Middle class consumers feeling financial stress

Ahead of the Sanlam Benchmark Symposium, Sanlam revealed that seven out of ten middle class workers experience some form of financial stress. This is based on the findings of the 2017 Sanlam Benchmark Survey which was carried out on 1,317 professionals across a range of professions.

“The annual retirement funding study, which has now delved into the financial wellness of employees in the workplace, shows that financial stress has reached dangerous levels in South Africa and has become pervasive both at the workplace and in the home,” revealed Sanlam.

Viresh Maharaj, CEO of Sanlam Employee Benefits for client solutions, stated: “The research shows that financial stress impairs the quality of our lives and diminishes our ability to be productive at work.”

The majority of the survey base had some form of tertiary education, with 22.02% having an honours degree or postgraduate diploma. Just under 60% of the respondents earn more than R300 000 per annum. However, despite being among the higher earners in South Africa and having a tertiary education, a majority (72.77%) of the respondents admitted to experiencing financial stress largely due to short term debt obligations (54.7%).

Furthermore, the survey revealed that just under half of the respondents (45.30% of 1,044 people) fail or struggle to meet there debt obligations at some point during the year, while 1.05% said they did not know how often they were able to meet their debt obligations.

Key takeaways from the survey

Among the key findings of the survey were:

• Nearly half of the respondents find themselves with a budget deficit a few times a year where their income is less than their outgo.
• The primary source of stress for 55% of respondents comes from their short-term debt, while 41% worry that they won’t have enough set aside for unanticipated emergencies.
• One out of nine say that they are just simply not coping with their financial stress.
• One out of three cope with their debt by reducing expenditure.
• One out of five has to borrow from friends and family to makes ends meet. By comparison, 32.97% of respondents noted that there financial stress included extended family financial obligations or ad hoc requests for financial support.
• Seven out of ten believe that they will have to reduce their standard of living when they retire.
• Three out of five are not making provision for their medical aid premiums in retirement.

Is there a solution?

Trurman Zuma, CE of Sanlam Personal Finance for savings, noted: “The starting point to address many of the issues is to gain a better understanding. But, while the level of understanding is at an all-time high due to the combined efforts of the media and providers – it is still too low. Our people need help. And, in this context, help means advisors who are able to work with the middle class to educate and help coach them towards consistently displaying the right behaviours and making better decisions. In fact, just over 80% of the respondents indicated that they do value financial advice. Good quality advice can have a material impact on financial stress but access to and affordability of quality advice may act as barriers to many respondents as only 52% of respondents actually have advisors.”

Zuma and Maharaj agreed that basic financial literacy is required to help people make better financial decisions. A lot of the financial problems facing people is a disease of lifestyle. The lifestyle choices that people make play a large role in their finances, better financial education will help people make better decisions.

Further reading:

• Factoring medical costs into your retirement

 Handy tip: Are you facing financial difficulty? You can apply for debt counselling here.