South African consumers are strongly encouraged to be wise with their money and avoid over-spending their budget during the festive season that could bring about unwanted debts. This advice is informed by a report that claims South Africans spend more than 80% of their income paying off debt, leaving only 20% to cover the rest of their household expenses.
Stian de Witt, executive head of financial planning at the employee benefits firm NMG, recommends some useful tips to consider when planning and budgeting for the December holidays to avoid the January debt hangover.
First, set aside some money in a savings account or safe deposit box. Second, make sure your credit card limit is sufficient to cover any unexpected expenses. And thirdly, ensure that debt payments are made on time.
“Know what you need, compare prices and quality, and if you are going to buy something, make sure it is something that you really need. Don’t buy stuff just because it looks like a good deal,” De Witt advises.
Have a festive season budget
List all your income and expenses, see how much you have left – and then plan how to spend that money carefully. “Just remember to add all your expenses – even the hidden ones like bank charges. That way you will minimise those unexpected surprises,” said De Witt.
Shop with your head, not your heart
The festive season is an expensive time of the year. It is not just Christmas gifts: it is also school uniforms, stationery and books. “Don’t get swept away by the holiday spirit. Make realistic, rational financial decisions, and differentiate between your ‘wants’ and your ‘needs’,” said De Witt.
Avoid the debt trap
“Once you are over-indebted, it is extremely difficult to get your head above water again. This happens so easily if you do not monitor and track your income and expenses – especially during the festive season,” said De Witt.
Be practical
Two practical ways of staying within your budget are to take the money that you want to spend on gifts and out-of-the-ordinary spending and put it in a separate envelope when shopping. Another one is to download a budget spreadsheet from the web to do your budget with. Once that is done, grab a book that you carry with you and write down the expenses incurred daily.
