Avoid The Festive Season Credit Trap

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The holidays are upon us – a time of buying and giving presents. The pressure to overspend is officially on! Planning and budgeting is key to avoid getting into debt during this period.

While credit-hungry South Africans are in dire need of a healthy culture of saving, they also must be educated about the pitfalls of giving in to easily accessible credit –they simply cannot afford. The festive season is a particularly vulnerable time for all income brackets, and consumers have to remember the demands of going into a new year.

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Chantel Cronje, a legal advisor at Legal & Tax, shares a few tips on how to save and stretch your hard-earned money and not get carried away by the spirit of the season…

  • The festive season is a time of specials, so try not to think SALE, but always think SAVE.
    A word of advice – pay the price advertised! According to the Consumer Act, suppliers must charge you the amount advertised or reflecting on an item, so check the price at the till before paying or double check your receipt.
  • Remind yourself of your needs; don’t confuse them with wants.
  • If you are a property owner with an access bond, transfer your full year-end bonus into the bond and only take out money as and when required. This will have a positive effect on the interest you pay for your bond, and also assist with that extra bit of self-discipline required in curtailing spending your bonus.
  • If you are not in the above position, transfer your bonus into a bank account other than where your normal salary is deposited – there are several low cost savings account products offered by banks.
  • Budget for things that you know you will have to pay in the new year, like school fees and uniforms.
  • Calculate your budget for January (groceries, transport, entertainment, etc.), and make sure you leave that money in your separate savings account. Also set a sum aside for emergencies.
  • We are all tempted to spend more money when we are on leave than during normal, working periods. If you therefore are not going away for your annual holiday, try to make sure you do not spend more than you would in a normal month.
  • Service your debt and stick to the payment terms. If you cannot service your monthly debts, discuss your situation with your credit providers before it is too late. Always contact your credit providers proactively with a payment arrangement plan before they contact you.
  • If you know you lack self-discipline, pay extra into your accounts when you receive your bonus.
  • The festive season is a time of giving, but most gifts will be long forgotten halfway through January. Don’t regret those lavish gifts you buy come January when you have to pay school fees.
  • If you are at home with kids, look for low cost alternatives to keep them busy – consider a picnic rather than visiting the mall or DVDs and popcorn instead of going to the cinema. While visiting the zoo is no longer cheap, it can keep anyone occupied for the whole day. Save money by taking a backpack with snacks.
  • You can even occupy your kids by helping them make decorations and gifts – the personal touch makes it more special than a store bought item.
  • If you are already battling with debt, speak to your creditors about possibly restructuring your repayments. If you’re in a debt crisis, you might want to consider a debt counselling process.

Debt counselling is a legal process that involves having your debt restructured so that you can pay household expenses and still be able to pay off your debt at a reduced instalment at the end of the month.