World Cup spending hangover

"Gripped by enthusiasm and zeal, too many ordinary South Africans are making financial sacrifices to buy all kinds of non-essentials which they are going to rue over the long term," he explains.

"Certainly, some people will have made a conscious effort to save in order to afford items such as tickets to one or more matches, the must-have accessories of clothing and memorabilia, even a new TV, but sadly, they tend to be in the minority. By far the majority will be indulging in this once-in-a-lifetime event and the consequences for normal instalment and debt repayments, even home loan repayments, could be dire."

Social spending is the spending of monies on those items not usually included in the monthly budget: ie spending on added entertainment, all the paraphernalia that comes with the World Cup, added transport, food and drink and the like. "Countless corporates are investing in the event, providing tickets and all the accessories for employees and these employees will allocate much smaller sums to their own social spending as a result. But those who don't benefit from corporate spending will be increasing their outlay on social spending."

Repercussions

Some of the repercussions are:

• Less allocated to household items;
  
• Neglect of monthly repayments;
  
• Heavy draw on credit;
  
• Increase in debt;
  
• Escalation of financial stress;
  
• Negative impacts on consumers' productivity at work, relationships and even health.

He points out that reckless, or simply unwise, spending is already commonplace among South Africans. "Over eight million consumers already have impaired debt repayment records," he continues. "Most are not in a position to repay the debt comfortably.

"The average consumer already uses 47% of after-tax income to repay debt. Paradoxically, this drives consumers to resort to short-term credit - but this is highly counter-productive since it is the most expensive form of credit available. The permissible rate is 5% per month, in addition to the minimum initiation fee of between R150 and R1000!"

Consequences are coming

The consequences are not encouraging. "It will be very difficult for consumers who have used monies allocated to debt repayments or obtained additional credit for this social spending to normalise their situation.

Missing even one payment puts added pressure on finances available. Consumers in this situation frequently succumb to the temptation to continue non-payment in an attempt to balance their budget, or worse, apply for yet another loan to fund existing repayments. The result is the insidious debt trap."

Solutions

So what is the solution for those who have spent unwisely or recklessly and now find themselves facing looming debt problems?

"The first step is for consumers to accept and admit that they are in trouble and need help. Turning a blind eye in the fond hope that problems will simply go away will just exacerbate the situation. They must seek professional help. Legislation now makes such help available and protects the consumer while he is seeking and implementing solutions.

Employers can assist in the situation by providing advice and recommending accredited debt counsellors who can provide customised solutions. However, employers should brace themselves for a rise in the numbers of employees seeking time off to resolve financial stress issues and asking for financial assistance. Credit providers can also expect to see an increase in the number of requests to reschedule repayments."

Unfortunately, there is no overnight solution. Getting out of debt requires determination and discipline, but as he points out, mechanisms and measures are now in place so that those consumers, who have the will, can extricate themselves from debt permanently.