Debt stress: how much is too much?

MOST of us suffer from financial stress from time to time, typically when expenses exceed income.

- MARTIN HESSE

Of course, many are in this stressed state permanently. The causes are numerous, from a lack of job opportunities to societal pressures, but there is one thing that amplifies stress to unbearable levels - debt.

Remember what they say about the magic of compound interest on investments? With debt, it works in reverse. If you don't repay at least the interest amount each month, your debt will compound. And when you have entered that downward spiral and your debt repayments consume such a large portion of your income that you can no longer afford the essentials of food, shelter, and transport, you are in serious trouble.

This week, debt counselling firm DebtBusters released its annual Money-Stress Tracker report, based on a survey of 27,000 subscribers to its website, conducted in May and June. These are not people in debt review, but who have an interest in the financial information on the site, and therefore, it is fair to say, may have debt problems.

The survey found, along with other recent consumer surveys, that South Africans are generally more positive about their finances than they were a year ago. Although the economy is still sluggish, interest rates have declined slightly, inflation remains low, and loadshedding is a nonevent, at least for now.

Yet South African consumers continue to be overburdened with debt, and it appears that the slight easing of interest rates has not improved the situation. Furthermore, the survey indicates that there is a curious lack of will to reduce debt and alleviate financial stress. It may be that people have come to accept this stressed state as normal.