Picture: Oupa Mokoena/African News Agency (ANA)
Picture: Oupa Mokoena/African News Agency (ANA)

Spiralling debt? Be wary of Black Friday spending spells

By Opinion Time of article published Nov 18, 2020

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By: Melissa Londt

If you are intending to splurge, make sure you have a plan, especially as retailers will be trying every trick in the book to encourage more spending this year.

This year many South African retailers are offering consumers an entire month of Black Friday shopping deals, with extended large discounts on big and small ticket items in an effort to boost and revive consumer spending.

“The full impact of this pandemic has likely not yet been felt, so consumers should be wary of stretching themselves unnecessarily. Many people have suffered job losses, reduced income and retrenchments this year. While we are all hoping for better times ahead, we should continue to prepare ourselves for a rocky road,” says Tamryn Lamb, Head of Retail Distribution at Allan Gray.

Lamb says that consumers should not be fooled into thinking that advertised deals and large discounts equate to savings. Consumers may end up spending more than what they would ordinarily spend in the month if focusing on the discounts only.

“An entire month of spending on items that are over and above a budget could put you into debt, or derail well-intended plans to save,” says Lamb. “Rather than allowing large discounts to be the motivating factor to participate in Black Friday, assess what you can afford and prioritise items you really need, or have been planning to buy at full price.”

Lamb adds that it is inadvisable to get into debt to finance things like gifts ahead of the festive season.

“This year retailers, who are struggling to make up for lost months of sales, are particularly motivated to coax you into parting with your money. There are many innovative promotions that are designed to lure you into spending, such as free gifts, 2-for-1 specials, or even pre-booked shopping times,” she says.

But now, more than ever, is a good time to be conservative.

“This year, given the even tougher period we are facing and the advent of salary sacrifices, many companies are not going to be able to afford 13th cheques or bonus pay-outs, making it a tougher festive season and leaving many without any buffer,” Lamb notes.

“The pandemic has highlighted the lack of emergency fund savings amongst consumers, and with the future continuing to look uncertain, rather than overspending, now may be a good time to start, or replenish, your emergency fund.”

Below are Lamb’s top tips to prepare for Black Friday and the festive season:

1. Avoid getting into debt in the name of festive season shopping. Resist the urge to use your credit card and don’t deplete savings built up intended for another goal. Ensure that you have sufficient emergency savings before you consider any discretionary purchases.

2. If you are going to shop, put a budget together and stick to it. Consider how much you can afford to spend, and don’t go above your limits.

3. Don’t fall for the well-placed items near the tills. Be mindful of those marketing tricks, shopping spending cues, additional discounts, promotions or large savings.

“You hold the power to your purse strings. As Warren Buffett says: Do not save what is left after spending; instead spend what is left after saving,” concludes Lamb.

PERSONAL FINANCE

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