How to score on Black Friday while avoiding the debt trap

You can score points and avoid the Black Friday debt trap by thinking differently about the world’s biggest one-day shopping event. Think of Black Friday as a chance to take stock of your finances and create a financial plan that doesn’t include unnecessary debt.

Consumer spending on Black Friday in South Africa is increasing year on year, with sales volume exceeding R2.5 billion in 2021.

Although 2022 is one of the toughest years yet for consumers, experts predict South Africans will resort to borrowing to support higher spending during this period.

The list: Charnel Collins, CEO of National Debt Advisors, on how to stay out of debt while satisfying your craving for a bargain:

Boosting spending is almost a way to make up for what consumers haven’t been able to buy throughout the year, but they need to think beyond Black Friday and manage their loans smartly to avoid falling into a debt trap ahead of the busy holiday season, says Tonia Pavlou, associate CFO of consumer finance firm RCS.

“South Africans must not look at Black Friday as the day to make up for lost time when it comes to spending. Instead, Black Friday should be 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.”

Also read: Checkers vs. PnP as Black Friday battle begins

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 overspending is not a wise option for the majority of South Africans.”

She urges 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

Tips to protect your budget

According to Pavlou, impulse buying is the number one reason people overspend on Black Friday, but planning ahead can help you avoid falling victim to the frenzy.

“Before you consider any 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. Once 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 your limit, she says you can safely browse available offers and take advantage of them if they’re 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.

ALSO READ: Load shedding could cost retailers R5.4 billion in lost Black Friday revenue

Think outside the Black Friday box

Black Friday has been dominated for the past few years by more ‘traditional’ retailers for items like clothing, electronics and home appliances, but since then all manner of retailers and service providers have jumped on the bandwagon by finding innovative ways to take part in the promotion .

“So when planning ahead, keep in mind your planned spending for the rest of the year. Consider other expenses like new tires, a windshield repair, or 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.”

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Use your loyalty programs

According to Pavlou, many retailers use loyalty or cashback programs ahead of Black Friday to motivate shoppers and build their databases ahead of the festive rush. 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 it to decide which campaigns to buy.”

Let what’s already on your list guide you and visit these retailers’ websites and social media pages to see if there are any opportunities to take advantage of cashback or rebate offers to work your way towards bonus savings chop, advises Pavlou.

ALSO READ: Wealthier consumers with higher debt burdens – Consumer Default Index

When buying on credit

Resisting urges for instant gratification is important to avoid overspending. “Before buying on credit, calculate these two important factors: how long it will take you to pay off the item and how much interest you will incur before the item is paid off.

That way you can factor repayments into your monthly budget and prepare for any financial or lifestyle adjustments you need to make to make the purchase possible.”

Pavlou says doing the math gives you a clearer picture of the commitment you’re making when you buy something on credit. This feeling is really at the core of managing personal debt responsibly. Borrowing is a commitment that brings both immediate benefits and longer-term commitments.”

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