Nearly half of all credit-active South Africans, or 9.9 million people, are over-indebted according to Debt Rescue, yet 97 000 people attended the opening of the Mall of Africa, says David Crossley, Business Manager, BDO Wealth Advisers.
He goes on to describe his experience of a recent shopping trip.
“One Christmas my son and I had decided to visit a Mall with one goal in mind – he needed one pair of shorts. Arriving at the Mall, it appeared that everyone in South Africa was present.
“Ten minutes later we were in the checkout queue to pay for the shorts, however, I could not help but notice the customers around me. The majority of them were staggering along under armfuls of clothing – five shirts, ten pairs of chinos and goodness knows how many accessories.
“When they reached the till, they all without exception produced a credit card for payment.”
This little episode got Crossley thinking about how many people apply the golden rule when it comes to buying ‘stuff.’ This is to ask themselves the question “Is this item something I need or something I want?”
Husbanding limited financial resources and ensuring that one doesn’t catch the credit train is all about weighing ‘wants’ and ‘needs,’ Crossley says.
“What I ‘want’ is generally what I don’t ‘need’”.
“For example, I don’t ‘need’ to buy a designer pair of chinos for R750 if I can buy a similar non-designer item for R250 – unless I have limitless money. The temptation to keep up with the fashionista is a difficult one to resist and will almost always lead you into financial difficulties,” he adds.
He sets out some golden rules to adhere to when out buying ‘stuff’:
Do I really need what I am purchasing? Stop and really think about whether what you are about to splurge your hard earned money on is really what you need – or is it something of an emotional purchase? If it is, then don’t buy it.
Can I make do with one item instead of buying two? Retailers are experts at messing with our emotions. They will trumpet “Two for the price of one!” This is never the case and it will always cost you more in the long run.
Beware of ‘free’ offers. In order to make you open a line of credit, the store will offer you something for free if you spend more than a certain amount. Remember that this certain amount will always be more than you want to spend – and will always end up giving you a ‘free’ ticket on the credit train.
Should I really be paying for this on credit? The answer should always be “no” unless you are going to settle the credit card at the end of the month.
If you really have to buy the ‘stuff’ then use cash or a debit card. That way the item will belong to you and not to the bank.
Crossley ends off with a word about the credit train: “It stops anywhere for anyone who becomes indebted, but once you are on the credit train, it is often immensely difficult to get off – because it never stops.”