Avoid holidays on credit

A2BThe pain of debt lasts a lot longer than the joy of the holiday.

2015 is fast coming to an end and the holiday season is upon us. Some of us will take the opportunity to treat ourselves and families with a trip to the coast or even an international holiday.

The holiday season is a time when budgeting seems to take a back seat, and our credit cards are often used to finance part or all of the expenses.

If the above describes your current holiday planning, we’ve highlighted some important issues you may need to consider.

Let’s start with a very simple example in which you put holiday expenses of R50,000 onto a credit card instead of using savings that you’ve accumulated over time.

The credit card option results in the holiday costs escalating significantly with the burden of a monthly payment long after the holiday is over. Here’s the loan amortization schedule for the above example, with a repayment term of two years:A2.1

The result is that your holiday expenses are increased by R13,445 – an increase of 27% – and, worse still, you need to make the monthly payments for two years after your holiday is over!

The additional stress caused by using this financing option far outweighs the benefits, but with some careful planning during the year this can easily be avoided.

Maybe it’s time to start planning for future expenses such as these. Call us so we can assist you with a plan that suits your budget and needs.

SeanSean Fahy
Investment Advisor
086 1111 376

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted. (E&OE)