Cape Town - Taking a break and enjoying in the sun with friends and family over the festive season is often the best way to end a year.
It is an unfortunate fact though that many may use debt to finance that week or two, only to face reality in the New Year. The choice may seem simple at the time, but it can have long-term consequences, says Nolene Parboo, Senior Manager: Savings and Investments at Standard Bank, outlining the ‘don’ts’ of using savings over the festive period.
“Having a savings plan is important. Deciding on the course you want to follow is simple if you look at the reasons why you should save, while at the same time looking at the reasons why you should not spend all your savings on the short-lived benefits of an unplanned holiday or shopping spree.”
Some of the reasons for not starting the New Year with a savings plan says Mrs Parboo, include:
Being honest enough with yourself to admit that there is no such thing as a normal month:
Most people spend the first few weeks of a new calendar year trying to work out just where their annual bonus, salary for November and December and savings went. They then promise themselves that they begin saving again ‘things return to normal’. The thing is, they never return to normal and savings just don’t happen.
Having to live through a cash-strapped January when even making normal payments puts a strain on the household:
Bond payments, car payments, electricity bills and other bills don’t take holidays. Having no savings generally means that January is a tough month and the financial pressure continues well into February. Stress mounts because there are no ‘rainy day’ savings available to cover expenses.
People tend to forget about the once-off annual payments that normally become due in January:
It is easy to forget that some expenses have to be met early every year. Examples of this are school uniforms, books and school fees.
Finding out that the ‘impulse purchase’ you made in December with your savings is now cheaper than it was in December when you bought it:
Most retail outlets in malls go ‘on sale’ in January so retailers can clear out the stocks they didn’t sell in December. It’s hard to find out in January that you have unnecessarily spent your savings on something that is now a lot cheaper. On top of it all, because expenses mount up in January, you will have little chance of ever replacing the money you have spent.
Finding that the lack of ‘rainy day savings’ has left you facing a financial storm:
Life happens. So do unexpected medical expenses that fall outside medical aid limits, car repairs, house repairs and electrical and plumbing emergencies. Not having saved for a rainy day can result in these unexpected expenses creating a financial storm in the New Year.
“All of this may sound depressing. However, you can enjoy a good holiday and keep your savings intact if you do a little budgeting and stick to it,” says Mrs Parboo.
Some of the easy steps you can take to ensure a happy 2016 include:
1. Doing a reconciliation of what you spent (and overspent) during the festive season:
Once you know what your expenses were, divide them by the number of months available before the next festive season and put aside money to cover these expenses every month. Alternatively, spend a set amount every month and begin buying presents early. You will be able to stretch your budget by taking advantage of the January, April, end of summer, winter and spring sales.
2. Making small adjustments to your discretionary spending and accumulating additional holiday and gift money in a really painless way:
Think about expenses on a monthly and yearly, instead of daily, basis. For instance, sacrificing two cappuccinos a day at work means a saving of about R30 per day. That’s R150 a week; R600 a month or R6 000 in a 50-week working year. Add in a packed lunch instead of buying food at a canteen and the savings become more significant.
3. Decide how you are going to pay for purchases:
Using a credit card for purchases rather than a debit card, and paying the amount owing in full each month, means you get 55 days of free credit and don’t have to pay a transaction fee as you would if you drew cash or used a debit card.
4. Check out the benefits offered by loyalty schemes:
You can stretch your budget and increase your savings by optimising the use of loyalty programmes. The points you accumulate can be used to reduce travel and holiday costs, or to buy presents for the family.
“Budgeting need not be a painful process. Just making a note of where you spend money every month will show you exactly where you are spending unnecessarily. Cut these items out and you will have year in which you still go on holiday, but keep your savings, and finances, intact,” concludes Mrs Parboo.
IOL, adapted from a press release.