Consumers should stick to their budgets this festive season, spend wisely and not take on unnecessary debt, according to PPS financial planning executive Nico Coetzee.
Coetzee said that with South Africans facing an even tougher economic situation, it was critical that everyone made a concerted effort to avoid falling even further into debt by sticking to their financial plan.
According to the latest statistics from the National Credit Regulator (NCR), collective consumer debt was currently more than R1.69 trillion.
“It is no surprise that most South Africans tend to overspend during the festive season, failing to remember that there is still a full month of expenses in January. During this time, people are more relaxed and are trying to have fun, so they naturally neglect to plan properly and end up spending money carelessly.”
According to the TransUnion Consumer Credit Index (CCI), this year’s third quarter declined slightly, although it continued to reflect a marginally improving consumer credit health.
The latest CCI report came in the wake of a period of difficult economic conditions in South Africa, including government debt downgrades, slow GDP growth and exchange rate volatility.
Lee Naik, chief executive of TransUnion SA, said: “Despite some encouraging trends in the past few quarters, we have been cautioning for some time now that low economic growth, high unemployment, low wage growth and uncertainty in a volatile global economy all pose significant pressure and risk for consumers. The increases in the CCI since 2016 should not be seen as justification for complacency, but rather the opposite: doing more to restore lender and borrowers to a healthier more robust financial position.”
Coetzee said that in order to avoid overspending, it was very important for consumer to have a clear picture of their finances prior to embarking on any adventures or spending sprees this festive season and the cornerstone of that planning should be a realistic budget.
He said it was important for consumers to understand what they would like to get out of their holiday and how they envisioned spending their time and resources.
“Then utilise your planner to ascertain if this is affordable in your current lifestyle financial plan. In the end you should be clear on what you can achieve and how that will be funded. This may involve compromising on certain aspects, but in the end there should be a balance between the wants, needs and cans.”
He said spending a bonus all at once would be a huge waste as it was much better to put at least a portion of a bonus toward long-term financial goals.
“By taking the time to plan your holiday budget, you will be able to enjoy your holiday free from stressing about your spending. By planning comprehensively you will find that sticking to a budget isn’t a chore, but simply a natural outflow of your planning.
“The stress will simply disappear and you’ll be able to enjoy every moment of your holiday. Most of all, be safe, prepared and enjoy the well-deserved break.”
Coetzee offered some tips to consumers to help them budget better during the festive season:
Make a list of the key expenses you foresee during this period.
Find a balance between your goals for the holidays and your finances.
Don’t deviate from your regular financial plan. If you have worked with a lifestyle financial planner, your expected expenditure over the festive season should be part of your financial plan.
Budget for emergencies and unexpected adventures.
Open a separate savings account and keep credit and cheque cards “hidden”.
If you are fortunate enough to receive a bonus, discuss this with your planner and use their expertise and guidance to work that into your lifestyle financial goals.