Save money this Christmas – as substantial expenses await in the new year
Deeply indebted consumers who collectively already owe more than R1.71 trillion in outstanding debt, should guard against ratcheting up even more debt over the Christmas holidays.
Neil Roets, CEO of debt counselling company, Debt Rescue, said having spent copiously on Black Friday and Cyber Monday, many consumers had already maxed out their credit cards and store cards and were now thinking of borrowing money from lenders in the form of unsecured loans to fund their Christmas spending.
“Unless you have budgeted for Christmas presents and New Year’s goodies, think twice about increasing your debt load.
“While it is true that some retailers have great specials going on over the holiday season, the reality is that loans have to be repaid – mostly at very high interest rates – and there are substantial expenses waiting down the road in January and February in the form of school fees, university payments, school uniforms and much of the debt that had been stacked up in November.
“Retailers are going the extra mile this holiday season to tempt consumers with extra special deals because they themselves are in trouble because of a tight economy that has reduced their margins and shrunk their turnovers to the point where they desperately need to sell more goods.”
Roets said many consumers had great difficulty adapting to the new reality of rising interest rates and high unemployment believing that somehow their economic circumstances would magically improve.
“The harsh reality is that we have just received two downgrades from ratings agencies which is going to further push up interest rates on borrowed money. It is also going to impact on the economy in the form of slower growth – as low perhaps as a half a percent this year and further unemployment.
“Those of us lucky enough to still have jobs may not have them for very much longer because with very little foreign direct investment coming into the country, it is unlikely that next year will see much of an improvement in any of the major financial indicators.”
He said now was the time to consolidate and build up cash reserves to guard against unavoidable cost of living increases next year.
“We know for sure that inflation is on the rise and there is definitely going to be a substantial increase in the price of fuel, perhaps by as much as 40 cents a litre,” Roets said.
“Red meat, chicken and eggs are already on the rise and thanks to the widespread outbreak of bird flu, the price of eggs – a cheap source of protein for many – is going to increase substantially.
“We are far from seeing the light at the end of the tunnel. It is our belief and many leading economists share that belief that we are far from staging a recovery.
“In short, it is my belief that things are going to get a lot tougher before they get better. Now is not the time to act recklessly. On the contrary – it is more important now than ever before to implement fiscal discipline and save whatever money is left over at the end of the month.”
Roets said January was when Debt Rescue saw the greatest influx of distressed consumers who had reached the end of their financial tether and who had debt collectors knocking on their doors.
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