Report reveals continued financial struggle

The latest TransUnion Consumer Pulse Study, which assessed the state of consumer spending and credit in the fourth quarter of 2021,  was released in late January 2022, and revealed the following:

• More than half of consumers (55%) indicate their household income remained negatively impacted by the Covid-19 pandemic towards the end of 2021.
• Though 55 % remains high, this number was down from 61% in August and 62% in March.
• 34% of surveyed consumers said someone in their household had lost their jobs during Covid
• 32% said someone in their household had their salary reduced
• Lower-income consumers (households earning less than R50,000 per annum) were hardest hit, with 38% indicating someone in their household lost their job in October 2021.

To combat the financial pressures, spending habits and shifts in household budgets took place across all households, mainly focused on discretionary spending. This category of spending typically involves non-essential items, covering things like eating out, entertainment, and travel.

The following patterns on household spending were released

• Approximately 60% of all households, across all age-groups cut back on discretionary spending (eating out, entertainment and non-essential items)
• 34% cut back on subscriptions and memberships
• 29% cut back on digital services
• 34% channeled their funds into paying off debt
• 30% put more money into emergency savings
• 20% put more into retirement funds

Only 5% of consumers said their household income had fully recovered after being impacted by the pandemic. And while 58% of consumers were hopeful their household income would recover, 42% were less optimistic. 85%  of impacted households remained ‘highly concerned’ about their ability to pay their bills and loans.

Most consumers remained concerned about repaying their unsecured loans. The debt not being serviced by consumers being:

• Personal loans (29%)
• Mashonisas (28%)
• Private student loans (24%)
• Clothing store accounts (21%)

Transunion also commented “While we’re seeing a slight improvement in the number of people financially negatively impacted by Covid-19, the study highlights the fact that many South Africans remain under pressure”

Sebastien Alexanderson, CEO of National Debt Advisors, says that because of rising interest rates and increased cost of living  – consumers will have to tighten their belts even more. He says: “Avoiding additional debt is the best strategy to stay afloat, given that the ratio of household debt to disposable income. Getting rid of overwhelming debt should definitely be  part of your plan of action for 2022”