BUSINESS NEWS - Contrary to the perception that lifestyle overspending is behind many South African households' financial struggles, the real issue may be that income is failing to keep pace with rising expenses.

After paying for essentials and servicing existing debt, many households simply have little money left.

An Old Mutual survey of 35 000 clients indicates that people are increasingly using withdrawals from the two-pot retirement system to cover basic expenses such as food, electricity, rent and school fees, or to assist family members.

At the same time, household debt is rising. According to the South African Reserve Bank, household debt increased to 62.2% of disposable income in the first quarter of 2026, from 61.8% in the previous quarter.

A recent DebtBusters survey of 18 000 consumers found that 53% of respondents were spending more than 40% of their take-home pay on debt repayments, up from 48% the previous year.

“This all points to the real problem being income growth that hasn’t kept pace with expense growth, rather than a lifestyle overspending issue,” says René Moonsamy, chairperson of the National Debt Counselling Association (NDCA).

“People can’t make ends meet and so are dipping into retirement savings or borrowing to make up the shortfall.”

Retirement savings and credit used to cover essentials

Moonsamy says accessing retirement savings can provide relief during a genuine financial emergency. However, regularly using these funds to cover daily living expenses indicates an underlying cash-flow problem.

The same applies when households rely on credit to pay for groceries, municipal rates, electricity, school fees and other everyday expenses.

Using credit to cover a temporary shortfall can develop into a cycle of borrowing, eventually leaving consumers needing to use 40% or more of their take-home pay to service debt. Most debt counsellors regard this level as unsustainable.

“Credit should not become part of your monthly income,” says Moonsamy. “If you’re repeatedly borrowing to make it through the month, your financial commitments are not affordable.”

Start by assessing household finances

Moonsamy says households facing financial pressure should start by identifying where their money is going and looking for opportunities to reduce spending or renegotiate costs.

However, the latest figures suggest that many households have already cut their budgets significantly and are being forced to rely on retirement savings or credit to cover essential expenses.

This is where financial restructuring, including debt consolidation and debt counselling, can help.

How debt consolidation works

Debt consolidation combines multiple debts into a single loan with one monthly repayment.

It can reduce service fees and credit life cover costs, potentially putting more money back into consumers' pockets. Depending on an applicant's credit score, the interest rate may also be lower than rates charged on credit cards or retail accounts.

However, consumers should consider the total cost of consolidation, as interest may be paid over a longer period.

While consolidation can provide some breathing room, it does not necessarily resolve an underlying affordability problem.

Debt counselling can help over-indebted consumers

For consumers who are over-indebted, debt counselling provides a structured way to restructure debt and regain control of their finances.

A registered debt counsellor assesses a consumer's income, living expenses and credit commitments to determine whether they are over-indebted.

If they are, their credit agreements can be restructured into a repayment plan based on what they can realistically afford.

Through negotiations with credit providers, interest rates may be reduced and repayment periods extended. Instead of managing multiple unaffordable repayments, the consumer makes a single monthly payment, which is distributed among their creditors.

The process is not a quick fix, but its purpose is to provide a sustainable alternative to continued borrowing.

Recognise the warning signs early

“Recognising you have a problem and doing something about it is sensible, responsible, and the earlier you do it, the more options you will have,” says Moonsamy.

“If you are at the point where you are using credit or retirement savings to make it through the month, that should be an early warning that you need to act.”

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