Belt-tightening time

DOWNGRADE: SOUTH AFRICANS’ DAYS OF EXCESS ARE OVER

Expert gives tips on how to manage financial wellness and avoid debt spiral.

As the political and economic realities of South Africa’s fortunes unravel after S&P Global Ratings cut the country’s sovereign credit rating to junk, the impact of the downgrade for the average Joe or Jane is clear: the days of excess are over.

Predictions were that the South African economy could expand by 1.3% this year as the economic growth outlook improved after the worst of drought conditions subsided, global growth picked up, commodity prices stabilised and the electricity supply improved. But that growth now hangs in the balance.

Expectations of two interest rate cuts later this year – a move that would have provided some reprieve for highly indebted consumers – will probably be postponed at best, and may be off the table.

And should the economy fall into recession, further job losses will be likely.

The sad reality is that many South African consumers – even high-income earners – are already in a precarious financial position and just don’t have the flexibility to cope with added financial pressures.

Statistics from the Bureau for Market Research at Unisa suggest that, on average, households earning between R33 334 and R57 333 per month have no net income available for discretionary savings.

The three income bands from zero to R33 333 are falling deeper into debt each month.

Those on R33 333 make zero savings each month on average.

Short-termism could have a devastating impact on finances.