Do you feel in control of your finances?

2014-02-24 08:00

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Neesa Moodley-Isaacs looks at the factors that may influence your financial wellbeing

The latest Consumer Financial Vulnerability Index, released this week by Unisa’s Bureau of Market Research (BMR), shows your financial behaviour tends towards seasonal patterns influenced by events such as the festive season, public holidays, changes from warm to cold temperatures, labour strike season and even irregular events such as sudden changes in the climate.

Do you feel in control of your finances? If you do, you fall in the minority, according to the study. Commissioned by MBD, a credit management company, the study shows consumer vulnerability was at its lowest point in the fourth quarter of last year since the economic recession in 2009. The analysis looks at income, expenditure, savings and debt servicing.

Professor Bernadene de Clercq, the head of the household wealth division at the BMR, says ­psychological factors such as New Year’s optimism cause consumers to feel more secure in the first quarter of the year.

“This can be dangerous as it may cause consumers to spend more than they should, which may have a negative impact on their finances later in the year,” she says.

The third quarter of the year is usually considered to be “strike season”, when negotiations for higher wages take place through collective bargaining by labour unions and employees often down tools.

During the fourth quarter of the year, consumers purchase more than during other quarters. “Consumers tend to spend more lavishly during the holidays, and disregard budgets and financial planning during the fourth quarter of the year. This is largely due to the impact of the holiday spirit, year-end bonuses, and expenditure on vacations and gifts,” De Clercq explains.

But despite seasonal factors, consumers’ access to credit was affected throughout the year by their relatively high level of indebtedness. According to the SA Reserve Bank, indebtedness remained at 75.7% of disposable income in the third quarter of last year.

Debt-service costs approached R160?billion in the third quarter compared with R154 billion during the first quarter of last year.

Both domestic and international economic circumstances contributed to deteriorating consumer finances during the second and third quarters of last year. “Although consumers generally perceived their cash flow to be better during the fourth quarter of 2013 compared with the rest of the year, their cash flow pressure on average was harshest during this time,” she says.

Local factors that affected the South African consumer included the weaker exchange rate, a spike in the crude oil price due to supply disruptions and a dramatic increase in the petrol price.

Labour strikes had an impact on the production of goods and services, which in turn had an impact on the income of both shareholders and employees in the first three quarters of last year.

“The manufacturing sector was hit hardest during the third quarter of last year, but negotiations led to wage increases above inflation, which provided some income relief,” says De Clercq.

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