Consumers living in debt to afford food
The report highlighted that “low-income households cannot make it through the month on their incomes. They struggled to secure the goods and services needed to live at a level of basic dignity. Households prioritised the payment of transport, education, electricity, burial insurance and the repayment of debt before food.”
Choosing debt over food
For families not willing or wanting to take on debt, they face the prospect of going hungry. Wendy Monkley, head of marketing at DebtBusters, noted: “Families are literally choosing to starve themselves in order to survive financially. Going to bed hungry is no longer just a figure of speech to indicate tough financial times, but rather a really concerning reality for many South African households.”
According to statistics released by DebtBusters earlier this year, lower income earners (those who earn less than R10 000 per month) had more than 90% of their debt as unsecured debt. The latest statistics revealing that DebtBusters’ clients require 106% of their salary to service their debt, a figure which is frightening, as these consumers require more than they earn just to pay back their debts, before factoring in the cost of food and living.
The PACSA report reiterated that consumers are prioritising the repayment of debt over the cost of food. “Food is prioritised last because it is one of the few expenses households can control. Because food is last in the line of expenditure, the food budget was low and households underspent on food by 55.6%.”
Monkley revealed: “Of clients in the 25-39 age group, 67% of loans can be attributed to pay day loans. PACSA’s finding that food runs out in the second or third week of the month proves that households require loans on a monthly basis for food. This explains the increase in the number of pay day loans.
“According to the Consumer Credit Market Report (CCMR) Q2 2015, pay day loans over R5, 000 are up to a staggering 557% with more than two million South African’s relying on “pay day” loans every month.”
PACSA noted: “The cost of a basic but minimum nutritional food basket for a household of 7 was R3 644.09 in September 2015 while most households are spending around R1616.97 a month. For a household with an income of R3 200 (the maximum income level for 60% of Pietermaritzburg households) proper nutrition comes to 113.9% of household income. If a household spends R1616.97 a month on food it consumes 50.5% of a R3200 household income. This is a substantial part of the household income when considering all the other goods and services that households need.”
Tips to help you manage your debt
It can be overwhelming to try to manage your finances when you are in a lot of debt. Here are some tips from DebtBusters to help you better manage your income and expenses.
-Set up a monthly budget: By establishing a budget you will be able to better monitor where your money is going and what your biggest expenses are. “Setting aside a specific amount of money every month for your expenses will ensure you do not spend your money blindly,” revealed DebtBusters.
-Stick to your budget: It’s no good drawing up a budget if you aren’t going to stick to it. “The hardest part of any plan is actually following through with that plan. Make a conscious effort to stick to your budget. The best thing about a monthly budget is that you will notice the difference in your finances immediately after the first month,” noted DebtBusters.
-Settle outstanding balances: You are charged interest on outstanding amounts owed to creditors, these include things such as a credit card or store card. By settling your outstanding amounts, you will be saving on the interest that you are being charged. When a debt has been paid off, you can use the money you are now saving to focus on another debt that needs paying by making larger contributions to pay it off sooner, or you can invest it in a savings account.
-Seek professional help: A budget can also assist in monitoring your debt and how much you owe. If your debt repayments are more than your income, or you are struggling to repay your debts, contact a debt counsellor who may be able to assist you in rearranging your debt repayments, so that you can pay off your debts and afford to put food on the table at the same time.