Holiday spending regret: How to get your finances back on track
2020 is officially over! To compensate for what was a challenging year to say the least, many of us took to the holiday season like it was our last, leaving our finances floundering. Considering the pandemic and its economic knock-on effects are still likely to be with us for some time, the start of 2021 is a good time to come to terms with the holiday hangover and embrace a new year and a new financial you.
According to Momentum financial planner Janine Horn, the road to recovery off the back of a tough 2020 is going to be tough for South African households. The 2020 Momentum/Unisa Consumer Financial Vulnerability Index for the third quarter of 2020 revealed that consumer financial desperation levels were still very high as of September 20209. In fact, the Index shows that these were at their second lowest level since the Index’s inception in 2009.
“Regardless of your financial situation, if you went a little overboard with spending over the holidays, you can still get back on track! Being mindful of this and taking steps as soon as possible to course-correct is important.”
Horn shares her tips on how to get some momentum back on your journey to success with these financial staples:
BUDGET, BUDGET, BUDGET
According to Horn, budgeting is like the dieting of the financial world – everyone knows they need to do it but not everyone is willing to commit. “January is the month where most households tend to begin the budgeting process. With the current economic crunch, this is the year for all of us to get serious about our household budgets and truly commit as it is likely going to be a life raft for your household in the year to come.”
Horn’s advice is to follow these four simple step when planning your new year budget: 1) Determine your income; 2) Be hard on yourself and cut the fat of things you don’t need; 3) Put more money into paying back debt if possible; and most important of all 4) Keep doing your budget every month to track your spending.
TACKLE YOUR DEBT
When it comes to household finances, Horn says that debt is the enemy of success. In fact, according to the 2020 Momentum/Unisa Consumer Financial Vulnerability Index debt servicing vulnerability also declined as the index score increased to 40.8 points in Q3 2020 from 32.1 points in Q2 2020. This means that households have been more easily been able to pay off their debt thanks to lower interest rates and flexible payment plans.
“With the interest rates being what they are, now is the time to start paying off your debt. Whatever you can afford to put into those repayments, you should do it. The less debt you have in the future the less burdened you will be when the unfortunate happens and you are left financially compromised,” says Horn.
SAVE FOR A RAINY DAY
The rainy day may not be here for you now but as life has taught us, it is always around the corner. A broken down car, a bed bug infestation, a robbery – these are all things that nobody plans for and there are 100 000 other things that can go wrong when we least expect it. Many of these disasters come at a massive cost and not everything will be covered by insurance (if you even have insurance).
“Saving is difficult because too many people make themselves do it manually every month. If you treat saving like an expense, you can just set up automatic monthly transfers from your bank account so that at least 10% of your income is moved into a savings account. You won’t miss that money as much if you never see it in the first place,” advises Horn.
DON’T LOSE SIGHT OF YOUR DESTINATION
As we are all embarking on our personal journeys to success, Horn says it’s up to us to take responsibility. “This is your life and your life choices will affect the outcome. Discipline is the key to success. But beyond that, a good partner can help guide you when you have been led astray. While a trusted spouse or a loved one may give you solid money guidance, there is no substitute for impartial, professional financial advice, especially in such precarious times.”
DON’T LET THE NEXT HOLIDAY CATCH YOU UNPREPARED
It may seem far away or less of a priority right now as you start the New Year with immediate needs, but before we know it, it will Easter holidays and you want to be ready. Horn says it is a good time to start thinking about what you may want to do – whether it’s travel or lunch at home with friends, you need to budget for that. She advises to think about the costs attached to your plans and start a savings account sooner rather than later. “You don’t want to be back to square one in terms of your savings when the time arrives to be able to enjoy your holidays,” she concludes.