Beware the festive spending bug

The price of petrol and diesel having skyrocketed over 40 cents on Wednesday, and with the interest rate likely to be bumped up a few notches to gasps from car and home owners on Thursday, the outlook for Christmas shoppers is painfully bleak.

Whilst the urge to splash out on family and loved ones can take control of us all, “don't go overboard on gifts and entertainment,” says Peter Setoue, Senior Manager for Education and Strategy at the National Credit Regulator (NCR).

Christmas is an expensive time for us all and many people fall into the debt trap by making use of that credit facility sent to you randomly in the mail, often getting us to spend money we simply do not have.

“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,” said Setou.

The festive season is aptly named the “silly season” because of a spending frenzy that ensues at this time of year.

After eyeing that pair of shoes or those glittery Gucci sunglasses for a year, we always decide now is the best time to buy it.

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

The National Credit Act (NCA) - introduced on 1 June 2007 – to curb rampant credit extension to unworthy consumers, was expected to bring many people's lavish lifestyles under control upon the advent of, “I'm sorry, no more credit.”

However, consumer confidence is high going into Christmas and people are adamant they are going to buy, buy and buy some more.

The question many ask themselves is how do I stop myself from falling into that debt trap?

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

Secondly, 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, [and that allusive clothing account].”

Setou also suggests paying off all the necessary bills before embarking on the widely enjoyed ‘great trek' to the nearest shopping mall.

“Be wary of deals such as ‘buy now, no deposit needed, only start repaying your debt after 3 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.”

Other pointers offered by the NCR include:

• Try not to 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

One of retailer's favourite ploys is to offer 15% discount to the wide-eyed consumers out on the hunt for the SALE sign, after already raising the price by 20%.

A simple solution, yet typically male, is to buy way before the Christmas rush even thinks of hitting the stores, thereby avoiding the rat race, commonly referred to as shopping malls.

Article published courtesy of BuaNews