The past 12 months have been tough for South African consumers.
Rising interest rates means rising debt repayments and if that isn’t enough, the cost of living is skyrocketing.
We have less money available to buy necessities which are just increasing in price.
We are being hit from all sides.
People cannot even afford to buy eggs anymore, as lower income earners simply cannot afford the cheapest animal protein.
“Eggs have always been that option for the consumer if the other animal protein sources are not affordable, so we’re seeing that again in the market that even though eggs are still the most affordable animal protein source, it’s still difficult for consumers
to afford that product,” said Abongile Balarane from the South African Poultry Association’s Egg Organisation.
When interest rates were stable during the pandemic, many people took the opportunity to purchase homes and vehicles at these more affordable interest rates.
However, in the last year or so, interest rates have increased dramatically, and some people are now paying around R3 400 more per month on a R1.5 million bond than they did last year.
The chances are slim that anyone got a salary increase to match these rising costs.
Where are people expected to find this additional income?
A large number of South Africans are getting into debt just to make it to month’s end.
People are “taking from Peter to pay Paul” to avoid defaulting on their debt repayments.
This is not a sustainable solution and with interest rates likely to rise again, we will undoubtedly see creditors getting ready to start the legal process against consumers who are defaulting on their monthly instalments.
And this in turn will lead to repossession of financed assets, a position no one wants to be in.
As costs rise and our disposable income becomes less, our first point of call should be to cut down on expenses.
However, many people have already cut back to the bone, and this is why they are even now considering cutting down on things like insurance, just to save a little bit more every month.
Long-term insurance statistics from the Association for Saving and Investment South Africa shows fewer risk policies were bought in the first six months of last year, and a high number of policies lapsed.
Sonja Oosthuizen from Standard Bank Insurance urges consumers to reconsider plans to cancel policies: “In these tough times, everyone is looking for ways to save. If you’ve been toying with the idea of cancelling your insurance cover and revisiting it sometime down the line, you may want to reconsider.
“Ultimately, being insured protects you and your loved ones from potential financial ruin,” Oosthuizen added.
After you die, life cover will pay out your dependents which they can use to take care of outstanding debts and day-to-day expenses such as food and transport, as well as the big expenses such as home loan repayments and funeral costs.
Oosthuizen advises people to reach out to their insurers instead of cancelling their insurance, to understand what their options are to make their insurance more affordable.
“If you can’t afford the payments, don’t do away with your insurance entirely. Instead, start by contacting your insurer about payment options and potentially restructuring your policy following a needs analysis, which is a review of your assets, business, lifestyle, and family considerations,” Oosthuizen said.
Insurance providers are now starting to offer flexible options that will make it more affordable for people to pay their insurance policies, including a payment arrangement, premium holiday, cover reduction or alternative products.
Oosthuizen added: “By cancelling your insurance, you are placing yourself in a vulnerable position should anything happen to you, your possessions, your home or your vehicle. No insurance means no protection in the event of a fire, storm damage, an accident or theft.”
One thing is definitely certain – we need to become proactive about our debt.
We must make the time to see exactly what we are spending our money on, and where we can realistically cut down.