The hard truth about how South Africans spend

Pretending to have more than you do is a bad financial move.

You can live your best life in 2021 by focusing on your finances and yours alone. Don’t let how others around you seem to be spending their money affect your decisions, because here’s the truth – statistically, South Africans are not saving enough, they’re spending too much and they’re servicing way too much debt. Here’s the hard truth about how South Africans spend:

We are spending 70% of our income on servicing debt

That is too high and we should all strive for just 30%. Experts estimate that the lack of growth in most people’s income in 2020 added to increased financial strain has contributed to the four-year-trend that shows most consumers’ debt levels steadily rising. As inflation goes up, short-term, high-interest loans become more popular or necessary, so many South Africans find themselves spending the majority of their monthly salary repaying yesterday’s spend.

salary on debt

The more we earn, the more unsustainable our debt is

“Consumers earning R20 000 or more a month had an unsustainable debt-to-income ratio of 138%.” This according to a Debtbuster report from the second quarter of 2020. That means that most people who earn more than enough to live a comfortable life are living a more luxurious lifestyle they actually can’t afford. On average, their monthly debt repayments are actually almost 40% more than they earn. So they end up borrowing even more and never get out of debt.

Earn more, more debt

Less income should mean a less luxurious lifestyle, but it doesn’t

“It is clear that in absence of meaningful increase in real income growth, SA consumers are supplementing their income with more debt on a large scale,” the Debtbusters report says. So we earn less but we spend the same or more because of inflation. The key here is affordability. Don’t get into debt maintaining the dream lifestyle, rather get real and know that very few South Africans have got a raise or bonuses in recent years.

Live by your means

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