Guiding consumers since 2009

Disposable salaries are declining

By Staff Writer

The latest BankservAfrica Disposable Salary Index (BDSI) showed that South African consumers’ disposable income, which refers to the money you take home after tax, is not showing any increase.

According to Brad Gillis, CEO of regulated products at BankservAfrica, disposable income has increased by only 3.8% over the last three months compared to a year ago.   
“This means the real situation is an actual decline after inflation. This is the fifth month in a row whereby actual real disposable salaries declined on a year-ago basis, and the eighth time in the last nine months, said Gillis.

Economist, Mike Schüssler, told BDSI that this is the longest decline since 2005, when the BDSI data series began.
“This is a clear indication that disposable salaries are once again not increasing as quickly as gross salaries,” he added.  

It is estimated that deductions take over 30% from the average gross salary in South Africa. The reason for this is likely to be the increase in the cost of medical insurance (10.2% year-on-year according to Statistics South Africa) and personal income tax, which has also increased by over 10% on the same basis.

Research showed that taxes, medical insurance, pensions and garnishee orders are the four biggest deductions from disposable salaries. They are followed by UIF and other statutory deductions, as well as loans (deducted at bank level), in some cases.

Schüssler said that, with the exception of December 2012, the declining trend in real disposable salaries showed that households will remain under pressure and the average South African consumer will have to cut back.

How should we make do with less?
Sasfin financial consultant, Gavin Came, recommends that consumers curb their expenses if they want more disposable income.

“After your compulsory expenses like your house’s bond repayments and medical aid are deducted, you are left with your discretion income usually spent on food, clothes, alcohol, cigarettes etc. You run into trouble when you allow expenses to exceed your income,” said Came.

Came describes discretionary expenses like cigarettes and alcohol as ‘low-hanging fruit’ because it is easier to cut down on them.

Where the importance of a discretionary expense is questioned is in cases where you have to opt for sending your child to a public school instead of a private school or choosing a cheaper medical with fewer benefits.

Came said that these disposable expenses have a different hierarchy than the ‘low-hanging fruit’ type because of the impact this budget cut has on your life.

“Most people only really cut down on unnecessary expenses when they are backed against a wall and don’t have any other option,” said Came.

Recent Articles

Featured Times are tough, but keep your debt under control

While the whole world is going through a rough patch, you may also be feeling the pinch. With the country in crisis, it may be difficult to keep up with your debt instalments. However, abandoning your debt obligations is not the solution.

Debt Series Part 2: Interest rates - unpacked

In the second part of our Debt-ucate series we explore interest rates –from how to get a better rate to what influences it, and how this affects the cost of your debt.

Debt counselling – the two sides of the coin

Being overindebted doesn’t just put a strain on your personal finances; it also puts a strain on your state of mind. The best solution is to start the process of debt counselling so that you can escape the debt cycle. But what are the ups and downs of joining this debt relief programme?

Travel ban – how to claim for the loss incurred

As with the recent Covid-19 pandemic, governments sometimes issue travel bans to prevent people from travelling to other countries. This becomes even more complicated if you’ve already planned and paid for your trip. Your flights will be cancelled, and you may lose money from cancelled accommodation arrangements. How do you claim for the financial losses incurred due to a travel ban?

Deals

Get 30% back when you fill up with your Absa card

Price: Available on request
When: Daily
Where: Nationwide

Get 50% back in eBucks when you apply for an FNB home loan

Price: Available on request
When: Daily
Where: Nationwide

Get 50% off your online fees when you pay with Capitec card

Price: Available on request
When: Daily
Where: Online