It is easy to get carried away with spending over the festive season, purchasing those gifts for the special people in your life and feasting on delicacies you usually don’t have. However, this spending spree over the silly season can leave many with empty pockets come the New Year and struggling until January’s payday.
Sharon Coppola, senior executive of risk and compliance at Experian South Africa, noted: “While December is certainly exciting, there is also good reason to approach this season with a measure of caution, given that the economy’s performance has not been as robust as before.”
However, consumers have shown to be more cautious over recent months, with Q3 figures showing a slowdown in retail activity, and consumers being more cautious about taking on credit for big-ticket items.
Coppola stressed that this cautious spending must not be overturned by the festive season, which for many may mean an earlier payday and for those lucky few a 13th cheque (or bonus). However, there are ways that you can monitor your spending while still enjoying the festive season. Experian offers five tips to help you avoid falling into a debt-trap this festive season.
- Don’t use the holidays as an excuse for a spending spree
If you are paid early in December, be cautious with your spending. This is the money that is meant to see you through January to your next payday. In the festive season glow it may be easy to forget this and leave you struggling through a hard January.
Experian noted: “Often enough many consumers forget that this needs to stretch up to 40 or more days until the end of January 2017. Budgeting is certainly one way of curbing this – and can be achieved by keeping a log book to track all expenses such as every shopping and grocery trip. This exercise can help you to steer clear of excessive spending and keep your bank balance healthy come the January pay cheque.”
- Understand your monthly instalments
The festive season doesn’t mean that your monthly financial obligations cease to exist. Come the end of December or the beginning of January you will still be liable for your monthly expenses, such as your mortgage, health insurance contributions, credit card payments and other debt and account payments you may need to make.
Before purchasing any on credit over the festive season, ensure that you will be able to cover all of your expenses. “When applying for credit, ask the credit provider to show you how much you will pay each month. Calculate how much you can afford to spend on a monthly basis and do not exceed it. You want to avoid falling into arrears on your repayments in the New Year as this will have a negative effect on getting access to credit in the future,” said Experian.
- Check your credit record before spending
Before purchasing anything on credit, check your credit report. This can be done by contacting one of the credit bureaus in South Africa, such as Experian, Compuscan and Transunion. You can also apply for a comprehensive credit report from Kudough on Justmoney.
Being familiar with the credit information available about you, you will be better equipped to make decisions about using credit. Having a good credit report is also important when making large purchases, such as a home or vehicle, which will most likely require you to take out a loan from a bank or other financial services provider.
“Remember, your payment behaviour, including any late or missed payments, are recorded on your credit report and may have a negative impact on your ability to access further credit. Furthermore, checking your credit report is also a way for you to keep an eye on your existing credit accounts so that you can identify any unusual activity, and ultimately protect yourself against identity theft, which often increases over the busy festive season,” noted Experian.
You are entitled to one free credit report per year from the bureaus.
- Use your debit card, not your credit card
It is easy to pull out your credit card when you don’t have enough cash on you or in your cheque account. However, using your credit card costs you more in the long run due to the interest charged on the amount you spend.
Experian suggested: “Make a habit of using your debit card instead of your credit card for everyday purchases. That way you can make sure you don’t over-extend your credit this festive season. The simple rule should be: if you don’t have the cash available, you can’t have the item.”
- Look out for sales
If you don’t want to miss out on the festive season shopping, look out for sales and make your purchases then. This will help you to better stick to your budget. “Often enough stores offer sales from groceries to clothing to gift ideas. Keep an eye out for sales announcements and promotions in your local community newspaper, radio station or on television. Also remember that the January sales are right around the corner,” stated Experian.
However, remember that a sale is not an excuse to shop. If you had no intention of shopping and see a sale, keep walking, as it is not a saving at all if you never intended to spend the money in the first place.
“December is an opportunity to take a step back and plan. This puts you in a better position to define your financial goals for 2017. It will also help you to keep your spending in check from an early stage so that come January, you are ready to pursue your financial goals with minimum debt and enough to survive the longest ‘month’ of the year,” said Coppola.
