re expecting it to get extremely hot. However, using the aircon too much will increase fuel consumption. Use your aircon only when necessary, for short bursts at a time.
Avoid short trips
As a rule of thumb, avoid using your vehicle if you can walk or use a bicycle instead. Reducing the number of times you turn on the ignition will help save on your monthly fuel bill.
3. Reduce the cost of rent
If you’re renting, renegotiating the terms of your rental agreement can be difficult, however, it’s not impossible.
If you’re struggling to afford your monthly rent, ask your landlord if they would be willing to temporarily reduce your rent until your finances are back on track. Some landlords will understand the situation and offer some relief.
You can also offer to do the occasional maintenance around the house. Repairing something means getting a repairman and that costs money. If you can do it yourself your landlord will appreciate it and might be willing to bring the rent down.
Relocate to a cheaper area
You can save a lot of money if you live in the right area. Living close to work and school might save you on transport costs. But, property in the city is typically more expensive. Try to find a property outside of the city where rent/bonds are cheaper.
4. Tackle the cost of education
If you’re in a position where you can’t afford your children’s school fees anymore you can ask for financial aid from your school. Exemption of school fees is available if you qualify. Parents who can’t afford school fees can apply for a partial or full exemption from paying school fees.
Save on school books
School books are notoriously expensive. Most schools in South Africa offer secondhand books at an affordable price. If your children take care of their books you can even resell these books at the end of the year and make some of the money back. That way you have some extra money for the next school year.
Save on school clothes
Finding affordable school clothes is near impossible. To help cope with the cost, shop at clothing outlets that offer sales at the beginning or end of the year. Alternatively, ask your school if they offer secondhand clothes for sale. On many occasions, these clothes are still in good condition at an affordable price.
If you’re in a position where you can’t afford to pay back the debt you’ve made on your credit card or store card, then stick to paying in cash. The more you use your credit card or store card, even for essential goods, the worse your financial position will become.
Planning and saving ahead of time will help you afford these expenses so that you don’t have to build up as much debt.
If you’re in a position where you can’t afford your monthly debt repayments and your monthly household expenses, you may be over-indebted.
Debt review is the go-to solution if you’re overwhelmed financially. Debt Rescue has helped thousands of consumers get their finances back on track with debt review. We can help you too.
Get in touch with us today and let us help you take control of your finances before it’s too late.