If you're in debt, it's basically your fault, say finance experts. Especially if you're not saving money and not managing your finances. What a load of &%^$ says Susan Erasmus.
We are so good in SA with blaming the victim. Then we can wash our hands of the responsibility and walk away smugly. Problem solved. Alas, not so fast.
For many years while I was working for NGOs, I survived on debt. My finances were always on the edge and I lurched from one financial crisis to the next. Car repairs, bond repayments, municipal bills – any unexpected expenditure could wreak havoc on the budget. Not to speak of medical expenses (how many NGOs you know have luxuries like pension funds and medical schemes?).
I used money from my overdraft to pay my credit card. Any windfalls would drop silently into an ocean of debt, barely causing a ripple. At the centre of my life was this big black hole that drained my money and my energy.
Whose fault is this?
And like many of the people reading this column, I blamed myself. I was sure poor financial management lay at the heart of this ongoing disaster that was my finances. All I needed to do was to budget better, to be stricter with myself. I had been a naughty, naughty girl. (It might be the time to say that I have never been a shopper, and don't go in for luxuries at all. My idea of a rare treat was to buy new underwear from a chainstore. I had no shop accounts, and still don't have.)
And how could I not blame myself with frequent comments even then in the media from experts who blamed me for everything? The following is a classic example quoted earlier this week in the news from Bernadene de Clercq, head of Unisa's personal finance research unit:
She said consumers put saving at the bottom of their priorities when they received their incomes. This led to over-indebtedness and consumers could not enjoy the current low interest rates environment.
"We need to teach people to manage their finances," De Clercq said.
Of course these things are true. But you tell me how someone whose family is starving is going to save money. And what difference financial management would make in the case of someone who earns R1600 per month like some of the farm labourers recently in the news.
And then an interesting thing happened that made me see the whole situation differently.
A new perspective
I got a new job that paid me a better salary. Not a huge increase, but enough to get me over that crucial edge. I managed to get some freelance work. If I were as financially useless as I was always ready to concede, I would simply continued living 10 – 20% above my income, whatever it was. But a few years later, I am debt-free (apart from a small bond on the house).
Not only do I realise that the former drowning-in-debt situation was not my fault – I also realised I simply wasn't being paid a living wage. No amount of budgeting was going to change that at all.
Things cost what they cost – petrol, electricity and other basics now cost even more than before when seen as a proportion of the average person's income. No wonder people are going into debt (unsecured – read loan sharks) to buy food (26% of those in SA) and pay for transport (16%).
It's one thing going getting caught in the debt spiral to buy fancy clothes and top-of-the-range appliances and gadgets – and quite another to go into debt because you can't watch your children going to bed hungry.
And what's more, while everyone tells you debt is not a good idea, shops and banks are falling over their feet to make it easy and tempting for you to go into debt. From special offers if you open shop accounts, or pre-approved personal bank loans, or credit cards on which the limits are increased hugely if you appear to be vaguely solvent.
Now I know there are people who go into heaps of debt to finance a luxury lifestyle. This article is not about them. If you're doing this, I am sorry, but you deserve every sleepless night you have. If you think what you have defines who you are, your emotional problems are actually bigger than your financial ones.
So what now?
Right, so what do I propose?
Firstly, people must get away from this idea that the inflation rate is 6%. Anyone who ever pays bills knows this cannot possibly be true, yet this is what salary increases are based on.
There must be a clampdown on the loan-shark industry. Once they get people into their clutches, there really is no escape. People just get deeper and deeper into the debt trap with huge interest repayments. Illegal practices such as taking of bank cards and ID books disempower millions.
Basic living costs must be considered when wages are determined. No one can live on R69 a day. At the same time, productivity levels also need serious attention in SA.
People need to realise that they're being duped into being good consumers. Ads are aimed to make you feel inadequate without certain products. Learn to differentiate between what you need and what you want. Big difference.
No one should have kids they can't afford to give the basics to. This is a vicious cycle that gets everyone deeper and deeper into the dwang – including the kids.
Of course financial planning is important. So is saving. But if salaries can't cover the absolute basics, something is wrong either with the salaries or with the costs of the basics. Or both.
(Susan Erasmus, Health24, November 2012)