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Set a budget – and stick to it. If you’ve not already made one, take a deep breath and draw it up so that you don't come up short next year. This is sobering advice from TransUnion head of consumer Africa, Kriben Reddy.
According to TransUnion’s quarterly Consumer Pulse study, which was released in October, Reddy said 36% of local consumers would not be able to pay their current bills and loans in full in the coming year, and many consumers were looking to cut back their discretionary spending as they start to feel the effects of inflation and interest rate hikes.
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When drawing up a budget, Reddy advises that consumers should factor in the cost of food and entertainment:
He said hosting family meals and gatherings could be an expensive exercise. “Better idea: ask everyone to bring one [food or drink] item with them and you’ll have all the bases covered.”
Credit health
Reddy said many retailers offer great last-minute deals as Christmas approaches. But, he warned that before starting to dream of shopping carts full of bargains, consumers should take the time to understand their financial obligations.
- Know what they currently owe lenders.
- Pull their credit report to check debts they may be unaware of.
- Check if they have any defaults or judgments against them that need sorting out.
Reddy said the more consumers understand their current financial health, the more realistic it was to set limits and get to know what they could afford.
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Monitoring credit reports regularly, he said, was an easy way to help keep your eye on the financial ball. Who knows, you may even emerge in 2023 with an improved credit score. You can get your annual free credit report from TransUnion.
Avoid loans
He said taking short-term loans or applying for additional credit to fund unnecessary entertainment or luxury purchases should be avoided where possible.
“If you suddenly open two or three new credit facilities in a short space of time, what you’re telling the lenders is that you might be in financial trouble. At the very least, you’ll be attracting attention the next time you ask your bank for credit,” he said.
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He warned that every time consumers applied for credit, the credit provider assesses their information – something known in the trade as a "hard" enquiry.
Reddy said:
He advised consumers to apply for credit only when it was necessary and when they could afford the monthly instalments.
Best credit usage
Reddy has urged consumers to use credit wisely. Manage accounts by making sure to meet the repayments. Reddy advised consumers to pay more than the minimum balance owing each month, otherwise they will end up paying more interest than they have to.
Reddy said:
Limit the amount of debt by using less than 35% of the limit. Also limit enquiry activity by not shopping around for too much credit at the same time. Read the fine print and, if you are in financial trouble, talk to the banks and lenders early and often.
“If you’re worried you’re going to miss a payment, contact your lender before the due date to make alternative payment arrangements. You can explain your situation and ask whether they can offer any assistance. Don’t just ignore your bills.”
