With Black Friday just a few days away, South African consumers are urged to remain level-headed during this period of high-pressure sales, says Nidia Lourens, Senior Actuary, Metropolitan.
“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,” Lourens said.
Firstly, Lourens is advising consumers to prioritise their financial wellbeing before hitting the shops.
Consumers should pay themselves first. This means setting aside funds for savings and monthly necessities before even thinking about discretionary spending.
After you have done the above, if you have money left over, determine how much you are willing to spend on Black Friday and then stick to that budget.
Lourens has also highlighted 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,” Lourens said.
Understanding the psychology of Black Friday
According to Lourens, the hype surrounding Black Friday is no accident.
Retailers design sales events to trigger instant gratification among shoppers which in turn lures consumers into buying items they do not need due to the perceived urgency of these limited-time deals.
“Retailers rely on this psychological effect to clear old stock and maximise profits,” Lourens said.
“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 they make any purchases.
Loures said: “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
Consumers need to focus on their long-term financial goals rather than giving in to short-term spending temptations.
Lourens said that visualising financial objectives for consumers can be a powerful tool. For example, they can: put a list of their goals up on their fridge or wall, along with a bar chart of their savings so that they can see their progress.
“Watching your savings grow towards these goals provides its own sense of gratification, reducing the impulse to overspend during sales events,” Lourens said.
Compound interest
The best friends of money are time and compound interest, according to Lourens.
Lourens said: “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.”
Lourens said that investing in tax-efficient products such as retirement annuities is another way consumers can still be focused on their 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,” Lourens said.
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,” Lourens said.
Understanding concepts like inflation and compound interest can give people the knowledge to make more informed decisions.
“For example, John can buy six loaves of bread with R100 today, but in 10 years, his R100 may only buy three loaves,” Lourens said.
“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.”
Avoid debt
As a final tip, Lourens warns consumers 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.
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