South Africa’s economic growth is projected to hit 1% in 2020, which is lower than what was estimated earlier this year. With low wages and a high unemployment rate in the country, South Africans are indeed feeling the pressure. Household debt continues to increase as people max out their credit cards and seek short-term loans in order to keep up with their daily expenditures. Unfortunately, due to the unsecured lending boom, millions of South Africans now find themselves unable to pay back what they owe. As new leaders try to improve the country’s performance, South Africans can also take measures to avoid falling into the debt trap.
Dealing With Current Debt
Millions of South Africans are caught in a debt trap, as they devote a large part of their wages each month to paying off their loans. However, most people are simply paying off the interest rather than the loan itself. In order to escape this vicious cycle, it’s important to for individuals to deal with their existing debt. This can be done by contacting the creditor to come up with a more manageable repayment plan. However, take note that this option doesn’t always equate to success, which is why it’s important to fully understand the limitations of credit counseling companies and weigh all the pros and cons.
Another viable option for individuals dealing with debt is be to file for bankruptcy. However, filing for bankruptcy via the High Court can be a very tedious process. As such, it’s recommended that individuals considering this option hire a bankruptcy attorney, who can provide credit counselling as well as providing guidance throughout the entire process.
Apart from dealing with existing debt, it’s important to assess spending habits and see which aspects caused the debt in the first place. In order to stay debt-free in the future, individuals are advised to adopt cost-cutting measures. Following the 50/20/30 budget rule can help. This means spending 50% of your income on essential expenses such as rent, car payments, water, electricity, healthcare and insurance. 20% should go into savings or emergency funds, or pay off any existing debt. The remaining 30% can be spent on non-essentials such as shopping expenses, internet, entertainment subscriptions and holiday expenses. Monitoring budget and expenses every month is a valuable asset, so all spending should be listed throughout the process.
South Africa’s economic performance is taking a toll on its citizens. Millions of South Africans have fallen into a debt trap because they are spending more than they earn. Additionally, people end up only paying off the high interest rates instead of the loan. While household debt can be very stressful, it should be dealt with as soon as possible. There are several viable options, such as enlisting a debt management company or filing for bankruptcy. Apart from that, employing cost-cutting measures to prevent further debt is essential. Even with the uncertainties of South Africa’s economy, it’s possible to secure a better future when household debt is under control.