The Reserve Bank’s Quarterly Bulletin for the fourth quarter of 2022 states that consumers spend 62.3% of their net disposable household income to service debt. This figure is very worrying. It clearly indicates that consumers find themselves in a debt trap, causing stress, and anxiety, eroding productivity and limiting consumers' ability to achieve their financial goals by Jeremy Chetty.
The debt trap occurs when consumers accumulate excessive debt, especially unsecured personal loans, and then struggle to make the required payments, often resulting in a cycle of borrowing and indebtedness.
The consequences of being trapped in debt include:
- Financial Stress:
- Limited Financial Options:
- High-Interest Payments:
- Damaged Credit Score:
- Retirement:
To escape the debt trap, consumers can seek assistance from financial wellness companies that specialise in debt management and provide solutions to improve financial health.
Here are some steps that these companies may suggest:
- Assess the Debt Situation:
- Create a Budget:
- Debt Consolidation:
- Negotiate with Creditors:
- Debt review:
- Sequestration:
- Financial Education and Counselling:
- Develop Savings Habits:
Remember, escaping the debt trap requires commitment, discipline, and a proactive approach to managing personal finances. While financial wellness companies can provide valuable guidance and support, consumers must also take responsibility for their financial decisions and actively work toward their goals.
* Chetty is head of corporate sales at the Welltec Groupo
PERSONAL FINANCE