According to new data from the South African Financial Distress Index, among 1577 debt review applicants, the median proportion of net income directed towards repaying unsecured debt was 57.8%. Even with higher incomes, this did not guarantee complete protection from severe financial difficulties.
The study showed that one in five debt review applicants earned over R15,000 per month, and one in eight earned over R20,000. The median amount of unsecured debt also rose sharply with income level: for applicants earning between R5,000 and R10,000 per month, the median unsecured debt was R10,295, whereas for those earning between R20,000 and R30,000, it reached R121,134.
These findings align with broader research indicating that many South Africans lack the means to cope with unforeseen financial shocks. A FinScope Consumer South Africa 2025 survey by FinMark Trust found that 48% of adults, corresponding to approximately 22.4 million people, do not save at all. Formal savings decreased to 22% in 2025 compared to 30% the previous year.
Concurrently, the South African Reserve Bank reported that in the first quarter of the current year, household debt growth outpaced nominal disposable income, raising the household debt-to-income ratio to 62.2% from 61.8%.
Expenses versus earnings
Ben Webbstock, founder of Fynbos Money, emphasizes that consumers must first distinguish between situations where they are consistently spending more than they earn and temporary cases where unexpected expenses temporarily exceed income. He argues that if regular monthly spending consistently exceeds income, it is an alarming signal that must be addressed before considering savings or investments.
Webbstock advises consumers to carefully analyze their spending, separate needs from wants, and identify expenditures that can be reduced or eliminated. The goal is to reach a point where regular monthly expenses are fully covered by income, leaving a surplus to improve the household's financial position.
In Webbstock's view, a consumer who usually lives within their budget faces a different problem when faced with unexpected car repairs, medical bills, or periods of lost income. It is in such cases that having an emergency fund becomes important.
Build a buffer first
Leonie van Pletzen, CEO of the Credit Association of South Africa, notes that living paycheck to paycheck exposes consumers to shocks, including unplanned repairs, medical co-payments, and utility tariff increases. A dedicated liquid reserve can reduce the need to resort to short-term loans, credit cards, or registered micro-lenders when such expenses arise.
Van Pletzen describes debt review under the National Credit Act as a legal safety net for those who are excessively burdened by debt, but believes that preventative measures are preferable. She recommends regularly reviewing debit orders and discretionary spending to identify expenses contributing to a monthly deficit.
Rene Munsaami, Director of National Debt Advisors, advises consumers to prioritize paying off high-interest unsecured debts and directing extra funds toward debt closure instead of taking on additional credit. Munsaami also warns against using credit for daily expenses, insists on maintaining emergency savings, and recommends regularly reviewing outstanding balances and payments.
Munsaami concludes that the goal should be to gradually reduce the total debt while simultaneously building financial resilience to avoid reliance on credit in case of unforeseen events. Trans-50 points out that anticipated expenses can change with age, as older people are often caught off guard by healthcare costs, home repairs, and vehicle breakdowns.
Cost of borrowing instead
Siyabulela Nomoyi, quantitative portfolio manager at Satrix, believes that assisting parents, siblings, or extended family should be included in financial planning, not treated as a secondary issue. Sino Bui, Head of Product Development at Momentum Savings, illustrates the cost of borrowing instead of saving using the example of a R100,000 vacation in five years. According to Bui's calculations, saving costs almost R40,000 less than borrowing over the same period. Avoiding credit for discretionary purchases also preserves access to credit for something urgent and unavoidable. Therefore, he calls emergency savings a lifesaver.
Webbstock also notes that when starting to build an emergency buffer, consumers should consider where they place this money. While a tax-free savings account can be an effective long-term investment, withdrawing funds does not restore the used tax deduction limit, so an accessible discretionary savings tool may initially be more suitable.
Long-term perspective
A tax-free savings account can then become part of long-term investment planning after the financial foundations have been laid. Webbstock asserts that consumers who have taken control of their spending should also look into ways to increase their earning potential. He notes that ultimately, it is easier to increase income by R1,000 than to find another R1,000 to cut from an already strained family budget.
Theresa Havenga, Head of Business Transformation at Momentum Savings, says that many consumers postpone saving until they receive a raise or pay off debt, but waiting for the perfect time can lead to perpetual postponement of savings. Instead, Havenga recommends choosing a realistic amount, automating it, and increasing contributions as income grows. She warns that income increases are often absorbed by new expenses, a calm month never comes, and one demanding life period is simply replaced by another.