While there’s a thrum of festive cheer in the air, there’s no getting away from the reality that it’s been a tough year for most people. Fewer people are getting annual bonuses and most will have a six-week stretch between their December and January paydays.
Kenosi Magosha, Head of Client Solutions Savings at Sanlam Personal Finance, says that people need to work smartly with their money to avoid the financial ‘hangover’ in January.
Here Magosha provides advice on how to successfully juggle needs and wants against funds available by creating a behaviour spending plan. This plan consists of a budget, covering spending plans and income, and things you should be doing to avoid financial trouble traps:
Create a spending plan:
The goal is to avoid financial distress by not spending more money than what you have. Look at how much money you will have in total (e.g. salaries, bonus, stokvel pay-out) from November to January. Then list what you want to spend money on split into “needs” (e.g. rent, debt) and “wants” (e.g. big parties). Prioritize payment for “needs” items and automate payment using online-banking payment scheduling. Note the dates of payments for those you can’t automate.
Top spending plan tips:
- Pay yourself first by putting funds, including some bonus, towards your savings, retirement, children’s education and life insurance. Save part of bonus in a secured saving account for January expenses – e.g. school expenses.
- Pay for things in advance when possible and make the November salary stretch as far as possible into December. Aim not to touch December salary before normal payday unless if paying for things in advance.
- It’s never too early to shop for Back to School – capitalise of on back to school specials, already on by some retailers, to make your money go further and also while you have money.
Say no to debt
You may receive a number of offers to buy those “wants” on credit, only to experience financial distress in 2018. Debt is a stressful way to kick-start the year and it will slow your progress to financial freedom. Besides, you could end up paying more than you bargained should interest rates increase.
Let your stokvel work for you:
Use some of your cash pay-out for things on the “needs” lists like school uniforms or starting a small business and the rest to treat your family. Engage our grocery stokvel to buy usual grocery to reduce your grocery bill or to buy children’s school items in bulk.
Shop smart and don’t buy things that you don’t need:
Whether you shop online or at the mall, avoid overloading your cart with clutter or extra things you don’t need in your home.
When online shopping:
- Once you have filled your shopping cart, give yourself a 10-minutes time-out to reflect on what you really need before you check out.
- Don’t save your credit card details on the online shopping sites as this makes it easy to pay for things which you don’t need with just a click of a button.
- Choose other forms of payments e.g. EFT, which will also give you time to reflect on the purchase.
When going to the mall:
- Limit the number of times you go to the mall to avoid the temptation of seasonal sales and eating out too often. Go in armed with a shopping list, stick to it, and leave your credit card at home.
Avoid malls for grocery shopping
- Rather shop at grocery shops outside malls and early to avoid additional cost of eating out should you be going around lunch time.
Share and enjoy moderate feasts:
Challenge family and friends to a different type of giving this season through a bring-and-share approach at gatherings and avoid buffet style with endless options. This way, the cost of entertaining can be shared whilst enjoying time together. Also, manage the extended family demands to overspend, which usually come when visiting family over this season.
Plan early for 2018 and beyond:
Start your New Year with a meeting with your financial planner to get your money resolutions in order. When February 2018 rolls around, start putting aside small amounts each month to ensure that you have some fun in December and are able to smoothly navigate back-to-school demands in January.