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The Latest Debtfree DIGI

Wednesday, November 9, 2011

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BEWARE the Festive Season

The best gift you could hand yourself and your family this festive season is to be vigilant and cautious when coming across goods that could later see you unnecessarily falling into debt for months or years.

The NCR are also advising caution as it launches its spend wisely campaign themed “Ungalahli”. The Ungalahli – a Zulu word either meaning don’t be careless or don’t be wasteful – is a campaign aimed at convincing consumers to spend their money wisely instead of figuratively throwing it away on unnecessary items. The NCRs Rajeen Devpruth says the first step to ensuring that you spend wisely this festive season is to draw up a festive budget which will guide you to spend responsibly during the December / January period.

"Most people don't do a budget each month but now maybe the time to work on one", says Zak King editor of Debtfree DIGI magazine. Start by formulating the "festive" budget now and only concentrate your budget items on your income, debt and daily living expenses if you have not received your bonus. However, if you have already received your bonus, you need to include it in the budget. Over and above your daily living expenses and regular debt repayments, you need to state clearly what is available for gifts, travel and entertainment as well as extra debt repayments over the festive period. By budgeting, you will be setting yourself and your family goals to help you spend your money on needs rather than expensive wants that could ultimately leave you out of pocket and be tempted to approach financial institutions for loans, says Devpruth. He suggests that it also helps to include school uniform and stationery in your December / January budget, as most consumers will only receive their salaries at the end of January 2012.

Recent figures from the Credit Bureau Monitor - June 2011 quarter- show that credit bureaus held records of 18.84 million credit active consumers, a recent increase of 1.3% .  The Credit Bureau Monitor further indicates that out of the 18 million credit active consumers, only 53.3% consumers are in good standing and 46.7% have impaired records. Consumers with impaired records are consumers who are classified as three or more months in arrears, have an adverse listing, reflect a judgment or an administration order.
Devpruth advises that you must take some of your December salary and 13th cheque to pay off your debts -prioritizing your home loan. “It is wise to do this because interest rates are low and you can reduce your interest burden for the future. Another good plan is to be proactive and to double-up on your regular payments such as mortgage or rent, lights and water. That way you would have given yourself some breathing space after the holiday season for New Year costs such as school fees and uniform”, added Devpruth.
Try to continue leading your normal life during the festive season and do not radically change spending patterns because this could be expensive and unsustainable in the long-run. “If you do borrow money, make sure you borrow only for what is strictly necessary, and ensure that you can afford the repayments,” he says. Those already under debt review would avoid borrowing funds at all and focus on spending only what they have been setting aside during the year.

The NCR have given consumers some tips:
  • Borrow money only for what is strictly necessary. Remember to request for a pre-agreement statement and quotation when you borrow;
  • Look at cheaper means to make presents for friends and relatives, like baking biscuits, drawing pictures, writing poems;
  • Limit yourself to an amount for each person to help keep track of your spending;
  • Invest in items such as school stationery, uniforms or other educational related items such as saving for registrations, school camps etc;
  • It is better to throw a braai at home and ask guests to chip in with salads and beverages instead of entertaining them at an expensive eatery;
  • Every year setup a fund for  presents as well as holidays;
  • Use your bonus to reduce your debt burden by paying off existing loans.  By spending wisely this year, you can reap the benefits next year.  
  • Visit for more news and stories about debt counselling in South Africa

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