<\/p>\n
You can also listen to this podcast on iono.fm here.<\/p>\n
DUDUZILE RAMELA: Many of us have heard phrases such as \u2018in this economy\u2019 when contemplating a purchase, or \u2018mampara week\u2019 \u2013 that week just before payday, when noodles or eggs are a staple.<\/p>\n
This lived reality boils down to the fact that more than 60% of South Africans run out of money before month end, many within the first week. Payday for millions is no longer about getting ahead. It\u2019s about catching up. That\u2019s according to National Debt Advisors.<\/p>\n
Dehan Scherman is senior operations manager at National Debt Advisors and joins us now to look at the payday poverty cycle. Thank you very much, Dehan, \u00a0for your time this morning.<\/p>\n
Maybe let\u2019s start with the first week after payday. Why is it the most crucial period for financial stability?<\/p>\n
Read\/Listen:
Bank account empty, January bills to pay \u2013 now what?
Cost of living crisis: Medical aid costs up 43%, food prices soar
The steady decimation of SA\u2019s middle class over the last decade<\/p>\n
DEHAN SCHERMAN:\u00a0 The core issue is that most salaries are already pre-spent before they arrive. By the time payday comes along, most of that is immediately absorbed by fixed costs.<\/p>\n
You have rent, transport, food and debt repayments. All these debit orders go off, so what feels like financial relief is just a temporary breathing room. It\u2019s not a real surplus.<\/p>\n
And that\u2019s unfortunately the cause, because people feel more relaxed, spend more money, and then by the time it\u2019s mid-month don\u2019t have anything left.<\/p>\n
DUDUZILE RAMELA: What practical steps, then, can consumers take right now to break the payday debt cycle?<\/p>\n
DEHAN SCHERMAN: Start off by tracking every rand for the full month. Understand where your money is going; be aware of how you\u2019re spending it. Lock down your spending for the first five days.<\/p>\n
So when you receive your salary, after those debit orders, make a point of not spending money for at least the first five days, and make sure that you pay essentials first.<\/p>\n
Thereafter, you\u2019ll have a better understanding of how much money you have left, and you can plan out to make it last over the remainder of the month.<\/p>\n
Read\/Listen:
Paycheques gutted by debt, particularly among high earners
South Africans hungry for financial education
Financial stress deepens as middle class faces mounting money strain<\/p>\n
DUDUZILE RAMELA: Some people, when there\u2019s a shortfall, turn to short-term credit. Now help us understand how that temporary cash shortfall can trap you into long-term debt.<\/p>\n
DEHAN SCHERMAN:\u00a0 Short-term credit acts almost like a bridge between your income and your expenses, but it\u2019s a really expensive one. When people borrow to cover shortfalls, they start the next month already behind. Interest and fees accumulate. They become more reliant on credit just to maintain basic living.<\/p>\n
Read:
High-income earners don\u2019t seek financial advice, despite mounting debt
Expensive credit piles on pressure
The payday trap that could cost you your bond<\/p>\n
This unfortunately creates a debt cycle, where borrowing isn\u2019t just occasional; it actually becomes structural \u2013 and it\u2019s repetitive.<\/p>\n
Eventually, you\u2019re going to run into a point where you don\u2019t have any money left \u2013 and you don\u2019t have any money left to borrow either. And then you\u2019re stuck in a situation where you\u2019re over-indebted, and you\u2019re completely out of options.<\/p>\n
DUDUZILE RAMELA: Many people view this as personal failure. Is it?<\/p>\n
DEHAN SCHERMAN: To some extent, it can be. It also highlights the fact that the cost of living and standards of living \u00a0increase over time, but salaries don\u2019t really increase proportionate to inflation. And so over time, that gap gets broader and broader and broader.<\/p>\n
To some extent, consumers have to be responsible for their spending and adjust their standard of living accordingly.<\/p>\n
It has to be in line with your affordability.<\/p>\n
But to another extent, we can\u2019t always control the rate of salary increases in relation to inflation. Over time that gap becomes quite substantial and many people just feel debt is the only way that they can solve that problem.<\/p>\n
DUDUZILE RAMELA: I was at a popular food outlet last week, and I heard two ladies talking to each other. The one was saying: \u201cI don\u2019t feel guilty being here because I can afford to buy a R30 meal with my kids not being here. Whenever I spend, I have to think about them. But today I don\u2019t feel guilty because I can. They\u2019re not here with me, so it\u2019s okay. I can spend R30 on this meal.\u201d<\/p>\n
Some people call that \u2018relief spending\u2019, don\u2019t they? How does it quietly sabotage monthly budgets?<\/p>\n
DEHAN SCHERMAN: Relief spending is pretty dangerous because it\u2019s almost a way that people will justify the month that they\u2019ve spent working. It\u2019s the same sort of false sense of relief that I mentioned earlier.<\/p>\n
It\u2019s that temporary breathing room when salary just comes in and those debit orders go off.<\/p>\n
Now you have some money and instead of thinking over the long term, okay, how am I going to make this last until the end of the month, people feel at ease with their spending, at least for that short period, because they have some money.<\/p>\n
That\u2019s what helps them justify the time that they\u2019ve spent to work and earn that money. However, it\u2019s also the worst thing they can do because halfway down the line they don\u2019t have money left for the end of the month.<\/p>\n
So, relief spending is definitely that trap, that temporary breathing room immediately after payday that people kind of fall for.<\/p>\n
Read: What does financial well-being really mean?<\/p>\n
DUDUZILE RAMELA: Dehan, thank you very much for your time this morning. Dehan Scherman is a senior operations manager at National Debt Advisors.<\/p>\n
Listen to the full MoneywebNOW podcast every weekday morning here.<\/p>\n
#Mampara #week #trap #relief #spending<\/p>\n","protected":false},"excerpt":{"rendered":"
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