With festive lights decorating shopping malls, year-end parties and carols-by-candlelight, it's easy to get into the Christmas spirit by buying presents and spoiling your loved ones. But there are ways to make the holidays memorable, without going into debt.
"Overspending now means you have to pay later," says Pete Setou, Education & Strategy Manager at the National Credit Regulator (NCR). "Debt is the worst present you can give your family this Christmas."
He says it can be daunting trying to make plans for an enjoyable festive season, especially at a time when many families have seen a decrease in their incomes. Many consumers also took on extra debt during the World Cup this year. "However, with planning and some innovative ideas, the holidays can be as fun as ever," says Setou.
One of the most important considerations is to pay off as much of your debt as possible before splashing out on presents and celebrations. "Use your bonus or thirteenth cheque to put a dent in your debt, prioritising your home loan," says Setou. "It's a good time to do this because interest rates are low and you can reduce your interest burden for the future."
The NCR's Credit Bureaux Monitor (June 2010 quarter) shows that in total, there are 18.32 million credit- active consumers in South Africa. Of these, 46.9% have impaired records. This means that a consumer is three or more months in arrears, has an adverse listing, or has a judgment or an administration order against them. The NCR's debt counselling figures show that there are now over 200 000 applications for debt review.
"Consumers are battling financially and we're urging consumers to spend wisely during this festive season, pay debt and guard against over-indebtedness," says Setou.
He suggests drawing up a budget so that you know beforehand how much you can spend during the festive period. Break this down into different items, such as presents, holiday, travel, food and entertainment. Then stick to it.
Make sure you have taken your everyday expenses, such as water and lights into account - these costs don't take a break over the festive season. The NCR has implemented a joint national consumer awareness campaign with the Banking Association of South Africa and the Debt Counselling Association of South Africa to tackle consumer debt-related challenges.
This includes explaining to consumers that they should contact their credit providers to see if they can renegotiate their repayments as soon as they start running into financial trouble.
Consumers who would like to negotiate with their credit providers should call the NDMA on 086 111 6362 or SMS 32422 for their banks contact number.
"Paying your debts on time means you can maintain a good credit record and avoid other costs such as collection costs," says Setou.
He adds that it may be tempting to splash out on extravagant gifts for your family, but cautions against "no-deposit" deals which enable you to pay off your purchases over a long period of time.
"These can cost you far more in interest than you realise - with the result that you may pay two or three times more than the original price of the goods," he says.
Setou also suggests shopping around beforehand, so that you know where to get the best deal. Retailers will ramp up their advertising during the festive period and may offer what seem like attractive deals. "Be sure to compare prices," says Setou. "Don't forget that shops clear much of their unsold
Christmas stock in January sales, and you could pick up things much cheaper if you wait."
Taking out a loan or buying on credit so you can splash out at Christmas will only leave you with extra bills to pay next year. By spending within your means, it means you can still enjoy the holidays, without the New Year hangover.
The past two years have seen hundreds of thousands of people losing their jobs. If you have been retrenched, use your package wisely by paying off your debts first. If your salary is cut or you are debt stressed, do not sit back.
Contact your credit provider first and explain your situation.
It's also important not to bow to social pressure of spending too much during Christmas. "It's useful to remember that no-one else is responsible for paying back your debt, except for you, so admit your limitations and explain to your family why you're sticking to a tight budget this Christmas," adds Setou.
"Once everyone understands why financial discipline is important, they're likely to be supportive of your goals." And if everyone in the family works together as a team, you're sure to achieve your financial goals more quickly.
"The best Christmas present is living debt-free," says Setou. "Own your financial future by spending wisely this festive season."
Be proactive and double-up on your regular payments such as mortgage or rent, lights and water. 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.
If you do borrow money, make sure you borrow only for what is strictly necessary, and ensure that you can afford the repayments;
Make it a family project to make presents for friends and relatives. Bake biscuits, draw a picture, write a poem or sew a cushion cover. These all cost much less than buying something in the shops and will mean more.
If you're not sure exactly how much you want to spend on each person's present, it's easy to get caught up in the moment and overspend. Limit yourself to an amount for each person to help keep track of your spending.
Items such as school stationery, uniforms or other useful items are a better investment than plastic toys that don't last. Choose presents that last long after Christmas.
Instead of buying expensive presents, set up a savings fund and put away an amount for your loved ones each Christmas. Over time this will grow into a much bigger pot of money that can be used to fund school fees or pay off a car.
Entertain at home. Ask guests to bring something for the meal so you share the costs of your festive entertainment.
Each year, set up a separate fund for birthday and Christmas presents as well as holidays. Keeping this money separate will enable you to save for special occasions, while at the same time fund your day-to-day living expenses without going into debt.
Use your bonus to reduce your debt burden by paying off existing loans. By spending wisely this year, you can reap the benefits next year