2011 is going to be another tough year for households, and we are going to have to continue to tighten our belts.
Although the recession is behind us there are no indications of a strong recovery. People who have lost jobs will find it difficult to find new employment. Small businesses will find it difficult to expand this year.
Most people remain heavily indebted and despite consumers paying off debt and not taking on new credit last year, our debt levels remain historically very high at around 78% of household income. This figure is confirmed by reports from the credit bureaux that every second credit active South African, is struggling to repay their debts.
However optimism does seem to be returning, people are borrowing more to buy homes and cars and even credit card debt has started to pick up. There is a sense that the worst is over and after two years of financial tightening, people just want to get back to spending.
So it is important not to get carried away and to rather resist taking on new debt, especially as the economic recovery is expected to remain subdued. There could be further economic shocks, especially if the rand takes a serious tumble resulting in much higher inflation and therefore higher interest rates.
Consumers who use this year to consolidate their finances by sticking to their budgets and paying off their debts will find 2012 a much better year.
Maya writes for the Mail & Guardian, you can read some of her questions and answers here.