Broad Guideline forSpending Patterns

Broad Guideline forSpending Patterns To assist Debt Counsellors the following broad guidelines can be used to measure spending patterns of consumers. It must be pointed out that these guidelines are general guidelines which could be used to identify excessive spending in certain categories and to motivate a reduction in lifestyle to the consumer.

a) Where the combined spending on household items exceeds 35 percent of after tax income there could be room for reduction. Household expenditure includes domestic, garden service, groceries, telephone, Internet, entertainment, education, rates and taxes, electricity, water, tithes, pocket money and cosmetics.

b) Where the combined spending on financial services exceeds 25 percent of after tax income there could be room for review. Financial service includes insurance, assurance, pension, medical aid and other savings. Consumers who apply for debt review very often spend less than the guideline of 25 percent on financial services. Debt Counsellors cannot advice consumers to reduce assurance, pension and medical spending. Where spending appears to be high the consumer should be referred to a Registered Financial Planner or FAIS registered Broker.

c) Where a property is rented, it is difficult to provide a guideline mainly because many factors such as lifestyle requirements and area influence the amount required for rental payment. However, the following general rule could assist Debt Counsellors. Where rental payment exceeds 23 percent of after tax income, there should be room for review. The percentage required for rent is not part of household expenses set out above.