Financially stressed out, drowning in debt and struggling to buy the basics, were the overwhelming results of two separate financial consumer surveys recently released.

DebtBusters’ second annual Money-Stress Tracker, which surveyed 35 000 individuals who were not under debt counselling, found that 78% of respondents were experiencing financial stress. This was impacting their home life, work life and even their health.

The survey found that women in particular are more stressed than men when it came to their finances.

The Old Mutual Savings and Investment Monitor (OMSIM) had similar findings. For the 1 500 working South Africans interviewed for the survey, the word most closely associated with money was “stress”.

Salaries not keeping up with inflation and rising interest rates are the biggest reasons that so many South Africans are financially stressed out. The OMSIM report found that 70% of those surveyed have not seen any improvement in their income since 2020.

“This means that the majority of those interviewed have less income in real terms,” says Vuyokazi Mabude, Head of Knowledge and Insights at Old Mutual.

Using the example of someone earning R25 400 in 2020, on average this person’s income would have increased by 3% to R26 000 by 2023, well below the rate of inflation.

Personal finance expert Professor Jaco Fouche of North West University says in comparison, costs such as food and transport have increased by 14% and 8% respectively. This means that if this person was breaking even in 2020, they would now have a shortfall of R654 a month. In many cases households have made up this shortfall by taking on more credit or dipping into savings.

Drowning in debt

Of those interviewed for the OMSIM report, more than half say they have dipped into savings to make ends meet while 43% have borrowed money from family and friends.

One out of three people have taken out a personal loan in the last year. Of those a third have taken a loan to pay off other debt and another third have borrowed money to pay for basic needs.

This is resulting in a serious credit crunch, with nearly 40% of respondents spending dangerously high levels of their after-tax income on debt repayments, according to the Money-Stress Tracker.

“We advise consumers not to use more than 30% of their take-home pay on debt repayments. Sixty-two percent of respondents in the two highest income bands we surveyed are spending 40% or more of their income to service debt. This is simply too much, especially in a high-interest, high-inflation environment,” says Benay Sager, head of DebtBusters.

A consumer spending 50% or more of their after-tax income on debt repayments is considered dangerously high, while spending 40% to 50% on debt repayments is considered unsustainable.

The Money-Stress Tracker found that 62% of those earning more than R35 000 a month have unsustainable levels of debt.

Debt repayment pressure is most prevalent among people between the ages of 45 and 54. Of this age group, 45% have debt repayments in excess of half of their income. This pressure is probably due to the fact that people in this age group are likely to have mortgages and therefore have been most affected by the rapid interest-rate hikes.

This ties in with the OMSIM findings that a third of home-loan holders are struggling to meet their monthly repayments or falling behind on payments.

Prior to the rate hikes a R1 million mortgage would have had a repayment of R7 752 compared to R10 830 today. That is over R3 000 more a month that a household has to find ‒ a household that has most likely not seen a real salary increase in the last three years.

What is most concerning about the financial pressure on this age group, is that they are close to retirement and should be focusing on building up retirement funds rather than worrying about how to meet their debt repayments.

In order to make ends meet, many South Africans are holding down several jobs. According to OMSIM, so-called “polyjobbers” make up 50% of this market with more young workers (18 to 29 years old) becoming part of this growing trend. Of those, one-third take up contract or freelance work in addition to their permanent job and 19% have a side business.

Consumers are also turning to reward and loyalty programmes to pay for groceries and basic needs. They are also cutting back on streaming services and switching to less expensive supermarket brands.

There is however light at the end of the tunnel. According to Old Mutual Investment Strategist Izak Odendaal, the rate of inflation as fallen to its lowest level in a year. Although this does not mean prices will come down, it does mean they are rising less quickly. This could allow the Reserve Bank to pause interest-rate hikes and provide some relief to financially stressed out South Africans.

Take steps to take back control

John Manyike, head of consumer education for Old Mutual provides some tips on how to take back control.

Stick to the budget: With 43% of people admitting they had to borrow from family and friends, Manyike says households need to commit to actually sticking to the budget – not just saying they have one.

Help family to help themselves: According to the survey 43% of working South Africans fall into the so-called “sandwich generation” which means they are supporting both adult children and aging parents. Manyike’s advice is to empower your family with an income-generating venture. Rather than giving them money to survive, invest in a business or sideline that they can run and which will provide them with an income.

Use extra income to pay down debt or save: If you are among the more than 50% of respondents who have a side income, make sure you have a plan to use that money to achieve worthwhile goals. “Don’t look at it as money you never had and that you can now spend. Rather use it to pay off debt and start saving,” says Manyike who adds that “when purpose is unknown, abuse is inevitable.”

Use stokvels for medium-term goals: With 61% of respondents saving through stokvels, Manyike says this is an opportunity to develop stokvels beyond groceries and use them to achieve medium-term goals like education, holidays or home renovations. However, people should also consider longer-term investing that allows them to benefit from the power of compounding.

Bank the cash: Of those who have unbanked cash, 60% admitted to keeping their emergency cash under the mattress. This is not safe, and you lose out on earning interest (which in the current environment can be quite high) that you would earn if you deposited it into a savings account.

This article first appeared in City Press.