SPENDING AND SAVING: Use loans and credit wisely and avoid falling into the debt spiral

Many South Africans are borrowing money to cover the gap between their earnings and essential expenses. This debt spiral often starts with small gaps, such as the time between payday and the end of the month, or the difference between a household's income and the rising costs of living. The warning signs are clear: borrowing to pay off existing debt is a major red flag.

According to the 2026 Consumer Pulse Study by TransUnion, 39% of South Africans anticipate missing at least one bill or loan payment, while 79% cite inflation as one of their top financial concerns. Additionally, 53% have reduced discretionary spending, such as dining out or traveling, due to the rising costs.

Ayesha Hatea, director of research and consulting at TransUnion, notes that "financial optimism has decreased to 66% from 71% in the second quarter of 2025, with pessimism rising to 19%." This shift in mindset is reflected in consumers' cautious credit behavior, as they grapple with the shrinking margin of error in managing their finances.

While younger consumers tend to use credit responsibly, often leveraging credit cards to manage cash flow or consolidating debt, the Sanlam Benchmark Survey reveals a growing concern for retirement. Kanyisa Mkhize, CEO of Sanlam Corporate, emphasizes that people are making retirement decisions in a challenging economic environment and need assistance in managing debt before it spirals out of control.

To break the debt cycle, experts recommend listing all debts along with their interest rates and repayment terms, prioritizing the repayment of the most expensive debt while ensuring that essential expenses are met. Crucially, avoid using new debt to pay off existing debt. By confronting the issue head-on and adopting a disciplined approach to credit management, consumers can prevent the debt spiral from taking hold.