According to Experian South Africa’s Consumer Default Index (CDI), the rate of first-time consumers defaulting has increased in 2021Q1. This has been linked to a possible increase in economic activity due to the ease of restrictions towards the latter part of last year.

Consumer spending seems to have increased

It-online reported that, Jaco van Jaarsveldt, chief decision analytics officer at Experian Africa, says:

This deterioration is primarily due to the increase in business volumes during the latter parts of 2020 when strict lockdown rules were relaxed at the end of the second Covid wave – particularly for credit cards and personal loans over the Black Friday and Festive season period in 2020.

Although an increase in spending is good for the economy as a whole, consumers must be wary of high loan and credit card repayments. Buying unnecessary items on credit is costly and can become a habit.

Home loan defaults have decreased due to the home being converted into the place of work for many during the pandemic.

Look at various saving and investment options

Many consumers have reported that they found it easier to save during the lockdowns. With minimal socialising and limited activities, staying at home can allow you to save more than usual. As the lockdown restrictions ease, consumers must not rush into unnecessary outings and spending sprees.

Try to find suitable savings plans and options for your extra funds. A good place to start is at your bank. Open a savings pocket or two and try to put money aside each month. Otherwise find a financial planner who can give you multiple options. A financial planner will talk about your savings goals and future wants/needs.

Focus on settling debts, not adding to them

With consumer debt in SA sitting at R1.9 trillion, many consumers are over-indebted. Many become over-indebted due to unforeseen circumstances. Unavoidable medical bills, legal costs or other family issues can force you to use large amounts of debt.

Using debt to pay for monthly expenses each month can lead to a debt cycle. This is when you need to make use of new debt each month to make it to the next pay day. If you are unable to pay your debts each month you should try speaking to a registered debt counsellor.

Budgeting and making large financial decisions can be daunting. Try speak to people with experience or professionals to make better financial decisions. It could be costly to make uninformed decisions which may be difficult to undo.

{Source: it-online}