How to avoid getting into debt on Black Friday

It is critical to resist the desire for instant gratification in order to avoid overspending.

The world’s largest one-day shopping event is rapidly approaching. In South Africa, consumer spending on Black Friday is increasing year on year, with sales volumes expected to exceed R2.5 billion by 2021. Despite the fact that 2022 will be one of the most difficult years for South African consumers, experts predict that credit will be used to support increased spending during this period. This increase in spending could be interpreted as a way for them to compensate for what they were unable to purchase during the year. To avoid falling into a debt trap ahead of the busy holiday season, consumers must think “beyond Black Friday” and manage their credit wisely.

When it comes to spending, I advise South Africans not to think of Black Friday as a day to make up for lost time. Instead, consider Black Friday as an opportunity to take stock and create a financial plan that will allow you to get through the end of the year without incurring unnecessary debt, said Tonia Pavlou deputy CFO of RCS.

The most recent household debt-to-income ratio in South Africa is 75.1%, according to the South African Reserve Bank. The additional pressures that the pandemic years placed on consumer pockets, compounded by the reverberant effects of an unstable geopolitical climate, mean that overspending on Black Friday is not a wise option for the majority of South Africans.

We encourage South Africans to practise responsible borrowing and purchasing as part of their personal financial wellness. Overall, South Africans need to become more aware of how their financial decisions today will affect them in the months and years ahead.

Make no changes to your budget

Impulse purchases are the leading cause of Black Friday overspending. However, planning ahead of time can help you avoid becoming a victim of the frenzy.

Make a list of essential items you need to buy as well as non-essential wish list items before considering any of the deals and promotions that brands promote during this time of year. Set a spending limit and stick to it after determining how much you’re willing and able to spend on each of these items.

With your list and your limit in hand, you can safely browse available offers and choose to take advantage of them if they are relevant to what you were planning to buy in the first place. Anything that did not make the preliminary list or falls within the limit should not be considered.

Consider thinking outside the ‘Black Friday box’

In previous years, more “traditional” retailers dominated Black Friday sales on items such as clothing, electronics, and home appliances. However, over time, all types of retailers and service providers have jumped on the bandwagon by devising novel ways to participate.

Set your sights on your planned expenditure for the rest of the year when planning ahead. Consider whether you’ll need to replace your tyres in the coming months, if you’ll need a windscreen repaired, or if you’re planning a home renovation.

If you know you’ll be footing the bill for these types of expenses in the near future, see if you can save money on those products or services on Black Friday.

Profit from loyalty programmes

Many retailers use loyalty or cashback programmes to incentivize shoppers and build their databases ahead of Black Friday. Some of these strategies include providing newsletter subscribers with early access to deals or providing first-time newsletter subscribers with exclusive Black Friday discounts.

You’ll most likely come across these types of targeted ad campaigns and promotions in the days and weeks leading up to the big day, but instead of allowing these marketing messages to “pull” you in many different directions, go back to your list and your budget and use it to decide which campaigns to buy into.

Allow yourself to be guided by what’s already on your list, and then visit the websites and social media pages of those specific retailers to see if there are any ways to use cashback or discount deals to hack your way to some extra savings.

Do the calculations

Resisting the desire for instant gratification is critical to avoiding overspending, and there is a very practical way to do so.

Before you make a credit purchase, figure out how long it will take you to pay off the item and how much interest will have accrued by the time the item is paid off. This will allow you to factor repayments into your monthly budget in the future and plan for any financial or lifestyle changes required to accommodate the purchase.

When you buy something on credit, doing the math will help you understand the commitment you’re making. That sentiment is at the heart of responsible personal debt management – taking out credit is a commitment with both immediate benefits and long-term responsibilities.

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