As the end of the month approaches and paydays are near, many South Africans find themselves with alarmingly low funds. They often struggle to meet basic expenses until their next salary.
According to data from First National Bank (FNB), the country’s average middle-income earners spend up to 80% of their salary within five days of getting paid. This means that most consumers are surviving on 20% of their monthly income for more than 20 days of the month.
Emerging middle-class individuals are experiencing the most financial pressure, as many have less than R1,000 left or even end up in debt before their next payday. This pattern may be influenced by the increasing access to overdraft options, which can lead to a higher likelihood of falling into debt as the end of the month approaches.
Emerging middle-class individuals are experiencing the most financial pressure, as many have less than R1,000 left or even end up in debt before their next payday. This pattern may be influenced by the increasing access to overdraft options, which can lead to a higher likelihood of falling into debt as the end of the month approaches.
Let’s explore why so many people face a cash crunch towards the end of the month and the financial behaviours and economic factors that contribute to it.
The Payday-to-Payday Cycle in South Africa
Living from payday to payday is a widespread issue, with only two in five people saying that they can endure a financial setback or achieve financial freedom. This reliance on a single monthly payment cycle means that most expenses, including rent, groceries, utilities, and debt repayments, pile up immediately after salaries are received, leaving little to sustain families as the month progresses.
The Impact of Rising Costs and Stagnant Salaries
A major factor in this end-of-month financial struggle is the continuous rise in the cost of living. High inflation rates have eroded purchasing power, particularly in essential categories like food, electricity, and transport. The average nominal take-home pay salary reached R16,582. Meanwhile, wages have not kept pace with inflation. In real terms, most South Africans find that their money does not go as far as it once did, leaving a wider gap between income and expenses.
Debt Obligations and Payday Loans
South Africa’s high levels of household debt also contribute significantly to the strain felt just before payday. Many people have little choice but to cover shortfalls through credit cards, personal loans, or payday loans. These high-interest products provide temporary relief but often lead to recurring cycles of debt, making it even harder for consumers to break free.
Lifestyle Inflation and Financial Choices
Lifestyle inflation—where people increase spending as their income rises—further limits disposable income. For example, those who receive salary increases might upgrade their lifestyle rather than save the extra income. Subscription services, entertainment expenses, and non-essential items collectively drain funds, leaving little for savings or emergencies and causing a scarcity of cash as the month ends.
Poor Financial Literacy and Lack of Budgeting
A lack of financial literacy and poor budgeting practices also contribute to this cash crunch. Many South Africans do not receive formal education on budgeting, saving, or debt management, which can lead to ineffective money management. Without a clear understanding of their income and expenses, people often overspend early in the month, leading to financial strain later on.
The Impact of Social Pressures
Social expectations can also play a part, with cultural norms and pressures to maintain a certain lifestyle adding to financial burdens. These pressures can lead to overspending on social gatherings, holidays, and significant life events, which often require resources that people don’t necessarily have but feel compelled to spend.
Breaking the Cycle: Tips to Avoid Running Low on Cash Before Payday
Create a Budget and Stick to It: Planning monthly expenses can help you control spending. Set priorities for essential expenses like food, rent, and debt, and track discretionary spending.
Build an Emergency Fund: Even a small fund can provide a cushion for unexpected expenses and reduce the need to rely on credit. Start small and build it gradually to cover at least three months’ worth of expenses.
Practice Delayed Gratification: Delay purchasing non-essential items until you have enough funds to cover them comfortably. Impulse purchases can be a big drain on monthly finances.
Limit Credit Use: Avoid high-interest payday loans or credit cards, as they often create recurring debt cycles. Seek financial counselling if you need help managing debt.
Prioritise Savings: Dedicate a portion of your salary to savings at the beginning of the month rather than the end, even if it’s a small amount. Consistent saving will gradually help build financial resilience.
For many South Africans, finding ways to stretch their salary is a necessity. With the right tools and a commitment to smarter financial habits, it is possible to reduce the end-of-month struggle and start building towards greater financial security.