Quieter winter season a time to reflect and work on debt

South Africans faced a number of economic challenges at the onset of the new year, influenced by several macroeconomic factors. We are facing higher inflation, with rising electricity, petrol and food prices, coupled with higher interest rates.

Historically, overspending during the festive season has a domino effect on the first few months of the year. As we head into the quieter winter season, now is the ideal time to reflect on and, if necessary, work on your relationship with your debt. There are small but significant steps that can be taken towards improving your financial position.

A recent report by market research consultancy Eighty20 found that members of the mass credit market in South Africa can be characterised as “stressed” in relation to their level of indebtedness. The mass credit market accounts for most of the credit-active South Africans, 82% of whom have retail credit and a fifth of whom have credit cards. Typically, this market has a monthly instalment to net income ratio of over 70%, or at least two loans that are in default.

These statistics are concerning and point to an over-indebted population that has taken considerable strain during the first quarter of the year.

However, the journey to becoming less indebted and financially secure begins with good planning, followed by consistency.

Expanding on this sentiment, there are helpful guidelines for managing your debt.

If you are struggling to decrease the amount of debt you’ve accumulated over the summer months, or you are concerned with rising prices and rising interest rates, you can focus on making a concerted effort to work closely with your debt cycle. You can do this by avoiding the things that trigger excessive spending. For some people, this may mean temporarily unsubscribing from promotional emailers from your favourite retailers. For others, it could mean putting a stop to shopping mall visits. Cutting out temptation and opportunities to overspend while you are working on reducing your debt can go a long way towards reaching a longer-term goal of financial fitness.

The reality of being over-indebted can be emotionally distressing, which can have broader consequences in other areas of your life. Creating a debt repayment schedule using a basic Excel spreadsheet, or a written list of exactly how much is owed to which institutions, can relieve some pressure. Seeing the figures on paper will give you a full view of the bigger picture and help you plan your debt repayments strategically.

Keep a record of all incremental payments that you make towards reducing loans or credit accounts, as this will help you track and monitor your progress. Seeing the debt reduce helps to feel less overwhelmed and motivates you to be consistent with regular repayments, no matter how small.

Receiving an unexpected windfall, income from a side hustle, a tax refund, a gift or a bonus is always a welcome surprise. The unfortunate reality is that for many South Africans, extra income means extra spending. Challenge this mentality and invest in your future self by paying down today’s debt levels. The opportunity to spoil yourself is still there, you are just choosing not to exercise it immediately and instead, to do so at a future date. This will accelerate your journey towards becoming financially secure.

Provide yourself with small but meaningful milestones at regular intervals on what “financially secure” means for you. Choose rewards for yourself as you achieve each of those milestones, making your financial journey a positive experience with a long-term view on what is best for you. It is important to understand that habits can be learned and unlearned and that this is the same for everyone. Remember to keep at it. As with any habit we change for ourselves, these things can take time.


  • Pavlou is deputy chief financial officer at RC

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