Debt expert warns about peril of Black Friday splurge

DEEPLY indebted consumers should think long and hard before plunging themselves further into debt by splurging on luxury goods on Black Friday, November 24.

Neil Roets, the chief executive of one of South Africa’s largest debt counselling companies, Debt Rescue, said often deals offered by major retailers seemed so good that consumers threw caution to the wind and blew their Christmas budget on single expensive items such as high-end TVs and other domestic appliances.

“Taking place on Friday November 24, many retailers and online shops such as Takealot have promised deals that would tempt even the most financially distressed among us,” he said.

“The short answer is: don’t. For the past several years we have seen the impact that Black Friday and Christmas shopping sprees have had on consumers when they approached us to try to get them out from under the financial mess that reckless spending has caused.

“Retailers, who are themselves in deep trouble because of the contracting economy, have come up with a host of clever ideas to tempt consumers to open their wallets and purses, which is how the idea of Black Friday was born.”

Roets said Black Friday was initially slow to take off when the idea was imported to South Africa by online retailer Takealot.

“Once it took hold, however, it took off like a rocket ship and many traders are now notching up a significant portion of their yearly sales on this day and over the Christmas holidays.”

He said many consumers had also developed a degree of resentment, believing they had been pulling in their collective belts for so long that they needed a break – and Black Friday would be the ideal opportunity to splurge on something nice.

“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, 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.”

Budgeting

Roets said consumers should buy only what was necessary.

“While we all feel that we desperately need a holiday at the end of a brutal year, keep those holidays within budget and don’t think that if you don’t have the money for school fees in December, the money will somehow magically be available in January when schools reopen.”

He said more than half of all South Africans were three months or more behind with their repayments, having collectively notched up some R1.71 trillion in debt (according to the latest National Credit Regulator statistics).

“We are in the midst of an exceptionally difficult economic cycle where the prices of everything are rocketing while salaries and wages in many cases are remaining static.”

For many consumers, January was the longest month of the year because many were paid earlier than usual.

Many South Africans were also the recipients of a 13th cheque which created a false sense of financial security.

“January is also when we see a sudden influx of distressed consumers who have reached the end of their financial tether and have debt collectors knocking on their doors.

“Fortunately the debt review process offers hope in that it allows them to repay their debts in smaller amounts over a longer period and sometimes even at a discount.”