According to the debt-to-income ratio for the different income groups, South Africans have a serious debt problem that must be solved.
Most of us know that feeling of having ‘too much month left at the end of the money”. We live in a cost-of-living crisis where our income grows far slower than our expenses, which means that our money runs out before the end of the month.
According to Standard Bank, if your ratio is higher than 43%, you should consider strategies to reduce debt. Benay Sager from DebtBusters is more circumspect, saying: “In our experience, if your debt repayment to net income ratio is over 30% you are in the danger zone. If it is over 40% your financial situation is not sustainable, regardless of the type of debt you are repaying, as indicated by the DebtBusters Money Stress Tracker.
Eighty20 developed illustrations of a typical income and debt burden for three segments: The Mass Credit Market, Middle-Class Workers and Heavy Hitters. Fulton says these examples aim to present a ‘typical’ instalment-to-income ratio by analysing the subset of people within each segment who have the most common credit product combinations.
This segment predominantly consists of married couples striving for a middle-class lifestyle, often juggling car and home loans along with their children’s education costs. Many are dual-income households with substantial debt repayments.
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