Warning: don’t go overboard on spending this festive season

While a petrol price cut and ‘safe’ verdict from ratings agencies is cause for celebration this festive season, consumers have been warned to not get ahead of themselves and spending cautiously over the holidays.

This is according to Debt Rescue CEO, Neil Roets, who says that the Christmas period typically inspires consumers to spend beyond their means, incurring debt that they simple cannot handle.

According to Roets, more people enter into debt rescue in January and February than in any other month due to excessive spending over the festive period.

“Parents suddenly realise that they have to pay school fees that had not been budgeted for and with credit cards maxed out on luxuries in November and December – and many have no choice other than to seek relief by going under debt review to prevent debt collectors from seizing their property,” he said.

“Many employees get paid early in December which creates a feeling of well-being and that they suddenly have extra cash to spend.

“Government employees in particular are at great risk because they get paid their Christmas bonus earlier than in the private sector and with the multitude of sales targeted at cash-flush consumers many are going to plunge themselves even deeper into debt.

“They forget that the time between their early pay check in December and the next check at the end of January can be the longest five or six weeks of the year,” Roets said.

While a petrol price reprieve and a break from junk status talk will inspire confidence among South Africans, the CEO says that it would be a false sense of security – irrespective of the current status, South Africa has been and remains one of the most indebted countries in the world, and can ill-afford to see its debt number increase.

It was hugely important for consumers to budget – especially for unforeseen expenses during the December holidays – and to bear in mind that the interest rate on credit cards is substantial.

“So, wherever possible, buy cash,” Roets said.

“Set up a budget for gifts for friends and family. Remember, it is the thought that counts and not necessarily the rand value. Don’t try and impress friends and family with expensive gifts that will only plunge you deeper into debt.”

Roets warned that 2017 was going to be a tough year, and that consumers who had difficulty making ends meet this year were going to find it much harder next year because of escalating prices and increasing interest rates.

“The repo rate increases we had this year may pale into insignificance to what may be waiting for us next year. There will almost certainly be an increase in VAT because that is pretty much the last tax left for the fiscus to collect money to pay its outstanding debt and run the country,” Roets said.

“With food inflation running at 11% and the consumer price index rising steadily, there is not the slightest possibility of relief in sight for consumers,” he said.

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