'Tis the season to be sensible

Lola Lazarus

Lola Lazarus

Don't be silly this festive season and spend wisely.

During the present challenging economic conditions consumers would do well to spend wisely to avoid falling into the dreaded debt trap.

Christmas is an expensive time for us all, so don't go overboard on gifts and entertainment, advises Peter Setou, senior manager: education and strategy at the National Credit Regulator (NCR).

"In January the cycle starts again and there will be demands on our income and you will face undue financial stress if you have been unwise in the way you spent our money," Setou says.

He says the "silly season" is aptly named because of the spending frenzy that afflicts people over this period.

Often debt results from an accumulation of many smaller purchases. Each one doesn't appear to amount to much but when they are added together they can make a big dent in the budget, Setou warns.

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

According to Setou part of the NCR's mandate is to educate consumers and create an awareness to enable them to make informed financial choices.

To do this the NCR, with stakeholders such as the Department of Trade and Industry, provincial consumer affairs directorates, Financial Services Board and the Council for Medical Aid Schemes have been running an awareness campaign countrywide to educate consumers about their rights and obligations.

"Given the complexity of some aspects of the act and in line with its mandate to educating the pubic, the NCR is conducting these workshops because consumers have to be equipped to make informed choices about their finances," Setou says.

How can you avoid falling into the debt trap this festive season?

"First of all," Setou advises, "plan your budget and know exactly how much you have available and what expenses must be covered."

Setou also recommends paying off debts before incurring additional expenditure.

"Be wary of 'buy now, no deposit needed' deals that will finally cost you more.

If you decide to borrow money, make sure you borrow only for what is strictly necessary and ensure you can afford the repayments."

He explains that consumers are encouraged to know their financial status since it helps to know all your creditors.

Communicate with your credit providers when you are struggling to repay debts and discuss your situation with them.

Consumers are also advised to avoid getting into more debt. Rather downgrade and change your lifestyle. If you drive an expensive car consider a downgrade for a less expensive car as it'll reduce your monthly instalment and enable you to pay other debts. Consider using public transport.

Look for a better price. When you buy groceries, compare prices across major stores.

Setou also offers these pointers:

lTry not to be tempted by the flood of advertisements in newspapers and on radio and television.

l Plan carefully and pay particular attention to your budget.

l Don't spend what you don't have .

l Be careful of "no-deposit" offers, as these loans can attract high interest and other charges.

l Christmas brings out the giving nature in us all. Be careful to give only what you can afford.