Personal-Finance

New year is the busiest season for debt rescue firms. Don’t fall into the trap

2016-12-07 12:31

With shopping malls expected to be filled to the brim this December, many people are about to splurge on Christmas shopping, plunging themselves into debt by purchasing expensive gifts for loved ones.

According to Neil Roets, chief executive of Debt Rescue, January and February is usually the busiest period for the debt management company.

“We see more new clients seeking help in January and February than during any other month of the year because of additional debts that had been stacked up during the holiday season,” Roets said.

While December is known as the season of giving, many people forget about the pending expenses the hit them hard in January, including school fees.

“Parents suddenly realise that they have to pay school fees that had not been budgeted for and with credit cards maxed out on luxuries in November and December, many have no choice other than to seek relief by going under debt review to prevent debt collectors from seizing their property,” Roets said.

The New Year is set to bring with it escalating prices and increased interest rates, with very little relief for consumers.

The latest figures released by the Reserve Bank show that total consumer debt stands at close to R1.6 trillion.

Registered financial planner Marc Joubert has some tips in order to still be able to spoil loved ones without breaking the bank.

Set a budget

It’s the thought that counts!

“The problem with purchasing gifts is that more often than not we tend to overspend. Review your capabilities and set yourself a clear budget – and stick to it. Otherwise you might end up unnecessarily over indebted,” Joubert said.

Plan where you would like to shop

“Being aware of deals and discounts happening can make a huge difference in stretching your monthly budget,” Joubert said, emphasising doing price comparisons.

Start a savings account for the next time round

“Setting aside extra capital on a monthly basis into a separate account and generating a lump sum to use for purchasing high-priced items is the best and most direct way to avoid falling into debt.”

Using your credit card isn’t the only option

Alternative ways to make large purchases is to rent to own, because the monthly rental is not affected by a change in interest rates.

“This is a rental agreement that can be cancelled at any time on 30 days’ notice and sets a clear monthly rental amount which includes all costs. This means that consumers avoid getting locked into debt or being surprised with hidden fees of unexpected increases related to the repo rate,” Rob Katzen, group chief executive officer of the Teljoy Group and rent-to-own specialist said.

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September 23 2018