A look back at the year that was, debt trends, mistakes to avoid, and debt management tricks that work
So, 2022 has been an incredibly difficult financial year for South Africans. As most businesses and citizens were still weening off the effects of the Covid -19 pandemic, they were hit by a series of setbacks, without any real chance of recovery, let alone growth. Throughout the year, interest rates, inflation, and petrol prices continued to increase and an unemployment rate that encompassed more than a third of the country’s entire population (include latest unemployment stats).
In such an economy, it is not surprising that debt levels are rising. In fact, according to the Financial Services Conduct Authority (FSCA) an increasing number of South Africans struggled to pay their bills, with 70% of people in the lower-income group admitting that they couldn’t cover all their monthly expenses.
Earlier this year a study conducted by Genesis Analytics in partnership with the FSCA found that more than half of the 27 million South Africa’s credit-active consumers are overindebted, with 48% of borrowers having bad credit records. Moreover, National Debt Advisors (NDA) monitors the number of South Africans undergoing debt reviews every two years and has observed an increase of approximately 8% since 2020-2022.
If you are one of the many South Africans struggling with debt, it is important to be aware of the common mistakes that people make when it comes to managing their finances. NDA CEO Charnel Collins highlights the following mistakes to avoid when it comes to debt.
- Not tracking your spending.
If you’re not keeping track of your spending, it’s easy to let your debt get out of control. Create a budget and track your spending so you can see where your money is going. This will help you make informed decisions about how to use your money and keep your debt under control.
- Not making payments on time.
Late payments can damage your credit score and make it harder to get out of debt. Make sure you make your payments on time, every time. Set up automatic payments if you can, so you don’t have to worry about forgetting.
- Not paying enough each month.
The minimum payment on your credit card is usually just the interest, not the actual debt. This means that if you only make the minimum payment, your debt will actually grow. Make sure you’re paying more than the minimum payment each month to get out of debt faster.
- Using your credit cards for everyday purchases.
If you’re using your credit cards for everyday expenses, it’s easy to rack up a lot of debt. Stick to using your credit cards for emergencies or big purchases only.
Fortunately, there are several things you can do to avoid these mistakes and get your debt under control. One of the best things you can do is to create a budget and stick to it. This will help you keep track of your spending and ensure that you are not overspending. Another helpful tip is to set up automatic payments for your debts, in this way you don’t have to miss payments and end up falling deeper into the debt trap. Needless to say, the country is facing a lot of economic problems, and this is reflected in the debt trends that we witness in the country this year. However, this does not mean we cannot turn things around in the new year.