Black Friday is here – avoid falling into the debt trap with some simple calculations

Black Friday is just around the corner, but this year in particular it’s best to avoid those “wants” you can’t afford, even if you feel like you should pamper yourself after a year of financial hardship.

It’s important to resist temptation, and never allow ads to lure you into digging deeper debt holes for yourself.

South Africans face ongoing challenges, setbacks and inconveniences such as load shedding and water restrictions, rising fuel and grocery prices, and rising repo rates, to name a few.

Aside from the increased emotional, physical and mental stress they have experienced in recent years, it appears that their financial woes are not going away anytime soon.

“Therefore, as a consumer, you must be careful when participating in any upcoming online or in-store ‘shopping extravaganza’ because you ‘can’ or ‘want’. Stand your ground and don’t be fooled by various marketing gimmicks:” Early Access…”, “Be early to our special discounts…”, “Get ready for the massive deals coming…” or “This week, every day is Black Friday…”,” DebtSafe spokeswoman and debt advisor Carla Oberholzer said.

“If you already have too much debt compared to your monthly income, you’re only going to dig deeper into the debt hole when you’re attending Black Friday or in connection with an upcoming event. So I suggest you don’t until you give up Shop, but reduce debt and return to financial freedom.”

Oberholzer said DebtSafe’s 2022 findings show that it’s clear that debt consumers are largely defaulting on retail credit, so she advises consumers to calculate their debt-to-income ratios before considering spending money they don’t have the budget for or don’t have.

“Proper debt management is now more important than ever when it comes to controlling these funding positions.”

Also read: Everything you need to know about false advertising rights

What is a debt-to-income ratio?

Your debt-to-income ratio (DTI) is critical to managing your debt. It compares the amount of your monthly income (the total before deductions) to the amount you owe (the total amount of your monthly debts, such as rent, home loans, credit cards, car payments, and store accounts), Oberholzer explained.

To calculate your debt-to-income ratio:

  • (+) Add up all your monthly debts
  • (÷) divide your total debt amount by the amount you earned before any deductions (gross salary amount) & (x) multiply it by 100
  • (=) The final percentage (%) determines your debt-to-income ratio.

Oberholzer recommends that you keep doing the calculations to make an informed choice before spending your hard-earned money or wanting to use credit (bank money).

“A low debt-to-income ratio indicates a good balance between your debt and income. By contrast, a higher percentage highlights a higher risk situation due to debt exceeding your total income.”

Also read: What to do when the price on the shelf is different from the price they charged at the checkout

0-20% Debt to Income Ratio Categories for Black Friday

Your debt is considered good compared to your income. So you can stay on top of your finances, and if you want to get involved in your upcoming shopping shenanigans, remember:

  • Do your research to make sure you’re buying something that’s truly special, your budget allows it, and the item isn’t considered desirable.
  • Since you’ll be researching prices and items beforehand, there’s no need to visit various stores, such as shopping malls or online stores, to entice you to buy more than you can afford. Instead, outsmart retailers and stick to a budget to keep debt in check. Then, buy only what you need, and go out and stay away from stores or avoid online store sites.

21-40% debt-to-income ratio category

The amount of your debt reflects a modest financial situation compared to your income. So, consider making small adjustments to your budget and lifestyle to lower your total debt amount.

41-60% debt-to-income ratio categories

Now you are entering dangerous territory. Consider making major adjustments to lower your total monthly debt amount. Participating in any upcoming “sale” events or unplanned shopping sprees is not recommended.

Also read: How Small Business Owners Get Through Their First Years

60+% Debt to Income Ratio Category

Oberholzer said reaching a 60+ percentage is worrisome and indicates over-indebtedness. The best thing you can do is find an authorized professional or entity to help you get back to a place where you can experience financial freedom again. Never participate in any Black Friday, Cyber ​​Monday, Tech Tuesday or Black November ‘Annual Sale’ purchases.

“Managing your debt is not only inevitable, but critical in the final months of 2022. By determining your debt-to-income ratio before taking on any additional debt in the event of an imminent, tempting event, You took an important step towards making an informed decision – making and financial literacy.”

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