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6 December 2013
There are ways to protect your finances this December, so that January doesn’t feel like the month that never ends. Follow these handy tips to enjoy the festive season sensibly:
Drawing up a budget to determine what you can spend on entertainment, presents and other items is the first step. Stick to this if you want to remain in control of your finances.
Make sure you understand how much money you really have to spend this holiday season. Have your bank statements at hand and be honest about what you'll have left after your regular monthly expenses. And don't cheat by including how much you expect to get from a 13th cheque or annual bonus – if you are lucky enough to get a bonus, see it as just that, not a guaranteed way to get through the month.
Make a list of all your expected expenses – accommodation, entertainment, gifts, extra fuel - this holiday and make sure you know where the money for all of this will come from. If there's a shortfall, decide where you will have to scale back.
Data indicates that the biggest killer over the festive season is the flagrant use of credit. Every January applications for two products in particular – debt management and debt consolidation options dramatically increase. This indicates that local consumers are relying on plastic to get through the festive season, particularly when it comes to buying gifts.
In the run-up to Christmas, also be wary of deals that entice you to buy on credit. Don't get distracted by "no deposit" deals as these can often end up costing you far more in interest repayments over the longer term.
It may make you feel better for a short while to splash out on feel-good gifts for your family, but remember that you'll be left with a high price to pay at the end of it. If you fail to keep up with your repayments, you could lose your most valuable assets, including your home and car.
When buying gifts, keep to your spending limits with the “envelope strategy”. Decide with your partner and family members how much you will spend on specific budget items (like gifts and entertainment). Draw that money in cash and put the exact amount into sealed envelopes. No plastic, no extra cash, just the maximum amount you are prepared to spend. This should go a long way to ensuring you stick to the budget. When you go shopping for presents, go with nothing more than the envelopes.
A convenient side-effect of creating a ceiling on how much you are prepared to spend is that you'll suddenly find it easier to shop for your gifts – you can't be tempted into spending more than you bargained for and so your options become limited.
Giving gift vouchers will also allow you to stick to your budget – or donate a specific amount to a good cause on behalf of your loved one. The online donations site Greater Good SA (www.myggsa.co.za) makes this very easy.
Some families opt for only giving gifts to kids – or a "secret Santa" strategy, where adults only receive and give one gift, to save money.
Avoid presents that may waste your money. Do your homework carefully to find out what the receiver really wants – otherwise your gift will end up at the back of a cupboard or being regifted to someone else. If you are only seeing friends or family after Christmas, buy presents on sale in January. When it comes to gifts for your children, make sure everyone understands what the budget is.
Overspending in December wouldn't be that much of an issue if January wasn't such an expensive month. Consumers often forget that they still have to pay household accounts such as lights and water in the next year and will need to pay for other costs such as uniforms and school fees.
Start setting money aside for all the additional start-of-the-year expenses early in the previous year.
Food prices at holiday destinations can be expensive and the price of meat usually shoots up during December. Try to plan your menus before you go on holiday, taking potentially expensive non-perishable items and frozen meat with you.
Car trouble over December will wreck your budget. Service your car before you go on holiday.
Also, given the alarming road accident rate in SA, it may be wise to consider taking out accident cover, which will pay out for costs not covered by your medical scheme and may cover a number of expenses in case of an accident.
This kind of cover is relatively cheap and no medical underwriting is required.
If you have a problem with debt, don't put off dealing with it until the New Year, when there's a rush of crisis-stricken people on creditors.
Speak to your bank and try to negotiate a repayment schedule or talk to a debt counsellor and see if they can help you.
The best way to ensure that you won't overspend in the festive season is by saving for it. Use a monthly debit order to put away an amount to use for end-of-the-year expenses.
Or start a stokvel with friends – peer pressure can be more effective than self-discipline. Every month each member contributes an amount, which is shared at the end of the year.
Booking and paying your holiday early in the year will also be cheaper and stock up on Christmas gifts throughout the year at sales.