In an article written by new24 earlier this year (2016), the article stated that South Africans were the biggest borrowers in the world in 2014. We’ve all heard that the economy in the country isn’t great and that salaries are terrible, but to be given a title like that, is quite alarming.
In the second quarter of 2016, South African consumer debt has increased to R1.63 trillion, and with an estimate of 23.37 million credit active consumers, each South African’s estimate debt is just shy of R70 000. If you have a home loans, you are immediately above this average.
Data captured from a debt management firm, also shows that 45% (10.5 million) of credit active consumers are struggling to meet their payments, and 60% of home owners are struggling to pay off their home loans. Consumers are owing up to as much as three quarters (75%) of their monthly income, making it absolutely impossible for them to regain financial security, as all they are doing is paying off accumulative credit interest.
By now, consumers should understand the basic concept that one pays interest on top of the money loaned, so the minimum payment you are paying every month on your credit card, is mostly covering interest, which mean the fridge you bought can end up costing you double. As hard is it may be, South Africans need to start practicing more discipline and stop spending money they do not have. It is too easy to open an account and buy things, but just for one minute consider the consequences if for 1 month you do not get paid, how will you recover the following month?
As opposed to spending money in advance, rather get in the habit of saving up for the item and then purchasing it. Keep in mind, to always start your children on the right financial path, children as young as 3 can already grasp the concept of saving and spending, read about it in our previous article Important Money Lessons To Teach Your Children.