Don’t let Black Friday shopping push your debt to the limit


By Carla Oberholzer

South Africans have faced endless challenges. And, aside from the increased emotional, physical, and mental strain in recent years, their financial woes don’t seem to be going away anytime soon.

Therefore, you, the consumer, should exercise caution when participating in upcoming online or in-store “shopping bonanzas” simply because you “can” or want to.

Stand firm and don’t be fooled by various marketing gimmicks that entice you with a: “Get early access …”, “Be the first to receive our special discounts …”, “Get ready for massive offers coming soon… ”or“ This week, every day is Black Friday… ”message.

If your debts are already excessive in relation to your monthly income, you will only dig yourself deeper into a bottomless debt hole by participating in Black Friday or related events. It’s shocking what we’ve seen in the industry – most consumers spend over 60% of their income to pay off their monthly debts.

So I would advise you to calculate your debt ratio before considering spending money that you didn’t plan or don’t have. When it comes to keeping these financial situations under control, good debt management is crucial.

What exactly is a debt-to-income ratio?

Your debt-to-income ratio is an essential calculation in managing your debt. It compares your monthly income (gross – before deductions) with the amount you owe (the total amount of your monthly debts, such as mortgage payments, vehicle financing, credit cards, accounts store and personal loans).

How do you calculate your debt ratio?

The calculation in a few words:

● Add up all your monthly debts.

● Divide the total amount of your debt by the amount of your income before any deductions (gross salary amount) and multiply by 100 to get a percentage.

● This percentage is your debt to income ratio.

A low debt-to-income ratio demonstrates a favorable balance between your debt and your income. On the other hand, a high percentage points to a riskier situation.

Which of the following categories does your debt-to-income ratio fall into?

0-20%: Good.Your debt relative to your income is considered good and easily manageable. Action plan: You can continue to maintain your financial situation.

20-40%: Moderate. This reflects a moderate financial situation. Action plan: Consider making minor adjustments to reduce your overall debt amount.

41-60%: risky. This indicates that you are in risk territory. Action plan: Consider making significant adjustments to reduce your overall debt amount. Attendance at upcoming “sale” events or unscheduled shopping sprees is not recommended.

60 +%: Over-indebted. Reaching a percentage of over 60% is worrying and signals over-indebtedness. Action Plan: Your best course of action is to find a professional or licensed company to help you settle your debt safely. Participating in any Black Friday, Cyber ​​Monday, Tech Tuesday, or Black November “Sale of the Year” purchase is definitely prohibited.

Managing your debt is not only inevitable, but also critical. By determining your balance or debt-to-income ratio before taking out additional credit during impending and attractive events, you are taking an important step towards informed decision-making and financial control.

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