Have a prudent Christmas and a better 2021

Everyone will agree that 2020 was a terrible year. We all feel like we need a reward and is Christmas not the best time to do just that? However, if you can resist the urge to go overboard, 2021 could be a much better year for you, especially since there is still so much economic uncertainty.

Beware of impulsive buying over Christmas

Consumers should beware of impulsive and spontaneous spending during the festive season to avoid an excruciating January, says Anne-Carien Du Plooy, acting manager for education and communication at the National Credit Regulator (NCR).

“If you enter January unprepared, the month will seem longer compared to other months. Avoid excessive spending with an aim of impressing friends, family or even strangers,” she cautions.

Many consumers have already received their December salaries mid-month, but this does not mean that you should spend all of it before the end of the month. “Bear in mind that your salary should cater for debit orders at the end of December and also for all January’s expenses such as rent, food, electricity, transport and additional expenses such as school fees, school uniforms, registration fees and stationery, Du Plooy warns.

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Budget

If you spend without a proper budget during the festive season, you could end up applying for credit to get through January. Du Plooy says when consumers’ credit applications are declined by registered credit providers due to affordability, they opt for unregistered credit providers who charge exorbitant interest and use unlawful tactics such as retention of cards and PINs to collect their payments.

Financial woes

It is a fact that the Covid-19 pandemic has caused financial strain to many consumers and this requires consumers to save more and spend less. According to Du Plooy, consumers battling to repay their debts should contact their credit providers for assistance.

If this fails, you can contact registered debt counsellors for assistance. However, Du Plooy cautions consumers to be wary of debt counsellors who use misleading marketing and advertising practices, particularly on social media platforms, such as Facebook, to lure consumers into their businesses.

“These advertisements are misleading in nature as they misrepresent the spirit and the objectives of the National Credit Act regarding the provisions of debt counselling as a debt relief measure.”

Tips

• If you have credit life insurance, submit a claim in the event of loss of income, retrenchment, disability or death
• If you get a bonus, count yourself lucky and use it wisely to repay debt and save as you do not know what the future holds
• Do not be tempted by sales/specials in the shops
• Stick to your budget
• Always remember that budgeting is crucial.

Debt counselling

Benay Sager, chief operating officer at DebtBusters, a debt counsellor, says the number of consumers who are under financial distress usually peaks early in the year as consumers come face to face with the financial realities of the December holiday period.

This year the economic impact of Covid-19 has contributed to the difficult position consumers find themselves in, with many consumers retrenched or working for a reduced salary. Many companies also cannot pay 13th cheques or bonuses, which means consumers will have no cushion to cover the extra Christmas and holiday expenses.

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“Typically, consumers who find themselves in a pinch borrow money to see themselves through until they get paid. The problem is that the repayments for these loans can add additional long-term pressure on households which are already only just keeping their heads above water. One unexpected expense or emergency can then result in serious financial difficulty.”

He says another response is to choose which debts to pay and which ones to skip. This too can have long-term implications as it negatively affects these consumers’ credit scores. This means they may not be able to borrow more money or the cost of borrowing will be higher as they are regarded as more of a risk.

He also urged consumers who do find themselves struggling over December or the New Year to seek help. “Remember that if you are in financial trouble the earlier you seek help the greater the possibility of being able to solve the problem. It may take some time before you’re debt free, but generally the success rate is good for people who do not wait too long.”

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