South Africans have easy access to credit they cannot afford. This is a foolproof way to get into deep financial trouble, very quickly. Recent statistics from the National Credit Regulator indicate that 50% of all credit-active consumers are in arrears by a minimum of three months on one or more of their accounts.
And with the current economic climate in the country being as it is, shoppers need to stop overspending and start a culture of saving instead.
Here, we look at the five most common reasons why people overspend, and offer a solution to overcome it.
Reason 1: You are an impulsive shopper
As an impulsive shopper you head to the shops whenever you need a loaf of bread but come home with a trolley of things, and perhaps even a pair of shoes. A impulsive shopper often run out of money by the middle of the month and have to use their credit card, overdraft or other forms of credit to survive the month. Once the new month starts, the circle continues, but every month you are worse off than the previous.
Solution: Budget and plan. Draw up a clear budget of all of your expenses and never ever go to the shops without a detailed shopping list. Also, don’t go to the shops every day. Instead, plan your meals ahead of time so that you are less tempted.
Reason 2: Swiping your credit card is too easy
You know you can’t afford that new pair of jeans, but they are on sale and because you have access to credit you think it is a good idea, right? Wrong! It doesn’t stop at the pair of jeans, does it? You host that dinner party you didn’t have money for and when it is your best friend’s birthday your trusty credit card will buy the perfect gift.
Solution: Give your credit card to you spouse or to a parent and draw your weekly budget in cash.
Reason 3: You don’t have any savings for unforeseen expenses
You are overspending every month on things you really need but it wasn’t in the budget. Things like a car that broke down, your child’s school project or the dog’s vet bill.
Solution: You need an emergency fund that can cover your unforeseen expenses. Start one immediately.
Reason 4: You’re too embarrassed to say no
The guys have invited you for a round of golf. It’s not in your budget, but you go anyway because admitting that you can’t afford it is worse than overspending this month. Feeling embarrassed to admit we cannot afford something is natural but don’t let it become the cog in the wheel that tumbles you into over-indebtedness.
Solution: Follow a strict budget that allows for you to save for something you and your family really want. Saving towards this will make it easier to say no to things. Get the whole family involved in this goal so that they are aware why anything not in the family budget will get a definite “No”.
Reason 5: You’re bored
Boredom can kill you financially. Whether you are physically bored and don’t know what to do with your time, or whether you are bored with your clothes, living room etc. boredom can drive you to spend too much money on things you do not need and certainly cannot afford.
Solution: If you have too much time on your hands, don’t head to the shops, get a hobby instead. Something that is inexpensive but you enjoy doing hours on end. Something like gardening, crocheting, playing Sudoku, crossword puzzles, etc. And instead of paying to keep the whole family entertained like trips to the mall, new toys, the movies or visiting amusement parks, get creative and go for a free hike, play board games together, make pizzas from scratch etc.
For the other kind of boredom, get creative ways to tackle it within budget. Like for e.g. through DIY projects you can upgrade any room in the house, make yourself new dresses or scarves etc.
At Debt Rescue, we know staying within budget is extremely hard. If you are over-indebted and cannot see a way out of your debt spiral – give us a call. We can help you!