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 Get personal with your finances – and tie the knot

As time passes, your financial products may not live up to your needs. Therefore, it’s important to take stock of what you’re paying for and adjust where necessary. We got in touch with financial advisers to find out how you can get your finances in order, and what you should do to ensure you’re financially stable.

Personal loan or business loan? The best way to finance your business

When starting your own business, you may have to rely on external funding. Perhaps you qualify for a personal loan, but would it be better to take out a business loan instead? We got in touch with a specialist to find out whether it’s best to take out a business loan or a personal loan to assist you with your ongoing business or start-up.

What to do when you’ve been denied a home loan

After months of scanning property sites and attending showhouse after showhouse, you’ve finally found what you’ve been looking for. But your dream of owning a home comes crumbling down when you receive the news that you’ve been denied a home loan. So, what now?

Best travel cards offered by top South African banks

Planning a trip abroad involves a lot of administration. You need to consider travelling arrangements, reasonable accommodation, and a daily itinerary. But have you considered how you’re going to pay your bills once you arrive? Besides considering bank costs, you also need to consider exchange rates.

Deals

Takealot January Big Sale

Price: Available on request
When: Until 31 January 2020
Where: Online

Annique Restore Package Special

Price: From R600
When: Until 31 January 2020
Where: Centurion

Ster-Kinekor Senior Citizens Discount

Price: Available on request
When: Daily
Where: Nationwide