Retail 'therapy' not a good idea for debt-strapped consumers

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"However, that immediate gratification is a problem that can have prolonged consequences," says Wikus Olivier, a debt counsellor at DebtSafe.

"Swiping a credit card for R1,200 now and paying it off over 24 months, possibly swiping that card a few times more during the 24 months; creates a never ending debt cycle. The instant you felt good when purchasing that pair of Levis on credit is nullified when you have to pay the instalment, including interest and fees for the following few months. Retail therapy to cash strapped consumers equals continued discontentment."

According to the Credit Bureau Monitor conducted by the NCR, the Credit Bureau held records for 20.08 million credit active consumers as of the end of March 2013. This number is an increase of about 0.6% when compared to the previous quarter, which means 9.53 million consumers are not in good standing but have impaired credit records. Even though the newly released Credit Amendment Bill will see the number of consumers with impaired records decrease, it will have little effect on the number of people who fall behind on payments on a monthly basis.

Set limits on 'treats'

"Retail therapy is not the worst thing in the world. If you have worked hard for a month, it is rewarding to treat yourself to something nice. The problem arises when people do not set limits on what that 'something nice' is. Apart from that, most consumers do not plan or budget for that little bit of retail therapy. Most of the time, it is an impulse or a spur of the moment purchase, which is the biggest mistake that consumers can make when indulging in retail therapy, ending up in overspending due to not having budgeted properly.

"When you do plan and budget to purchase an item, it is also important to stay within the budget. If you budget R10,000 for a new laptop for instance, do not get carried away and spend R2,000 extra on that nice keyboard and mouse for which you have not planned for. Consumers should work a savings plan into their budget whereby they put away a little extra cash each month that they can blow on retail therapy. In this way their spending will be controlled and they will immediately know if they are overspending."

Set goals

"Set goals and treat your feel-good shopping as a reward for achieving some or other goal. Whether it is a work related goal, financially related to your budget or spending habits, or anything that challenges you. Plan ahead and budget for that reward. Even saving enough for that specific item you want to buy can be a goal, and your reward is to go out and buy it with what you have saved.

"If it is possible, and you don't break the bank in the interim, it is good to treat yourself once in a while. People work hard and a little treat can be good for morale. However, you need to be realistic and keep it reasonable. If your budget is tight and you are going through a tough time financially, you will have to prioritise. Is it more important to make a down payment on that car so you don't lose it, or is it more important to treat yourself to a new pair of jeans?" concludes Olivier.