Don't be silly this season!

Christmas is an expensive time for us all, but don't go overboard on gifts and entertainment, advises Peter Setou, Senior Manager: Education and Strategy at the National Credit Regulator (NCR).

“In January, the yearly cycle begins again and there will be demands on our income. We might face undue financial stress if we have been unwise in the way we spent our income,” he says.

According to Setou, the festive season is aptly named the “silly season” because of a spending frenzy that appears to afflict people over this period.

“Bonuses present a great temptation to buy, buy and buy some more,” he observes, “but we strongly encourage people to stop, consider and plan their expenses very carefully, especially over this period.”

Part of the NCR's mandate is to educate and create awareness among consumers with a view to enable them to make informed financial choices. As part of executing this mandate, the NCR is hosting a series of radio programs and will be running an advertising campaign to sensitise consumers about spending wisely.

OK… so how can one avoid falling into the debt trap this festive season?

“First of all,” Setou advises, “plan your budget – know exactly how much you have available and what expenses must be covered.”

Secondly, he adds, be careful on how you use your credit card, as it tempts you to spend money you do not have. “For example, avoid using it for a holiday if you do not have money set aside for other essential items such as municipal rates, school fees, etc.”

Setou also recommends attending to current debts before incurring additional expenditure. “Be wary of deals such as “buy now, no deposit needed, only start repaying your debt after three months”, which will cost you more in the long run. If you do decide to borrow money, make sure you borrow only for what is strictly necessary and ensure that you can afford the repayments.”

According to Setou, debt often results from an accumulation of many smaller purchases: each one doesn't appear to amount to much, but when they are all added together, they can make a very big dent in one's budget.

“Consumers also tend to forget that usual expenses such as rent, school fees, clothing, food and transport must still be provided for, whereas they continue to spend most of their available cash on unnecessary items which they actually cannot afford.”

He advises that a good plan is to be proactive and to double-up on your regular payments such as mortgage or rent and lights and water. That way you would have given yourself some breathing space after the holiday season for New Year costs such as school fees and uniform.

Some pointers:

• Do not be tempted by the flood of advertisements in newspapers, on radio and television, including letters offering credit;
• Plan carefully and pay particular attention to your budget, especially bearing in mind the additional expenses that come with the new year;
• Don't spend what you don't have – this means do not live beyond your means;
• Be careful of “no-deposit” offers, because those are loans and can attract high interest and other charges;
• The Christmas season brings out the “giving nature” in us all. But be careful to give only what you can afford;
• If you do borrow money, make sure you borrow only for what is strictly necessary, thus ensuring that you can afford the repayments;
• Spend wisely now and enjoy a financially relaxed and peaceful new year.