Debt repayments swallow almost 60% of income - IOL

South Africans applying for debt review are spending almost 60% of their take-home pay on unsecured debt repayments alone.

South Africans applying for debt review are spending almost 60% of their take-home pay on unsecured debt repayments alone, before home loans or vehicle finance are even considered.

New data from the South African Financial Pressure Index shows the median share of net income going towards unsecured debt repayments among 1,577 applicants was 57.8%.

And earning more offered little protection from serious financial trouble. One in five debt review applicants earned more than R15,000 a month, while one in eight earned more than R20,000.

Median unsecured debt also rose sharply with income. Applicants earning between R5,000 and R10,000 a month had median unsecured debt of R10,295, compared with R121,134 among those earning between R20,000 and R30,000.

The findings come as broader research shows many South Africans have little room to absorb an unexpected financial shock.

FinMark Trust’s FinScope Consumer South Africa 2025 Survey found 48% of adults, equivalent to about 22.4 million people, were not saving at all. Formal saving fell to 22% in 2025 from 30% a year earlier.

At the same time, the South African Reserve Bank reported that household debt grew faster than nominal disposable income during the first quarter of this year, lifting the household debt-to-income ratio to 62.2% from 61.8%.

Ben Webbstock, founder of Fynbos Money, says consumers first need to distinguish between consistently spending more than they earn and an unexpected expense temporarily pushing costs above income.

“If your regular monthly expenses consistently exceed your income, that is a warning sign that needs to be addressed before you start thinking about saving or investing,” he says.

Webbstock says consumers should examine where their money is going, distinguish between needs and wants and identify expenses that can be reduced or removed.

The aim is to reach a point where ordinary monthly expenses are comfortably covered by income, leaving money over to improve the household’s financial position.

A consumer who ordinarily lives within their means faces a different problem when confronted with an unexpected car repair, medical bill or period without income, Webbstock says.

“This is where an emergency fund becomes important.”

Many consumers postpone saving until they receive an increase or debt has been paid off, but waiting for an easier time can result in saving continually being postponed.

Leonie van Pletzen, CEO of the Credit Association of South Africa, says living pay cheque to pay cheque exposes consumers to shocks including unexpected repairs, medical co-payments and utility price increases.

A dedicated liquid reserve can reduce the need to turn to short-term loans, credit cards or registered micro-lenders when these expenses arise.

Van Pletzen describes debt review under the National Credit Act as a legal safety net once someone becomes over-indebted, but says preventative measures are preferable. She recommends regularly auditing debit orders and discretionary spending to identify expenses contributing to a monthly shortfall.

National Debt Counsellors director René Moonsamy says consumers should, where possible, prioritise paying off high-interest unsecured debt and direct extra money towards settling debt rather than taking on additional credit.

Moonsamy also advises consumers to avoid using credit for everyday expenses, maintain emergency savings for unexpected costs and regularly review outstanding balances and repayments.

“The goal should be to steadily reduce your overall debt while building enough financial resilience to avoid relying on credit when something unexpected happens,” Moonsamy says.

Trans-50 notes that the expenses consumers need to prepare for can change with age, with healthcare costs, home repairs and car breakdowns catching older consumers off guard.

Satrix quantitative portfolio manager Siyabulela Nomoyi says helping parents, siblings or extended family should be included in financial planning rather than treated as an afterthought.

Sino Booi, product development lead at Momentum Savings, illustrates the cost of borrowing rather than saving with the example of a R100,000 holiday five years from now.

Under Booi’s calculations, saving costs nearly R40,000 less than borrowing over the same period. Avoiding credit for discretionary purchases also keeps borrowing available for something urgent and unavoidable. “That is why we call emergency savings a lifesaver,” he says.

Webbstock says consumers starting to build an emergency buffer should also consider where they put the money.

While a tax-free savings account can be an effective long-term investment, withdrawing money does not restore tax-free contribution room already used, meaning an accessible discretionary savings vehicle may initially be more appropriate.

A tax-free savings account can then form part of longer-term investment planning once the financial foundations are in place.

Webbstock says consumers who have brought their expenses under control should also consider ways to increase their earning potential.

“It can ultimately be easier to increase your income by R1,000 than to find another R1,000 to cut from an already stretched household budget,” he says.

Therèse Havenga, head of business transformation at Momentum Savings, says many consumers postpone saving until they receive an increase or debt has been paid off, but waiting for an easier time can result in saving continually being postponed.

Rather than waiting, Havenga recommends choosing a feasible amount, automating it and increasing contributions when income allows.

“The increase is swallowed by new expenses, the calmer month never arrives, and one demanding season of life simply gives way to the next,” she says.