When R35 000 a month still is not enough
An illustrative look at how a reasonable salary can still feel squeezed when repayments absorb the budget first.
Illustrative case study. This is not an actual client. Individual circumstances and debt-restructuring outcomes differ.
The situation
Thabo earns a net salary of R35 000 per month. On paper, that may sound like a reasonable income. Over several years, his monthly credit commitments had increased.
His normal monthly debt repayments came to approximately R19 800. After paying debt, he had roughly R15 200 left for rent, groceries, electricity, transport, insurance, school expenses, cellphone costs, medical expenses and other household needs.
The warning signs
Thabo had started using credit to fill gaps created by other credit repayments. His credit card covered groceries, the overdraft helped with fuel, and another personal loan started to look like a quick fix.
Debt repayments create a cash-flow shortage. More credit can then create higher repayments and a bigger shortage.
Looking at affordability differently
The useful question is not only whether Thabo can get another loan. It is how much he can sustainably afford toward debt after reasonable household expenses.
If his reasonable household expenses were around R18 000, that would leave about R17 000 available for debt. His contractual repayments were around R19 800, which means his budget was already short by approximately R2 800 before unexpected expenses were considered.
What options could be investigated?
If Thabo remained able to qualify for appropriately priced consolidation credit, that option could be compared. It would only make sense after checking the new interest rate, fees, repayment term, total amount repayable and whether old accounts would actually be settled.
If he could no longer meet obligations on time and was genuinely over-indebted, formal debt counselling could instead be investigated. Debt consolidation usually means new credit. Debt counselling is a regulated process under South Africa's National Credit Act for consumers assessed as over-indebted.
The important lesson
A higher salary does not automatically mean someone is financially comfortable. The relationship between income, essential living expenses and existing debt commitments is what matters.
If you earn an income but still rely on credit before payday, it may be worth assessing your full position before taking another loan. You can start the assessment when you are ready.