Consumer debt: The good and bad

Consumer debt: The good and bad

06/02/2018 Although the election of Cyril Ramaphosa seems to have had some citizens breathing a sigh of relief, it will be a long time before the effect is felt in our pockets and piggy banks, where it really matters.

Consumer indebtedness levels remain at a scary high. And as if Januworry was not a tough enough ride, the upcoming budget speech is expected to only worsen the burden on most consumers. Even with all that’s going on, there are still some reasons to smile and be grateful.

Country duty: Helping fellow South Africans pay off their debts

Entrepreneur Quinton van der Burgh is the most recent reason why some families are starting off this year with big smiles on their faces. This savvy businessman and philanthropist is offering to settle the accounts of ordinary South Africans who are hopelessly indebted.

His recently launched #ActOfGenorosity CSI initiative will not only help consumers escape debt, but it also aims to teach them about maintaining financial health. After receiving thousands of submissions of stories of indebtedness, three beneficiaries were selected and their debts were completely cleared by the entrepreneur! It seems this is only the beginning as the initiative is expected to change more struggling consumer’s lives. Fantastic news... right?

Based on the stories of the chosen beneficiaries, the initiative is mostly aimed at those who had no other choice but to get into debt. So you may want to settle for the back of the line if you treated yourself to a Gucci suit on credit knowing fully well you have a limited disposable income.

Kudos to Quinton for selflessly embracing country duty and stepping up where the state seems to be unable to step in.

With this initiative comes a big lesson for indebted consumers - once you are out of debt, actively learn how to stay out by planning better and saving where you can.

The 2018 budget speech and how it could affect consumer indebtedness

With the budget speech looming, analysts and economists have warned consumers to brace themselves. Budget forecasts by experts seem to all be sending the same message - 2018 it is not looking good.

South Africa is struggling for air under heaps of debt and the current level of tax revenue is not nearly enough to decrease it. Major tax hikes are undoubtedly expected across the board to minimise the shortfall.

Another hot topic everyone is looking out for is free education. While the idea of free education may be pleasing, the actual implementation will no doubt be costly. Funding for the plan, should it go ahead, will most likely also have to come from tax hikes and/or additional borrowing - yet another unfavourable cost for the consumer.

We can only hope that finance minister Malusi Gigaba will come bearing some solutions, that’s if he is still the minister by then.

If the budget speech turns out to be exactly what we are anticipating, the blow will most likely be felt by everyone. Given the high consumer indebtedness level, the news will not help in anyway as more consumers will be left with a lower disposable income in general and fears of even more bad news.

With all that is happening, most of us are not sure what tomorrow will bring. Times may very well be tough for the South African economy, but there is hope. Chin up and cut back on the finer things of life by saving and steering clear of more debt. Remember, the only way from worse is better!

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