As most businesses and citizens were still weening off the effects of the Covid -19 pandemic this year, 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.
While South Africa’s unemployment rate improved by one percentage point to 32.9% from 33.9% in Q2, the reality is that the level of total employment remains about 4% below the pre-Covid (2019 Q4) level.
It’s no doubt – 2022 has been an incredibly difficult financial year for South Africans.
Given this context, it’s not surprising to see 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% in the lower-income group admitting that they couldn’t cover all their monthly expenses.
We at National Debt Advisors (NDA) have monitored the number of South Africans undergoing debt review every two years, and have observed an increase of about 8% between 2020 and 2022.
Furthermore, a study conducted by Genesis Analytics in partnership with the FSCA earlier this year, found that more than half of the 27 million South Africans’ credit-active consumers are overindebted, with 48% of borrowers having bad credit records.
If you are one of the many South Africans struggling with debt, it is important to be aware of the common mistakes people make when it comes to managing their finances.
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 that 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. Ensure that 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. Ensure that 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.
Not changing your spending habits.
Getting into debt can lead to a vicious cycle. Making sound financial decisions and spending more wisely can prevent the cycle from getting out of control.
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 won’t miss payments and end up falling deeper into a debt trap.
Needless to say, the country is facing a lot of economic problems, and this is reflected in the debt trends the country has witnessed this year. However, this does not mean we cannot turn things around in the new year.
Charnel Collins is the CEO at National Debt Advisors
*The views expressed here are not necessarily those of IOL or of title sites.
IOL Business