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Cape Town – For many consumers, retail therapy seems to be just what the doctor ordered to lift their mood.
But just as many go out and buy goods that they do not need and cannot afford, turning what should have been a mood enhancer into a potential debt disaster.
“It’s not called retail therapy for nothing. Shopping can actually make you feel better, because for many it is just another coping mechanism.
“But while the positive effects of a good purchase may wear off quite quickly, the repercussions and actual cost that comes along with retail therapy, can negatively linger for a long time,” cautioned Debt Rescue CEO Neil Roets.
Friedl Kreuser, manager at 6cents, a division of Summit Financial Partners, gave a sterner warning. “Retail therapy is a killer if you’re doing it on credit,” he said.
“It’s the stupidest reason to make debt, as there is little return on your ‘investment’ beyond the initial thrill of buying something pretty.
“Also, retail accounts usually have the highest interest rates, which mean they are the most expensive debts in the long run.
“Although it seems unlikely, managing your money responsibly will do far more for your peace of mind and self-esteem in the long run,” he said.
Melissa America, head of financial consulting at Debtbusters, concurred with Kreuser, adding that retail therapy can cause major damage to the budget.
“This is normally an impulsive shopping spree and you tend to spend money that was not allocated in the budget.”
More worrying is that people with accounts have less to worry about immediately, but without monitoring it can easily lead to over-indebtedness.
America said 50% of Debtbusters’ clients have admitted to over-spending because the credit was available to them. She warned that impulse buying (aka retail therapy) can have a negative impact not only on the individual buying, but on the whole household.
“When you have a higher instalment on accounts, you have less money to spend on the day to day living expenses and if you do retail therapy with unallocated cash funds, there will be less for necessities.
"This impacts the rest of the household and can lead to tension and family problems,” said America.
Statistically, 44% of the country has missed three of more debt instalments. With the debt income ratio at around 75%, South Africans cannot afford to be casual about debt - not if they want to end up among the mere 7% who are able to retire independently, added Kreuser.
“Consumers should save their available cash surplus for investing in the right kind of debt – a mortgage bond, preferably one they can pay off faster by paying more than the required instalment,” he advised.
How to avoid temptation
Tips to avoid retail therapy as a mood enhancer:
• Take a long walk with your family – exercise releases endorphins that will literally improve your mood while connecting with your family will deliver much longer lasting satisfaction.
• Always have a monthly budget and stick to it.
• Allocate cash funds in the budget if you do not have any retail accounts, so that you have an amount to spend when doing retail therapy.
• Manage the balances and instalment on your retail accounts in accordance with your monthly budget.
• Never maximise your credit limits only because the funds are available to you.
• Avoid retail therapy by getting a take home movie to enhance your mood.
• If you are way in over your head, consider debt counselling.
But just as many go out and buy goods that they do not need and cannot afford, turning what should have been a mood enhancer into a potential debt disaster.
“It’s not called retail therapy for nothing. Shopping can actually make you feel better, because for many it is just another coping mechanism.
“But while the positive effects of a good purchase may wear off quite quickly, the repercussions and actual cost that comes along with retail therapy, can negatively linger for a long time,” cautioned Debt Rescue CEO Neil Roets.
Friedl Kreuser, manager at 6cents, a division of Summit Financial Partners, gave a sterner warning. “Retail therapy is a killer if you’re doing it on credit,” he said.
“It’s the stupidest reason to make debt, as there is little return on your ‘investment’ beyond the initial thrill of buying something pretty.
“Also, retail accounts usually have the highest interest rates, which mean they are the most expensive debts in the long run.
“Although it seems unlikely, managing your money responsibly will do far more for your peace of mind and self-esteem in the long run,” he said.
Melissa America, head of financial consulting at Debtbusters, concurred with Kreuser, adding that retail therapy can cause major damage to the budget.
“This is normally an impulsive shopping spree and you tend to spend money that was not allocated in the budget.”
More worrying is that people with accounts have less to worry about immediately, but without monitoring it can easily lead to over-indebtedness.
America said 50% of Debtbusters’ clients have admitted to over-spending because the credit was available to them. She warned that impulse buying (aka retail therapy) can have a negative impact not only on the individual buying, but on the whole household.
“When you have a higher instalment on accounts, you have less money to spend on the day to day living expenses and if you do retail therapy with unallocated cash funds, there will be less for necessities.
"This impacts the rest of the household and can lead to tension and family problems,” said America.
Statistically, 44% of the country has missed three of more debt instalments. With the debt income ratio at around 75%, South Africans cannot afford to be casual about debt - not if they want to end up among the mere 7% who are able to retire independently, added Kreuser.
“Consumers should save their available cash surplus for investing in the right kind of debt – a mortgage bond, preferably one they can pay off faster by paying more than the required instalment,” he advised.
How to avoid temptation
Tips to avoid retail therapy as a mood enhancer:
• Take a long walk with your family – exercise releases endorphins that will literally improve your mood while connecting with your family will deliver much longer lasting satisfaction.
• Always have a monthly budget and stick to it.
• Allocate cash funds in the budget if you do not have any retail accounts, so that you have an amount to spend when doing retail therapy.
• Manage the balances and instalment on your retail accounts in accordance with your monthly budget.
• Never maximise your credit limits only because the funds are available to you.
• Avoid retail therapy by getting a take home movie to enhance your mood.
• If you are way in over your head, consider debt counselling.
