It’s so easy to fall into a nasty debt trap. Once you are in it, debt becomes “the boss” and it’s tough to escape. Momentum offers advice on how to manage your finances with the festive season fast approaching.

The so-called ‘silly season’ may tempt us to skip debt repayments or even ramp up debt levels to pay for gifts or a holiday we can’t really afford, but we urge you to rather be money wise than debt-ridden this festive season.

Recent research conducted by Momentum and Unisa shows that South Africans are feeling more financially squeezed than ever. People are worried about their income, can’t buy what they used to buy, are struggling to pay accounts and debts, and feel that they are not saving enough for retirement. Maybe you are feeling a little like this? If so, the last thing you want is to use the festive season as an excuse for overspending and racking up more debt.

Prepare a special festive season budget List all your ‘needs’ and ‘wants’ over December and January. A ‘need’ is something you have to have while a ‘want’ is something you would like to have. Always prioritise ‘needs’ over ‘wants’. Don’t forget to include ‘needs’ such as stationery, school fees and uniforms which you will need to pay in January. Once ‘needs’ have been budgeted for, you can start allocating income to festive season ‘wants’ which may include gifts, new clothes or holiday plans.

Beware the hype
In the run-up to the festive season, retailers and advertisers go out of their way to get us to buy things we don’t really need. Don’t be tempted by offers of ‘gift vouchers’ or ‘discounts’ if you open a new account with a store. There’s a good chance you will end up opening unnecessary accounts, buying things you don’t really need, and racking up more debt.

Say a BIG “No Thank You” to new debt
If you have not saved or budgeted for something, don’t increase your debt to buy it. Use your credit card to pay for something only if you absolutely have to. Try to stick to the golden rule: pay off any negative credit card balance in full and on time every month. If you don’t do this, the interest charges are added to the total balance. This means you end up paying back more than what you borrowed and have less money for daily living and your financial goals. The higher the interest rate on your credit card, the more you eventually pay back.

Credit cards are not the problem - it’s how we use them that counts.

Are you fortunate enough to receive a bonus?
Use your bonus to pay off credit cards, short-term loans or retail accounts. Or think about reducing what you owe on your home loan or car. This will save significantly on total interest paid in the long run.

If you are already suffocating in a debt trap and feel there is no way out, take a deep breath and seek professional assistance. Talk to a registered debt counsellor, who can help you to work out a better monthly budget which will enable you to pay your debts more effectively. They may also consolidate your debt into one lower monthly payment and structure a payment plan you can afford.

Show debt who is “boss” this festive season. Stay on the road to financial wellness.

Article by Momentum.

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