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DUDUZILE RAMELA: Many of us have heard phrases such as ‘in this economy’ when contemplating a purchase, or ‘mampara week’ – that week just before payday, when noodles or eggs are a staple.
This lived reality boils down to the fact that more than 60% of South Africans run out of money before month end, many within the first week. Payday for millions is no longer about getting ahead. It’s about catching up. That’s according to National Debt Advisors.
Dehan Scherman is senior operations manager at National Debt Advisors and joins us now to look at the payday poverty cycle. Thank you very much, Dehan, for your time this morning.
Maybe let’s start with the first week after payday. Why is it the most crucial period for financial stability?
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DEHAN SCHERMAN: The core issue is that most salaries are already pre-spent before they arrive. By the time payday comes along, most of that is immediately absorbed by fixed costs.
You have rent, transport, food and debt repayments. All these debit orders go off, so what feels like financial relief is just a temporary breathing room. It’s not a real surplus.
And that’s unfortunately the cause, because people feel more relaxed, spend more money, and then by the time it’s mid-month don’t have anything left.
DUDUZILE RAMELA: What practical steps, then, can consumers take right now to break the payday debt cycle?
DEHAN SCHERMAN: Start off by tracking every rand for the full month. Understand where your money is going; be aware of how you’re spending it. Lock down your spending for the first five days.
So when you receive your salary, after those debit orders, make a point of not spending money for at least the first five days, and make sure that you pay essentials first.
Thereafter, you’ll have a better understanding of how much money you have left, and you can plan out to make it last over the remainder of the month.
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DUDUZILE RAMELA: Some people, when there’s a shortfall, turn to short-term credit. Now help us understand how that temporary cash shortfall can trap you into long-term debt.
DEHAN SCHERMAN: Short-term credit acts almost like a bridge between your income and your expenses, but it’s a really expensive one. When people borrow to cover shortfalls, they start the next month already behind. Interest and fees accumulate. They become more reliant on credit just to maintain basic living.
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This unfortunately creates a debt cycle, where borrowing isn’t just occasional; it actually becomes structural – and it’s repetitive.
Eventually, you’re going to run into a point where you don’t have any money left – and you don’t have any money left to borrow either. And then you’re stuck in a situation where you’re over-indebted, and you’re completely out of options.
DUDUZILE RAMELA: Many people view this as personal failure. Is it?
DEHAN SCHERMAN: To some extent, it can be. It also highlights the fact that the cost of living and standards of living increase over time, but salaries don’t really increase proportionate to inflation. And so over time, that gap gets broader and broader and broader.
To some extent, consumers have to be responsible for their spending and adjust their standard of living accordingly.
It has to be in line with your affordability.
But to another extent, we can’t always control the rate of salary increases in relation to inflation. Over time that gap becomes quite substantial and many people just feel debt is the only way that they can solve that problem.
DUDUZILE RAMELA: I was at a popular food outlet last week, and I heard two ladies talking to each other. The one was saying: “I don’t feel guilty being here because I can afford to buy a R30 meal with my kids not being here. Whenever I spend, I have to think about them. But today I don’t feel guilty because I can. They’re not here with me, so it’s okay. I can spend R30 on this meal.”
Some people call that ‘relief spending’, don’t they? How does it quietly sabotage monthly budgets?
DEHAN SCHERMAN: Relief spending is pretty dangerous because it’s almost a way that people will justify the month that they’ve spent working. It’s the same sort of false sense of relief that I mentioned earlier.
It’s that temporary breathing room when salary just comes in and those debit orders go off.
Now you have some money and instead of thinking over the long term, okay, how am I going to make this last until the end of the month, people feel at ease with their spending, at least for that short period, because they have some money.
That’s what helps them justify the time that they’ve spent to work and earn that money. However, it’s also the worst thing they can do because halfway down the line they don’t have money left for the end of the month.
So, relief spending is definitely that trap, that temporary breathing room immediately after payday that people kind of fall for.
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DUDUZILE RAMELA: Dehan, thank you very much for your time this morning. Dehan Scherman is a senior operations manager at National Debt Advisors.
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