The month of sales is here and while we’re being strongly convinced to part ways with hard-earned cash over great specials and discounts, it’s equally important for us to exercise caution and self-discipline when managing money over this period to ensure we don’t overspend.
Ester Ochse, Product Head at FNB Integrated Advice says, you can avoid getting into financial distress over the Black Friday period by taking the time to ask yourself five simple questions before making a purchase:
1) Do I need it?
FNB’s behavioural data shows that among the top five categories driving spend during Black Friday, are groceries, clothing, and entertainment take the lead. Non-perishable goods, other essential items and school clothing for next year are particularly prudent items to consider. However, when it comes to entertainment items like Smart TVs and gaming consoles, make sure you fully read the terms and conditions of any purchase as there may be some extra charges hidden in the costs.
2) Have I budgeted for it?
It’s crucial to ask yourself whether you’ve budgeted for an item before you add to your cart and click buy using your physical card or tapping the virtual card on your smart phone. If not, this may result in short-term euphoria, immediate buyer’s remorse and long-term debt servicing.
A good idea here is to put in a ‘today, tomorrow and next week’ limit to your spending. For example, a today limit can be R100, if the item is less than R100 then buy it today. Then the tomorrow limit can be R300, if the item is more than R100, but less than R300, wait until tomorrow and re-assess if it is still a good idea. Then the last one is the next week limit, so for more than R300, wait a week before you seriously consider buying it. Then of course make sure that you have the money in your budget to buy it.
3) Is it a really good deal?
This is where it’s vital to do your research heading into Black Friday. If you are looking to make a large purchase, this is not something that one should look at as an impulse buy but rather something that one should ‘kick the tyres’ on. This of course gives you the time to do the proper research and compare Black Friday deals to make sure that the discount that you are getting is a proper deal. A bit of arm-chair research on the web will go a long way here to compare different retailers for certain items. And, while a R500 difference does not seem like a lot, this extra R500 could go towards emergency savings or retirement savings.
4) Do I take out debt for it?
Let’s start by saying that the right debt for the right purpose at the right time can be very powerful. But how does this relate to Black Friday? One first needs to consider the total cost of credit, which is the amount that one borrows, plus interest and fees that are applicable on the purchase. Therefore, if it’s for normal groceries and short-term use items, rather try to pay for it without using debt. If it is a necessary larger item such as a new fridge, then ensure that you do your calculations properly, because once you have paid the item off over a few years, it could potentially cost you more than the discount and you may not even have the item anymore.
5) Can I rather pay with savings or loyalty reward points?
If you are looking to buy a larger item, one should try to save up for it and pay it in cash or buy using your loyalty rewards points if you have been saving them for Black Friday. For example, if you have R15,000 in a cash investment you potentially getting 6.8% interest per annum. If, however, you take out a loan of R15,000 over a longer period loan the best interest rate that you will get is 17.5%. So, you will pay significantly more interest by purchasing the item on credit than what you will earn on your savings. Just remember that ideally you would like to keep between 1-and 3 months’ worth of income in your savings for emergencies, and that a new gaming console is not an emergency.
Black Friday is also a great time to use any loyalty reward programmes that you have such as FNB eBucks as this saves you from spending money and there’s a wider range of options that you can use the accumulated eBucks for. This is also the time of the year when scammers and fraudsters are on the lookout for possible victims, so it’s important to remain vigilant when you are making your purchased. Below are a few quick tips to remember:
- Always be vigilant when shopping either online or instore.
- Be careful when clicking on links and ensure that it is the actual website of the company, and that the URL starts with “https//” or where you see the icon of a padlock.
- Use your virtual card for all purchases as there is an extra layer of protection with the CVV number changing every hour, and an added benefit is that it helps you earn eBucks.
- Register for your bank’s inContact notification and ensure you’ve enabled App Notifications under your phone settings.
- Never let your card out of your sight when transacting at a store. Ensure that you always get your own card back after each transaction.
“Though spending season is an opportunity to pick up well-researched bargains, it’s important to take note of the tips provided above to avoid overextending yourself due to the hype that surrounds Black Friday and potentially being in a worse-off financial position heading into Janu-worry. Do not be tempted to spend excessively and, if you have a wish-list and a budget, stick to it. Just because something is labelled cheaper on Black Friday doesn’t always mean that it’s a worthwhile buy,” concludes Ochse.
