February 18, 2007 Edition 1 Edwin Naidu Three months before new credit laws aimed at curbing reckless lending come into effect, debt-laden South Africans are struggling to keep up with bond repayments, car installments and credit card bills as interest rates start to bite. The National Credit Regulator last week began training debt counsellors so […]
21 November 2013
As the year draws to an end, South African consumers start to prepare for the holidays by purchasing gifts, booking vacations and planning events – All things that lure people into overindulgence and spending money.
The holiday season alone accounts for a large portion of retailers annual sales. As a result, retailers rely on the festive season to make sales and encourage consumers to spend money that they do not have. Many South African consumers are paid their December salary in the middle of the month and are tempted by retailers to overspend. By the time Christmas arrives, they are out of money.
The festive season is the perfect opportunity for one to recklessly spend their money and to overspend, consequently leading them into the New Year with a festive season financial hangover – holiday debt.
With a little discipline, planning and adhering to the following tips, you can minimise your holiday spending and avoid having to pay your festive season bills throughout the New Year.
1. Save up prior to the festive season:
Before the festive season begins, save up as much money as you possibly can. Use this money to leverage the pressure from your holiday finances.
2. Calculate a festive season budget:
Plan your festive season finances wisely. Take into account your income and all of your expenses for both December and January, and proceed by determining the amount of money you can afford to set aside for the holidays. Be disciplined and stick to your budget, rather than borrowing money and paying it back later with interest.
3. Purchase items with cash or debit card:
Leave your credit card at home. Avoid shopping on credit at all times and instead, pay for items with cash or with a debit card. By doing this, you will not be able to overspend. When you are out of money – you will be out of money.
4. Be careful with credit:
Keep in mind that not all credit is bad. When borrowing money to purchase a house or a car when you are able to afford the money you owe, as well as the interest, it is not bad as you will land up with an asset in the end. Credit becomes dangerous when you use it to purchase consumable goods such as food and alcohol, as you will be left with nothing in the end. Do not overspend on perishable items over the festive season as you will be paying it back over the course of the next year.
If you are going to purchase a credit-worthy item on credit, make sure the most favourable terms are implemented. Use your credit card with the lowest interest rate and do not exceed your credit limit or make late repayments. Credit card debt can be extremely expensive, if you can’t immediately repay the amount in full. Make sure that you create a list of your credit card expenses to keep a visual record of exactly how much you have spent.
Personal loans and in-store credit may also appear to be attractive finance options over the festive season, where they may offer you 0% interest and finance for a certain period of time. It is advised that you are not tempted to opt for these choices, but if you do it is vital that you have a clear understanding of the full costs involved and not just the interest payments. Also consider whether you will be able to afford the payments if your salary decreases or if you incur and an unexpected expense.
• Gifts purchased on credit end up costing more in the long run.
• Spending more than your credit limit can cause your credit score to drop.
• Unexpected post festive season expenses can extend your credit card repayment plan, consequently lengthening your credit card debt .
5. Cautious festive season shopping:
Festive season shopping on impulse is dangerous. Make a list of exactly what you need to buy and where to purchase it from. This will prevent you from getting caught up with the festive season shopping hysteria and will help you focus on only buying what you need and can afford, nothing else. Always keep in mind affordability and not desirability.
In addition, be creative and think outside of the gift box. Research gifts options and find gift alternatives that are cheaper in price and more fun. Start shopping early, as this will give you time to find the best deals, as opposed to being pressured into buying something more expensive at the last minute.
6. Keep the new year in mind at all times:
Make sure that you budget properly and keep your finances for January and the rest of the year in mind. Instead of waiting for January to come, when there is a chance of having already accrued holiday debt, plan a budget now that will encourage responsible spending over the festive season. Set new savings goals and amend your budgets to fit in line with your financial requirements. Although there is a possibility that you may overspend, planning before the New Year will create awareness and help you to take better control of your finances.
If you are struggling to manage your finances and more importantly, meet your debt repayments, contact DebtBusters on 0869990606 to speak to a financial consultant, who will assess your current financial situation. Holiday debt is not uncommon, but it is vital that you are aware of your financial situation and take the right action to reduce your debt.
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