Most consumers who approach the National Debt Mediation Association (NDMA) have debt exceeding their income by more than 30%.
Most consumers did not save and were dependent on credit to deal with economic and life shocks, CEO Magauta Mphahlele said today.
“Most consumers who approach the NDMA for assistance operate with a budget deficit of more than 30%, where debt repayments and living expenses added together exceed their net income,” she said.
Mphahlele said consumers should improve their money management skills, reduce their debt and put money aside for emergencies, education, and retirement.
Consumers approach the NDMA to make payment arrangements, deal with credit bureaus, resolve payment difficulties and get advice on how to stop legal action against them.
Mphahlele said reasons for over-indebtedness differed. Some people were granted debt beyond what they could repay. Others incurred excess debt by not fully disclosing their financial position.
A “sizeable chunk” of consumers had debt levels so high that even a reduction in monthly obligations did not help reduce their “debt stress”, she said.
“This is the case with consumers whose income has been reduced due to divorce, retrenchment, unemployment or the failure of a business venture,” she said.
She advised consumers to simply plan ahead.
“Ideally you should be saving between 10% and 15% of your income and putting it in different types of saving and investment products based on your short and long-term needs and goals.
“It’s as simple as making sure that your income covers your expenses. If you can’t afford to pay for it without borrowing, you probably don’t need it.”
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