File photo: Andy Wong.
File photo: Andy Wong.

Warning: don't blow that bonus

By Bronwyn Fourie Time of article published Nov 21, 2014

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Durban - Money gurus have issued stern warnings to consumers before the festive season with research revealing that most have no intention of cutting back their spending in line with the tough economic climate.

Some consumers are already mentally spending their 13th cheques, while others will buy items on credit before being paid.

A recent survey – the Acentric Christmas Shopping Intentions Survey 2014 – revealed that 34 percent of the country’s middle- and upper-income consumers had already planned to spend more money this festive season than they did last year, while 36 percent were going to spend the same. Only 26 percent planned to cut back.

Craig Kolb, managing director of Acentric Marketing Research said the survey found that food, clothing, toys and alcohol were the top items consumers would spend on.

TEMPTED?

The South African Savings Institute said people had continued spending more than they earned this year – despite an environment of growing inflation and rising interest rates – and that this habit was going to be compounded over the festive season when money was used to celebrate rather than being put aside for unavoidable obligations. Such obligations included equipping children for school, getting to work, medical expenses and rising food costs, its chairman, Prem Govender, said.

“Consumers are also tempted by offers of credit such as store cards and short term loans. They then mismanage this debt, incurring high interest rates and becoming further indebted.”

Debt management company DebtBusters said a 13th cheque not only gave consumers a sense of joy and happiness, but also a sense of relief. However, the sad reality was that many did not use their “extra salary” wisely, chief executive Ian Watson said.

“The typical 13th cheque gets spent on anything from TV screens to fancy holidays, most of which the consumer can’t afford. But the power of this additional money makes them believe they can.

DO YOU DESERVE A SPLURGE?

“If your monthly expenses are under control and you can comfortably afford your debt each month, then perhaps you deserve to splurge out over December. But with one in every two South African consumers having impaired credit records and unable to meet their monthly debt repayments, the money could be more effectively spent.”

Aneesa Razack, the head of Strategic Growth at FNB Investment Products, advised consumers, even those without bonuses, to take stock of their financial situation before splurging on holidays, eating out, or Christmas gifts to ensure a healthier financial start to the year.

“Apart from the fact that it’s just a good idea to put aside some of your bonus in an emergency fund to prepare for unforeseen events such as car or home repairs, or to cover things like school fees and new uniforms at the start of the year, there are a couple of excellent additional reasons to save a portion.”

One of these was the launch of the government’s tax-free savings incentive next year. “Consider setting aside some of your bonus now and be ready to take full advantage of these benefits when it’s launched.

 

“Decide up front how much of your bonus you want to save and set it aside in a savings account now, before the festive season starts. If it’s out of sight, it’s out of mind, and you won’t be tempted to splurge because your bank balance looks so healthy,” said Razack.

The Mercury

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