For every R100 you earn – R72 is going to debt

A new survey conducted by insurer 1Life shows that South Africans are struggling financially, with high levels of debt putting pressure on households and leaving little room for monthly expenses.

The group conducted the survey in July, testing consumers’ understanding of saving and financial responsibility.

Addressing the survey results, 1Life said that despite knowing how important saving is – respondents are struggling to save even the minimum each month. Half the respondents indicated that they could only save less than 5% of their monthly income, while a high number said that they depend on a credit card to ‘get by’ each month.

The survey also revealed that a significant proportion of South Africans have had to use other methods – loans, store credit – to cover costs. Only 15% of respondents indicated they could save more than 10% of their income each month.

1Life’s research suggested that, while 77% of respondents have a monthly budget in place, high levels of indebtedness indicates that financial planning is simply not working.

“If we consider that 40% (of people) use their credit cards for monthly expenses, it is highly likely that this budget is not getting used correctly and consumers are using them as a guideline, rather than a mandatory financial management tool,” it said.

Additional research by the insurer put South African debt levels at around 72%.

“This indicates that for every R100 a person earns, R72 goes towards debt, leaving little room for monthly expenses and tangible financial obligations – let alone inflation,” the group said.

This echoes sentiments from debt counselling company, Debt Rescue, which recently said that there has been a marked increase in the number of consumers seeking relief by going under debt review since the start of the year.

Debt Rescue noted that consumers are “already up to their necks in debt”, carrying a combined debt load of R1.66 trillion, which has been exacerbated by less than stellar economic conditions, with rising fuel prices, slow growth, amid political uncertainty.

According to 1Life MD, Laurence Hillman, the situation has led to a snowball effect.

“We have to ask ourselves; if consumers are already not able to cover expenses with their monthly income – how are they able to service the debt created through loans and store accounts? It is a catastrophic problem and is drastically impacting debt levels in South Africa and worse, consumers’ ability to get themselves into a sound financial space,” he said.

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