After selling more than 61million albums in the U.S. alone and having a decade-long attraction open at Disney theme parks, the ‘King of Pop’ Michael Jackson died at age 50, awash in reportedly $400 million debt.
The question on everyone’s mind is, how do people earning excessive amounts of money land up in debt?
Luke Hirst MD of DebtBusters says, “Anyone can get themselves into debt. It doesn’t matter what you earn, it’s the attitude you have towards money and your spending habits that come into play. If you live beyond your means and take on high interest loans that you can no longer afford, you can become over-indebted.”
It seems that debt that was traditionally associated with poverty but that is no longer the case, even in South Africa.
According to economists South African households in middle to higher income brackets are over run with debt.
The higher income groups' debt burden was already so bad in the first quarter of this year that people in this group had to use on average nearly two thirds of their disposable income for the repayment of their debt.
And the middle income group is not far behind.
The danger that they could lose assets bought on credit such as houses, cars and furniture in the event of interest rates rising further is great, because they cannot repay their debt.
Economists have for some time warned that higher economic growth (hovering around 5%) experienced over the past two years has been built by consumers who have taken on debt they can no longer afford (thanks to interest-rate hikes) in order to live above their means.
Another study by the skills training group of Astro Tech reported that the rich in South Africa are the most indebted and banks are reporting a 50% increase in bad debts.
South Africans now owe a whopping R 1. 139 trillion. In other words R8.20 of every R10 a South African earns goes to pay off debt.
DebtBusters advises all South Africans of all income brackets to be realistic about your finances. Don’t make impulse decisions and if you feel that you are slipping financially contact a debt management company to assess your situation and help you to budget effectively.
