A study by debt management service, DebtBusters, shows that upper-middle-income South Africans earning more than R420,000 per year are experiencing significant financial distress.

Despite relatively stable salaries, these individuals are spending an overwhelming 74% of their take-home pay on servicing debt— the highest percentage across all income groups.

The study, which examined data from various income brackets, highlights the increasing financial pressure faced by South African households.

On average, consumers allocate 68% of their income towards debt repayments, with high-income earners bearing the greatest burden.

The DebtBusters Q4 2024 report shows that high-income earners face a debt-to-income ratio of 187%, meaning they owe nearly double their annual earnings.

Major contributors to this debt are home loans and vehicle financing, which make up a significant portion of their monthly repayment commitments.

In contrast, individuals earning between R240,000 and R420,000 annually have a debt-to-income ratio of 137%, while lower-income groups are facing even more severe financial challenges.

The study also sheds light on how South Africans across various income brackets allocate their spending beyond debt repayments:

-Top Earners (R420,000+): The largest proportion of non-debt income is spent on medical aid and insurance, accounting for 13% of their disposable income.

-Middle-Income Earners (R10,000–R20,000): This group dedicates 31% of their income to housing costs, the highest proportion across all income bands.

-Low-Income Earners (Under R5,000): Individuals in this group spend more than 50% of their disposable income on groceries, while only 9% is allocated to accommodation.

Consumers have faced significant increases in the cost of living over the last decade.

Inflation has surged by 144%, petrol prices have risen by 172%, and electricity tariffs from Eskom have jumped by 235%, while salaries have only grown by 98%, making it difficult for many households to maintain financial stability.

Benay Sager, executive head of DebtBusters, commented: “The disparity between income growth and rising living costs is alarming. This has forced many South Africans to cut back on essential expenses, such as housing and groceries, to make ends meet.”

The study also reveals a concerning trend regarding retirement savings. Only individuals in the top two income bands allocate any portion of their income to long-term savings, leaving lower-income groups with little ability to save for retirement.

“The recent changes to the two-pot retirement system are a step in the right direction, but there is still much work to be done to educate South Africans about the importance of long-term savings,” Sager said.