According to the latest statistics from the Reserve Bank, the real disposable income of South African households shrank by 49.7% in the second quarter of 2020. Less income means less spending, so it comes as no surprise that household consumption also dropped by 49.8% in the second quarter of 2020.
With less income and less spending going around, it would seem as though the Festive Season is going to be tough for those used to splashing out at the end of every year. With eight weeks to go, it’s the perfect time to start preparing your budget and mindset for a leaner year-end.
It’s also the time of year to be realistic about your debt situation. If you started the year with the intention of getting out of debt and you’re at square one perhaps it’s time to get professional help from a debt counsellor. Rather than spend your festive season agonising over how far in the red you are, talk to us about getting you set up for success before the year is over. Start 2021 on a debt-free foot!
1. Don’t buy food like it’s fashion
Retailers spend millions on Festive Season marketing campaigns to convince shoppers to buy overpriced “it” ingredients. While there’s nothing wrong with going on a gastronomic adventure every once in a while, buying expensive food items to impress guests can cause a dent in your wallet. Getting yourself into a good food habit before Christmas will help you resist and possibly avoid denting your wallet too much at the end of the year. Start looking out for specials now, especially on drinks and ingredients that store well. And remember, Christmas is just as special with chicken on the table as it is with turkey.
2. Living a lifestyle you cannot really afford
With Black Friday coming up and all the triggers on social media popping into your feed, many consumers end up going overboard and spending more than they should. Some even don’t set a budget at all, they just keep trying to live up to a certain kind of lifestyle. Going neck-deep into debt just to be seen clutching that expensive purse or driving that top-of-the-line car is never going to be okay. Maxing out your financial resources and living paycheque to paycheque financially disarms you and leaves you vulnerable to future financial emergencies, not to mention the risk of insolvency and blacklisting.
3. Paying beyond the due date
According to the latest statistics, nearly 40% of South Africa’s credit-active consumers have defaulted on their payments. Missed payments build up over time and can also affect your credit score. A low credit score means lower chances of getting approved for loans for bigger purchases. If you are the forgetful type, set up an automatic payment or turn on the reminders on your mobile to build a monthly routine. Don’t fall into a debt trap by thinking: “I’ll catch up next month.”
4. Paying the minimum amount of balance
Paying the monthly minimum of your credit card balance is enticing, especially when it offers low-interest rates. We get it. It feels like you want to use that extra money for something exciting, rather than simply paying off more on your debt. Though the payment term offers a light monthly payment, you are actually hurting your finances. With the ballooned interest, you are actually paying more. Make it a point to pay the full amount indicated on your bill every month.
5. Rewarding yourself through purchases
There’s nothing wrong with treating yourself after accomplishing a big project or overcoming a stressful week at work. But stress shopping, stress eating, and reward splurging can end up with you spending more than you should. Splurging too much and leaving your wallet with nothing will only cause further distress from worrying. Look for affordable and cheaper ways to reward yourself.
6. Shopping as mood booster
Retail therapy is a lie created by marketers. As mentioned above, retail therapy is also a root cause of overspending. Allot a budget for simple shopping pleasure instead, which covers budget allocation for both necessities and leisure. When you do shop, make a list of what you need before leaving the house. Stick to your list and avoid browsing. Browsing leads to baskets filled with things you want, but don’t necessarily need.
7. Trying too hard to belong in that circle
Many are accustomed to joining the bandwagons of the moment. It could be jet-setting to the most popular party cities or buying the latest kicks with a hefty price tag, or snatching up the latest phone as soon as it’s out on the market. Basically, when your friends buy something or something is posted by an influencer, the item is deemed worth the buy for bragging rights and just to belong. This mindset is a surefire way towards mismanaged finances.
8. Living without a safety net
Realize your needs and wants and establish long-term goals. Doing so will help you determine the amount you need to save and set a deadline. Set up an account and make an automatic transfer from your payroll account to your savings account.
If you’ve tried breaking your bad money habits but can’t seem to do it on your own, it’s time to talk to a debt counsellor at Debt Care. Our counsellors are trained to help evaluate your current financial situation and restructure your debt to free up some money for you to live on while still covering your debt repayments. Call us on 0861 977 873 or email wecare@debtcare.co.za to speak to a debt counsellor today.
