Do you find that you are in the red every month but don’t know how you got there? You may not know it but your spending habits could be why your finances are a mess. Angelique Ruzicka surveys four spending habits that you could be following that is making you poorer every month.
11 November 2013
Ian Wason, DebtBusters CEO, speaks to Fin24 on the debt spiral. Millions of South African consumers are unable to break free from debt and find themselves more and more indebted as time passes by.
The average age of our clients has come down from the age of 44 in 2008, to 34. This shows us that consumers are getting into debt at a far younger age than before. The reason why they’re getting into debt is that they’re borrowing more than they earn, and they’re filling that gap by borrowing more money.
Initially it starts with an overdraft; perhaps they build a house which they can’t necessarily afford, and maintenance has caught up with them of the house. Perhaps they bought a vehicle, and they haven’t factored in the cost of maintenance and petrol and insurance. And people increasingly have to borrow money to meet their debt repayments: borrow from Peter to pay Paul. The problem with this is the more they borrow, the more expensive the debt becomes.
If you look at the mortgage, people will be paying on average 8 % on their mortgage, and they will be repaying that mortgage over 20 years. And the other extreme, if you borrow a loan for the less than 12 months, your credit provider can charge you up to 60% interest, there will be also on top of that an initiation fee and a monthly fee and no doubt credit life insurance on top. Many consumers are paying over a hundred per cent interest per annum, if you include all the fees. It’s simply impossible for people to get out of this.