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Credit Crunch, Recession and You as a Consumer

It has been in the headlines that the world is in a global recession. Now there is evidence that South Africa is already in one, the first time in almost 17 years since the fourth quarter in 1992. The question everybody asks, how will this affect me as a consumer?

When we talk about the economy of South Africa or any other economy, a recession is what we all fear and do not want. In general, a countries economy has to be performing poorly for at least six months before the economist's starts talking about a recession. In the world of economics there are numerous reasons for a recession or for a recession to start. It is normally when consumers and investors are getting worried, anxious and scared because of what happened in the business world or the dreaded collapse on the stock market. This fear normally forces people to cling to their money instead of spending or investing it.

Unfortunately, once consumers stop spending it turns into a vicious cycle whereby this reduced spending means companies, retailers, banks etc, are forced to reduce their production or output. If this happens for long enough it will mean cut-backs or retrenchments of jobs. The inevitable soaring job losses will take their toll on consumers as businesses go into survival mode and try to cut costs through retrenchments. As soon as the consumers start losing their jobs they typically stop spending as there is no more income. The more retrenchments and job losses there are as companies are in survival mode, the less the consumers consume. Once the consumers consume less, there will be even further retrenchments and job losses. As you can see, a vicious cycle.

When the unemployment rate is high, as in South Africa, there is normally a fierce competition for employment. When there are a lot of consumers searching for employment, companies normally do not have to spend as much money to fill the vacant jobs. You will find that intelligent people with degrees will work in any job they can find to make some money to feed their families. In times of a recession it is vitally important to hold on to your job as best you can as you might not be able to easily find another position.

Please remember that during a recession there are thousands and thousands of people looking for employment. It is not just people who have been retrenched that are looking for work. There are also learners who have recently matriculated who will be looking for employment. University graduates will also be looking for work. During tough times mothers who previously resigned to stay with their kids at home could be getting back into the workforce. All the people will be looking for employment along with the newly unemployed

What can you do to protect yourself in times of a recession?

  1. Having a secure job is number one. We can't all have secure employment; however it is something to consider and do what you can to ensure you have one.
  2. Have money in the bank. Having an emergency savings account to cover necessary expenses is a must in times of economic problems.
  3. Reduce the amount of debt and loans you have through our consolidation process
  4. Make a budget and stick to it. Save as much money as you can.
  5. Do not take on more debt or unnecessary loans from micro loan companies, or spend a lot of money on something not completely necessary during a recession. Rather consolidate 2, 3 or 4 loans into one payment through our consolidation loan process.
  6. Stick to your budget! Don't just have three months of money in the bank. Have three months of food and toiletries in the house as well. It is like an edible emergency fund. If you are struggling to pay your accounts one month, then at least you won't have to worry about groceries. Should you overspend rather consume the food from your built up grocery stock and use the grocery money to pay your accounts on time ensuring you maintain a good repayment record on your credit profile.
  7. Clear any adverse information from your credit profile by contacting us

The recession will impact a lot of people in South Africa, as it is all over the world. How severely it impacts you depends on what you do to prepare for it. Making sure you are credit worthy in the event you will need financing from a bank and your finances are in order. You have to be positive and proactive in protecting you and your family which will make a recession and credit crunch a lot easier to deal with.

Click on each title below to find more about the topic

  1. Working with us hand in hand to repair a Bad Credit History and adverse listings
  2. How to dispute incorrect information on your Credit Profile
  3. Help us help you to break the chain of being overcommitted
  4. The truth about credit checks and your cedit store