Festive Debt: Why Financial Education is Essential this Holiday Season
The holidays are almost here and with them comes
a huge list of expenses, from plane tickets to presents. Getting smarter about
finances is essential.
If you love this time of year, you'll no doubt
be pretty excited about spending time celebrating with friends and family and
enjoying at least a few of the luxuries on that list. What you're probably not
looking forward to is looking at your bank statement in January…
In 2014 South Africa was officially the nation with the highest level of personal debt in the world, and although personal debt levels are dropping, this reduction is very gradual. A huge proportion of the population are still saddled with troublingly high levels of debt. According to Nedbank, in August 2016 there was a 10% rise in consumers defaulting on payments, while quarterly reports from the National Credit Regulator show that, of South Africa's 24 million credit users, 10 million were in arrears this year.
READ: Economist advises consumers to settle debt quickly
The festive financial problem flashpoint
Christmas and the holiday season are serious flash
points for financial trouble, with many of us feeling pressured into using
finance in order to pay for the trappings which the season demands, whether
we're doing up the spare room to impress our in-laws when they stay, or buying
your special someone something special. This high level of financial pressure
is precisely why during the festivities we need to be thinking even more about
improving financial education and ensuring we have a god grip on our money –
all over the country.
Good vs. bad debt: A holiday lesson
Understanding the difference between good and
bad debt Wonga.co.za have a
helpful online tutorial on
the subject) is a crucial lesson for consumers to take in as the holiday season
approaches. Almost all of the purchases which could be made on finance over
this period fall into the bad debt camp, which is why South Africans must be
especially vigilant when it comes to borrowing and spending, whether they're
making use of store cards or taking on a personal loan.
What's the difference
So what is the difference between good and bad
debt? Bad debt refers to any type of loan or finance used to pay for
unaffordable, unnecessary “luxuries”. From presents, to holiday party outfits,
if you're unable to pay for these items upfront and use a store card, credit
card or loan to cover the cost, it's a bad debt – especially when repayments
are unrealistic.
Good debts, on the other hand, are loans used
to help build a financially stable future. Affordable, with realistic
repayments, these debts could be student loans to fund a degree, boosting your
earning potential. They could also be a mortgage that will rescue you from the
financial drain of renting and help you work towards property ownership.
Next time you're about to pop a festive treat
on your credit card, think carefully to ensure you have a financially healthy
holiday.