Don’t splurge cash you don’t have

Cindy Preller

AFTER the gifts have been opened and the suntans fade, the reality of festive season overspending hits our wallets inabout mid-January, but experts advise that these penniless days can be avoided if budgets are planned – whether or not you earn a 13th cheque.

Consolidated Financial Planning articled planner Tiaan Herselman said for those not lucky enough to receive a bonus at this time of the year, it was even harder to avoid increasing short-term debt due to December expenses normally being higher than take-home pay.

“It is sometimes difficult not to get caught up in the spending habit over December. The secret to success in any month is to have a good budget. By keeping a budget throughout the year, it will ensure that you spend less when you need to and have money saved for months like December,” Herselman said.

Tackling the mountain of accumulated short-term debt, especially once January hits, is to start off by paying the smallest monthly premium first, and once this is paid off, to snowball this newly freed-up cash flow into the next debt repayment.

Herselman advises those who earn a 13th or even 14th cheque to first pay debit orders and essential lifestyle expenses like groceries, insurance and petrol. “Most importantly, cut the tablecloth to fit the table. If you have R1000 surplus, do not spend R1500 on Christmas gifts.” Christiaan Ras, also an articled planner at Consolidated Financial Planning, said the payment of salaries earlier than usual in December unfortunately also fuelled poor spending habits.

“Treat December like any other month in terms of your spending habits. Rather put the money into your bond if you feel you are going to spend it, or put it somewhere where it is not as easily accessible.” The Unlimited financial services provider chief executive Steph Bester suggests a “savvy blend of saving, spending and splurging” in the holidays.

He also advises budgeting before spending any bonus money, then paying off debts, settling school fees and planning for emergencies and grudge purchases, like replacing car tyres.

“Your home is probably your single largest investment, so it’s worth using your bonus to enhance its value by spending money on maintenance or upgrades. Alternatively, save on the costs of your home loan in the long term by investing some of your windfall into your bond. If you haven’t yet bought a property, put your bonus towards the deposit,” Bester said.

Instead of shopping early for Christmas, try saving early, Imara Asset Management managing director Lara Warburton said. “Starting to save early is often a New Year’s resolution, but why wait? The opportunity to cut waste comes before Christmas, not after.

“Make a collective family decision that the festive season should be about family, not debt. Speak to the people you give gifts to and agree to avoid extravagance. Hide the credit card and store cards and use cash for Christmas purchases,” she said.

FNB Investment Products strategic growth head Aneesa Razack said the trick to enjoying your bonus in December and not ending up penniless in January was balance.

“We need to learn how to have fun with the money we actually have available to spend. Don’t be afraid to ask your guests to contribute towards expenses – it’s easy for them to bring along an occasional salad or drinks, which will ease your financial responsibilities,” she said.

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