Spend wisely this 'silly season'

2006-11-28 19:20
Cape Town - The temptations of the Christmas season can lead to a financial headache in the New Year, warns Peter Setou, senior manager at the national credit regulator (NCR).

According to Setou, the "silly season" is aptly named because of a spending frenzy that appears to afflict people over this period.

"Bonuses present a great temptation to buy, buy, buy," he continues, "but we strongly encourage people to stop, consider and plan their expenses very carefully, especially over this period."

Part of the NCR's mandate is to educate and create awareness among consumers with a view to enable them to make informed financial choices.

How can one avoid falling into the debt trap this festive season? "First of all", Setou advises, "plan your budget - know exactly how much you have available and what expenses must be covered."

Secondly, he adds, be careful how you use your credit card, it can tempt you to spend money you do not have.

"For example, avoid using it for a holiday!" Setou also recommended attending to current debts before incurring additional expenditure.

'Be wary'

"Be wary of 'buy now, no deposit needed' deals, which will finally cost you more. If you do decide to borrow money, make sure you borrow only for what is strictly necessary and ensure that you can afford the repayments."

According to Setou, often debt results from an accumulation of many smaller purchases: each one doesn't appear to amount to much, but when they are all added together, they can make a very big dent in one's budget.

"Consumers also tend to forget that they must still provide for the usual expenses such as rent, school fees, clothing, food, transport etc, and want to spend most of their available cash on items which they don't really need and actually cannot afford."

"Christmas is an expensive time for us all, but don't go overboard on gifts and entertainment," says Setou.

"In January, the yearly cycle starts again and there will be demands on our income - and we face undue financial stress if we have been unwise in the way we spent our funds."

He advises that a good plan is to double up on your regular payments such as mortgage or rent, lights and water.

That way you'll have prepaid those January expenses and given yourself some breathing space after the holiday season for New Year costs such as school fees and uniform.

  • This article originally appeared on Fin24.

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