With Black Friday mere days away, shopaholics across the globe are gearing up to get the best deals and discounts. Nidia Lourens, senior actuary at Metropolitan, urges South Africans to remain level-headed during this high-pressure sales period. “Black Friday deals are often marketed as being too good to pass up, so it’s important to approach them logically, with a clear strategy to avoid overspending and derailing your financial goals.”
First and foremost, Lourens advises consumers to prioritise their financial well-being before hitting the shops. “Pay yourself first! That means allocating funds for savings and monthly necessities before considering discretionary spending. Once you’ve done this, if you have money left over, determine how much you will spend on Black Friday and stick to that budget.”
She also highlights the importance of researching advertised deals to ensure they are genuine. “You need to realise that some retailers might trick you into believing you’re getting a great bargain when you’re not. Knowing the everyday price of an item helps you identify the real deals from the rip-offs.”
Understand the psychology of Black Friday
The hype surrounding Black Friday is no accident, says Lourens. “Retailers design sales events to trigger instant gratification among shoppers. This lures consumers into buying items they don’t need because of the perceived urgency of limited-time deals.
“Retailers rely on this psychological effect to clear old stock and maximise profits,” she adds. “For example, a retailer will advertise an item from the previous season, saying it’s 50% off when it’s already been marked down by 40%. This means the actual discount is just 10%, but consumers are drawn in by the illusion of a half-price deal.”
To counteract this, Lourens advises shoppers to pause and reflect before any purchase. “Don’t rush into buying on impulse. Take a moment to consider whether the item aligns with your current needs. And if it’s too good to be true, it probably is.”
Shift your mindset from spending to saving
Lourens encourages consumers to focus on long-term financial goals rather than succumbing to short-term spending temptations. “Visualising your financial objectives can be a powerful tool. For instance, put a list of your goals up on your fridge or wall, along with a bar chart of your savings so that you can see your progress. Watching your savings grow towards these goals provides its sense of gratification, reducing the impulse to overspend during sales events.”
The value of compound interest
“The best friends of money are time and compound interest,” Lourens explains. “If you save diligently, your money not only grows but also retains its value against inflation. Over time, this allows you to afford higher-quality items or achieve other significant financial goals.”
Investing in tax-efficient products like retirement annuities is another effective way to remain focused on long-term goals. “With a retirement annuity, a fixed amount is deducted from your salary, reducing your disposable income and naturally curbing overspending. Additionally, the tax deductions you receive make it a financially smart choice,” she notes.
Financial education is key
Lourens believes that financial education is key to changing consumers’ spending habits. “Financial literacy creates awareness around saving – whether it’s for retirement, education, or other significant expenses.”
Understanding concepts like inflation and compound interest equips people to make more informed decisions, she explains. “For example, John can buy six loaves of bread with R100 today, but in 10 years, his R100 may only buy three loaves. This shows how, over time, inflation erodes the purchasing power of your money. By understanding this concept, people will see that it’s important to put money away now – so that it can grow above inflation.”
Don’t go into debt
As a final tip, Lourens warns against using credit cards during sales events like Black Friday. “This ties in with the principle of paying yourself first and sticking to a budget within your means. Turning to credit for a perceived good deal is risky, as the interest charged on your credit card will likely negate any savings from discounts,” she explains.
“While Black Friday can be a great opportunity to snag bargains, it should never come at the expense of your financial future. By prioritising long-term goals, staying disciplined, and shopping wisely, you can take advantage of the deals without dipping into your savings or falling into debt,” Lourens concludes.
PERSONAL FINANCE