This is something I have been saying for the last few years which puzzled me and that so many people have so much money to just blow on things. People heading to the coast every long weekend or school break and it is very noticeable because where I live in Johannesburg it becomes a ghost town. Restaurants are always full even in the middle of the month and it is like many households have an unlimited budget.
You start questioning what am I doing wrong and am I missing something here because I cannot afford to live like this. I knew the economy was bad, but it was not reflecting this directly in the area where I live and it did not make much sense.
The latest report by DebtBusters which is a National registered financial company that helps households resolve their debt issues through counselling, debt review and debt consolidation. Normally when they give out statistical data they are a month or two behind the curve which is understandable.
It has been common knowledge for some time that the middle income group has a roughly 60% debt to income rate meaning 60% of their total income is used to fund existing debt. That information is a little outdated which is expected due to inflation with the cost of living not tracking annual increases. That 60% is now at 70% and could be even slightly higher and as we all know common sense tells you any number over 30% is really bad.
The higher end income group which is over R50K per month and deemed a good salary in South Africa looks like they have peaked and maxed out owing more than they earn each month which is idiotic. The madness is these individuals are most likely employed in some managerial position at some company yet they cannot even maintain their own household budgets.
We noticed a trend about 3 months ago when disposable income looked like it had dried up and this aligns with what we had noticed. The worrying part is this group is your customer consumer base that keeps the economy flowing and removing them from the customer pool which is very small with 60% unemployment. In many ways the middle class has removed themselves through idiotic spending practices and have no clue what the consequences are.
The credit companies/banks are also to blame for allowing these households to max out their credit cards which in a way is self inflicted debt entrapment. We are not a credit card household and the only loans we have are the house and the car and after that a couple of monthly commitments otherwise debt free. There are no trips to the coast for a holiday as there are concerns about the economy and rather keeping the nest egg intact than just blowing it.
There is definitely a squeeze happening with many households and thinking from a logical perspective there is no easy answers. I know from others who fell into heavy debt is that this will take many years to overcome and there is no guarantees that at these levels it is even possible. When your take home pay is 90% or 100% spoken for through debt then you are financially finished.
The madness is these idiots could not see this and this is from living beyond your means so you only have yourself to blame. Any debt owing over a 30% threshold is unsustainable as it offers no wiggle room to turn things around unless you change your spending habits through downsizing your property and motor vehicles.
What I find quite hilarious is many debt companies prey on these households through clever schemes. They offer a reduced monthly payment through consolidating your debt and paying it off. What they actually do is increase your debt paying it off over x amount of years making it look less as your repayments are less than what you were currently paying. If you are not good at figures then the chances are you will agree to this deal ending up owing even more which is utter madness. I am sure many households have fallen for these schemes and are in way over their heads that will have debt owing for the next 10 years or longer.
This data does not surprise me one bit as a vast percentage of the population has basic education and learning about budgets would have flown right over their heads. Earning a decent salary meant it would take longer to catch up to them and they have now cooked themselves properly. We should see a spike in the repossessions of properties and higher end vehicles which is good news for anyone looking for a bargain. Some people do not deserve the opportunities they have been given in life as it looks as though it was too easy and not appreciated and is a problem when you have not worked your way up the ranks on merit as it was just expected.