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“This alarming news highlights the importance for all South Africans to ensure they have a sound financial plan in place for the remainder of 2012 to avoid a financially straining year,” Peter Atkinson, National Technical Portfolio Manager at the Financial Intermediaries Association of Southern Africa (FIA) says.

He added that those consumers who found themselves starting the year burdened by debt should seek the assistance of a qualified and experienced financial planner, who could assist them in creating a financial plan to pay off debt and start saving to ensure they became more financially stable.

Atkinson said it was vital for all consumers who did not already have a personal or family budget to start one as soon as possible or they risked finding themselves in a financial predicament for the rest of the year.

“If you don’t have a budget or you’re not working to the one you currently have, then this needs to be addressed. If you are carrying debt, now is the time to revisit the budget and cut out anything that is dispensable. Be ruthless and remember that there is a clear difference between a ‘need’ and a ‘want’.”

“When considering which debts to pay off there are four questions consumers can ask themselves: which debts are most pressing and threatening to result in potential additional costs if not serviced immediately? Which carry the highest interest rate? Which do not carry any penalties or added costs for early settlement? Which are at a stage where the settlement amount is reasonably low in relation to the regular monthly payments?”

Atkinson noted some consumers believe cutting down on insurance premiums is a good way to save, however, this is not the case.

“On the short term side, this could leave you exposed to a risk that you cannot afford, while terminating life insurance policies or medial aid may result in risk exposure as well as considerable penalties, which you don’t want to incur for the sake of the longer term plan.”

He said it was important for consumers to remember that a budget had two sides: expenditure and income.

“Consider the possibilities of earning a little extra income on the side - perhaps by offering a gardening service on a Saturday morning, or doing a short shift in a call centre in the evenings. Or perhaps it is just a matter of cleaning up that outside room and looking for a tenant. You’d be amazed how much even a small amount of income can contribute to overall debt repayments.

“However, for those who are so seriously in debt that the above does not offer a feasible solution, it is critical to act now and investigate the formal debt counselling process. Ignoring the problem will not make it go away and will most likely result in a snowball effect with consumers finding themselves in even further debt,” concluded Atkinson.