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Seven out of 10 middle- and upper-income earners say they are experiencing financial stress, according to the annual retirement study conducted by the Sanlam Benchmark Survey.
Viresh Maharaj, the CEO of Sanlam employee benefits: client service, says that, when more than 70% of middle-income South Africans are experiencing financial stress, the problem has reached epidemic levels.
When asked about the sources of financial stress, nearly 55% of those surveyed said it came from short-term debt obligations such as car payments, credit cards and personal loans.
The second-biggest source of stress (42%) was attributed to not having enough savings for the future or for unexpected emergencies.
Financial obligations to extended family members and school fees were also two of the biggest reasons for stress.
The financial pressure on households is so great that, in this relatively affluent segment, three-quarters of people admitted that at least once a year they did not have enough money to meet their expenses, with nearly six out of 10 people saying that this occurred several times or more
a year.
Financial stress is starting to have a serious effect on our ability to function at work and at home, with 74% of people saying it is negatively affecting their home life. More than 50% said it negatively affects them at work.
In a country with such high levels of inequality and unemployment, we expect there to be financial stress, however, this survey was not focused on low-income earners.
The majority of those interviewed fall into the higher-income earning brackets and, as members of retirement funds, are fully employed and earning a good income.
Nearly all have a tertiary education, and 60% have a degree and earn more than R300 000 a year – 40% of those interviewed earn R500 000 or more a year.
If people who earn R500 000 a year are feeling financial stress, at what point do we start questioning our lifestyle choices?
For entry-level middle-income earners with a salary of R15 000 to R20 000 a month, it is challenging to cover the basics such as groceries, rent and school fees, especially if you have an extended family to support – this is where the weak economy and high unemployment rate is having its biggest effect.
But when you are earning R400 000 or more a year, it is not so much about basic survival any more – its our lifestyle choices that create the stress.
At a media briefing on the survey, Trurman Zuma, CEO of Sanlam personal finance: savings, pointed out that the survey highlighted the extent to which we, as consumers, are not prepared to acknowledge how our own behaviour is affecting our finances.
Only 13% of those surveyed acknowledge that their own spending habits are a source of stress. But how do you end up in debt if you’re spending your money wisely?
Only 3% of people responded that “keeping up appearances” was a source of stress, yet how many of those cars we drive, clothes we wear or phones we buy are bought to keep up appearances?
Before the global financial crisis began in 2008, employed, qualified income earners were able to sustain an increasingly affluent, debt-enabled lifestyle as salaries mostly rose at levels above inflation, and as interest rates were at historic lows.
As the economy contracted, salary increases reduced and interest rates edged higher, so the lack of savings and the overextension of credit started to be felt.
Unfortunately, it is unlikely we will see a significant improvement in the economy any time soon.
Much of this stress can be avoided if we make sound financial decisions, such as not buying a luxury car, not using credit to buy things we don’t really need and starting to put some money away for emergencies.
When it comes to kicking the proverbial can of debt down the road, the road has already hit a dead end.
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