‘Don’t make more debt’

Holiday season tempting for consumers to spend more money than budgeted for

AS THE festive fever gets into full swing, many consumers are already shopping like there is no “January dis­ease” that is also fast approaching.

Debt counsellors have warned people about getting into further debt over the festive season.

Neil Roets CEO of Debt Rescue yes­terday said that a number of consumers become indebted during the silly season due to a lack of budgeting.

He said that people seeking debt counselling increase in January as a result of overindulging in December.

“They get into debt during this sea­son because they don’t budget. They feel obliged to spend money on presents and holidays even if they can’t afford it. They forget that they get their salaries earlier in December and only get paid late in January,” he said.

With the country’s high levels of indebtedness which has seen more households relying on credit to make ends meet, Roets said instead of over­spending in December, consumers should plan and budget for January expenses like school uniforms and fees.

Salem Dyafta from the Credit Ombudsman said that consumers should do more research before agree­ing to deals that promise them a pay­ment reprieve.

“Most times consumers don’t do research to understand the agreement they are entering into. It could go both ways where a con­sumer pays what the agreement says or it could be a situation where the interest accumulates from the time they enter into it,” Dyafta said.

“What we have seen is that the cash flow saving for those months is important especially if you want to take something immediately and ‘save’ on the installments for a couple of months.”

With research showing that credit spending rises in December, other experts caution about the consequences of taking out loans to fund expenses.

“It is important to understand debt commitments before engaging in fur­ther commitments, particularly with increased credit card expenditure over the festive period. Consumers thinking of taking out a loan to fund additional expenses over the festive season should weigh up the financial consequences carefully before they take it on,” direc­tor of TGI South Africa Maria Petousis said.

She also said that credit played a big role in consumer reckless spending.

“Consumers who use credit cards are more likely than the average popula­tion to enjoy shopping for clothes, to be tempted to buy products they’ve seen advertised and to try out a new brand.

Credit cards enable spending patterns not always feasible, particularly in South Africa, India and Turkey and significantly less so in Germany and in France,” Petousis said.

“It’s important to spend bonuses wisely to support feeling wealthier all year round and reduce debt which bears interest, rather than indulging in impulse purchases,” she said. Roets said that bonuses can be useful in assisting consumers to set up an emergency fund.

Spending tips for the festive season:

  • If you have not saved for it, don’t buy it. Make sure you can afford the goods
    before you purchase them.
  • Before you buy, compare prices between stores to get the best deals.
  • Don’t be misled by stores offering you gift vouchers with purchases or when you open accounts as you might find yourself buying things you don’t need and opening accounts unneces­sarily.
  • Be proactive and double-up on your regular payments such as mortgage or rent, lights and water (arrange with your credit providers).

That way you will be able to afford costs such as school fees and uniform which will hit you at the start of the new year.

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