<strong>By: Ronelle Kind - General Manager of Member Engagement Solutions at Momentum Corporate</strong>

<h2>Quarter 3 Momentum/Unisa Consumer Financial Vulnerability index</h2>

Under financial pressure for more than a decade, South African consumers experienced yet another financially stressful time during the third quarter of 2019. However, the latest Momentum/Unisa Consumer Financial Vulnerability Index (Momentum/Unisa CFVI) shows that despite feeling financially exposed, consumers are not changing their behaviour and continue to live beyond their means.

Overall financial vulnerability improved slightly from 50.35 points in Q2 2019 to 50.46 in Q3 2019. This was due to a slight increase in income and a low inflation rate. However consumers are still heavily burdened with unaffordable financial commitments.

Various factors at national, institutional and individual economic levels contribute to South African consumers’ state of financial vulnerability. On an individual level, one of the biggest contributing factors is that consumers are over extending and not living within their means.

“South Africans are inclined to spend rather than service their debt or save,” says Ronelle Kind, General Manager of Member Engagement Solutions at Momentum Corporate. This is the result of various drivers, including a culture of “keeping up with the Joneses” and an inability to budget or stick to a budget.

Key institutions dealing with consumers also participated in the Momentum/Unisa CFVI research, with 69% of them indicating that consumers are not living within their means. This is also evident in the Q2 2019 NCR Credit Bureau Monitor data which shows that during June 2019, 40.8% of all credit active consumers had impaired credit records, 12.7% of these had adverse listings and 5.1% had judgements and administrative orders.

According to Kind, “Due to circumstances, the typical South African consumer lacks a level of control when it comes to spending and incurring debt. Although poor financial literacy contributes to this situation, the Momentum/Unisa Consumer Financial Vulnerability Index indicates that even consumers with high levels of financial literacy often fail to put their knowledge into practice.”

Kind says that although income vulnerability improved slightly from 50.09% in Q2 2019 to 50.62% in Q3 2019 and savings vulnerability remained about the same, expenditure and debt had a negative effect on the overall financial vulnerability score. “As consumers earn higher income, their expenditure on non-essential items increases at the cost of saving. Poor financial literacy and financial capability, which is using financial knowledge to make smart financial decisions, are at the heart of the problem,” says Kind.

Kind says that while South Africans wait for structural interventions to improve the national economic climate and create opportunities to improve employment levels and increase income, the onus falls on the individual to make a difference in their personal financial space. She offers the following tips to help consumers get the most out of the income they earn.

<h3><strong>Plan your finances in advance</strong></h3>

Set financial goals and create a monthly budget or plan to reach those goals. Start by identifying your “needs” and “wants”. Allocating money to your “needs” should take priority over spending on your “wants”.  When it comes to goals, reducing debt should be at the top of the list.

<h3><strong>Live within your means</strong></h3>

Only buy what you can afford. Paying interest on any debt incurred is a long term and expensive commitment that can add stress to your cash-flow position.

<h3><strong>Pay yourself first</strong></h3>

If you decide to save whatever you have left after all your other expenses are paid, there’s a good chance you’ll save zero. Before you pay your bills or buy groceries, set aside a portion of your income for savings.