How to avoid the Black Friday debt trap



The world’s largest one-day shopping event is fast approaching. And in South Africa, consumer spending on Black Friday continues to rise year on year, with sales volume tipping the scales at over R2.5 billion in 2021.

Although 2022 is one of the toughest years yet for South African consumers, experts predict South Africans will turn to credit to fund higher spending during this period.

This increase in spending could be seen as a way to make up for what they weren’t able to buy during the year.

But consumers will need to “think beyond Black Friday” and manage their credit smartly to avoid falling into a debt trap ahead of the busy holiday season.

My advice to South Africans is not to look at Black Friday as the day to make up for lost time when it comes to spending.

Instead, Black Friday should be seen as an opportunity to take stock and create a financial plan that will allow you to get through the end of the year without incurring unnecessary debt.

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

The added pressure that the pandemic years have put on consumer pockets, compounded by the lingering effects of an unstable geopolitical climate, means that for the majority of South Africans, overspending on Black Friday is not a wise option.

We urge South Africans to practice buying and borrowing responsibly as part of personal financial well-being.

Overall, 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.

ALSO READ: Black Friday is Coming – Avoid Falling Into Debt with a Few Simple Calculations

Don’t budget according to your budget

Impulse buying is the number one reason for overspending on Black Friday. But planning ahead can help you avoid falling victim to the frenzy.

Before thinking about the deals and promotions that brands are offering this time of year, make a list of essential must-buy items and non-essential wish-list items.

After you determine what you are willing and able to spend on each of these items, set a spending limit and don’t compromise.

Armed with your list and limit, you can safely browse available offers and take advantage of them if they’re relevant to what you originally intended to buy. Anything that didn’t make the tentative list or falls under the limit simply shouldn’t be included in the list.

Think Outside the Black Friday Box

In recent years Black Friday has been dominated by more ‘traditional’ retailers for items such as clothing, electronics and home appliances. But over the years, all manner of retailers and service providers have jumped on the bandwagon by finding innovative ways to get in on the action.

So when planning ahead, keep your planned expenses for the rest of the year in mind. For example, consider whether you will need to change your tires in the coming months, whether you will need a windshield repair, or whether you are planning a home renovation.

If you know you’ll be paying for these types of expenses in the near future, see if you can take advantage of savings on those products or services on Black Friday.

ALSO READ: Checkers vs. PnP as Black Friday battle begins

Take advantage of loyalty programs

Ahead of Black Friday, many retailers use loyalty or cashback programs to engage shoppers and build their databases ahead of the festive onslaught.

These strategies include giving newsletter subscribers early access to deals or offering exclusive discounts on their Black Friday shop to first-time newsletter subscribers.

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

Let what’s already on your list guide you and visit those specific retailers’ websites and social media pages to see if there are any opportunities to take advantage of cashback or discount offers to help make your way Hack Bonus Savings.

Do the math

Resisting the urge for instant gratification is essential to avoiding overspending, and there’s a very practical way to do it.

Before you buy on credit, calculate these two important factors: how long it will take you to pay off the item and how much interest you have incurred by the time the item is paid off.

This allows you to factor repayments into your monthly budget and prepare for any financial or lifestyle adjustments you may need to make to account for the purchase.

Doing the math gives you a clearer picture of the commitment you make when you buy something on credit.

That sentiment is really at the heart of responsible personal debt management – ​​borrowing is a commitment that brings both immediate benefits and longer-term commitments.

Tonia Pavlou is Deputy CFO of RCS.

This article originally appeared on Moneyweb and has been republished with permission.
Read the original article here.

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