LISTEN: How to score on Black Friday, while avoiding the debt trap

You can score and avoid the Black Friday debt trap if you think differently about the biggest one-day shopping event in the world. Rather see Black Friday as a chance to take stock of your finances and make a financial plan that does not include unnecessary debt.

Consumer spending on Black Friday in South Africa increases year on year, with sales volumes tipping the scales at over R2.5 billion in 2021.

Despite 2022 being one of the toughest years yet for consumers, experts predict that South Africans will turn to credit to support increased spending over this period.

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The increase in spending is almost a way to make up for what consumers have not been able to buy during the year, but they need to think beyond Black Friday and manage their credit smartly to avoid falling into a debt trap ahead of the busy festive season, says Tonia Pavlou, deputy CFO of consumer finance firm, RCS.

“South Africans must not think of Black Friday as the day to make up for lost time when it comes to spending. Instead, Black Friday should be a chance to take stock and make a financial plan that will allow you to see the end of the year through without incurring unnecessary debt.”

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According to the South African Reserve Bank the most recent household debt-to-income ratio in South Africa stands at 75.1%.

“The added pressures the pandemic years placed on consumer pockets, compounded by the reverberating effects of an unstable geopolitical climate means that it is not a wise option for the majority of South Africans to over-spend.”

She urges South Africans to practice buying and responsible borrowing as a component of personal financial wellness. On the whole, South Africans need to become more aware of how the financial decisions they make today will affect them in the months and years to come.

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Tips to protect your budget

Pavlou says impulse buys are the number one culprit behind overspending on Black Friday but planning ahead can help you avoid falling prey to the frenzy.

“Before considering any of the deals and promotions brands push during this time of year, make a list of essential items you need to buy, as well as non-essential wish list items. After establishing what you are willing and able to spend on each of these items, set a spending limit and do not compromise on it.”

Armed with your list and your limit, she says you can safely browse available offers and choose to take advantage of them if they are what you originally planned to buy. Anything that did not make the preliminary list or fall within the limit, simply should not make the cut.

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Thinking outside the ‘Black Friday box’

Black Friday was dominated by more ‘traditional’ retailers on items such as clothing, electronics and home appliances in previous years, but all kinds of retailers and service providers have jumped on the bandwagon since by finding innovative ways to get in on the action.

“Therefore, when planning ahead, set your sights on your planned expenditure for the rest of the year. Consider other expenses such as new tyres, a windscreen repair or home renovation. If you know you will be footing the bill for these kinds of costs in the near future, have a look at whether you can take advantage of savings on those products or services on Black Friday.”

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Use your loyalty programmes

Pavlou says ahead of Black Friday many retailers use loyalty or cashback programmes to incentivise shoppers and build their databases ahead of the festive rush. Some of these strategies include offering newsletter subscribers early access to deals or offering first-time newsletter subscribers exclusive discounts on their Black Friday shop.

“In the days and weeks leading up to the big day, you will most likely come across these kinds of targeted ad campaigns and promotions, but instead of allowing these marketing messages to pull you in many different directions, go back to your list and your budget and use it to decide which campaigns to buy into.”

Allow yourself to be guided by what is already on your list and visit the websites and social media pages of those retailers to identify whether there are ways that you can use cashback or discount deals to hack your way to some bonus savings, Pavlou advises.

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When you buy on credit

It is important to resist the urge for immediate gratification to steer clear of over-spending. “Before buying on credit, calculate these two vital factors: how long it will take for you to pay the item off and how much interest will accumulate by the time the item is paid off.

This will allow you to factor repayments into your monthly budget going forward and prepare for any financial or lifestyle adjustments you will need to make to accommodate the purchase.”

Pavlou says doing the math will give you a clearer picture of the commitment you make when you buy something on credit. That sentiment is really at the crux of responsible personal debt management. Taking out credit is a commitment that comes with both immediate benefits and longer-term responsibilities.”