The festive season is almost in full swing and many of us are preparing to celebrate with friends and family. Although an enjoyable time of the year, there is always the potential risk of overspending as we seek to relax and spoil loved ones with expensive gifts, outings and fun experiences.
If finances are not managed effectively many of us could find ourselves with some very real and burdening financial challenges at the start of the year. Some of us may also be embarking on a holiday away from home and this can attract high, and sometimes unplanned costs.
For those who have planned and saved this is a great time to enjoy the rewards of hard work. However, those who have not planned sufficiently might find themselves spending haphazardly, and this could cause financial problems in the New Year.
“The result of overspending during the holiday season is typically a financially strained start to the year. December’s excesses become January’s problem, forcing consumers to play catch-up with their finances over the first few months of the New Year,” says Ghana Msibi, executive head of sales and marketing at Wesbank.
“Customers need to think twice before they splurge their savings, early salaries and bonuses. It’s vital that they take clear note of exactly how much money they have available to them and work out their budgets accordingly. This will allow them to enjoy the festive season while ensuring they have enough money to accommodate their regular expenses”, says Msibi.
Historical financial data shows that the first three months of the year often see an increase in the number of people applying for debt review. It is important for consumers to understand that while under debt review, they relinquish control of their finances and are effectively handed over to debt counsellors to ensure all payments are met – a situation that nobody wants to find themselves in.
WesBank recommends the following important tips aimed at assisting consumers to stay financially healthy this festive season and into the New Year:
Draw up a Christmas shopping list
Going into the stores blindly can often lead to impulse purchases and buying things that you and your family want but don’t need. Drawing up a shopping list and setting a budget will help you to focus on the things you really need and ensure that you spend within your means.
Don’t spend money you do not have
Many people anticipate an annual bonus and spend money on credit in advance – planning to repay their debts when their bonus is paid. This is very risky. Consumers should rather spend money they have in the bank and at their disposal. This is especially important in the current uncertain economic climate, where businesses may struggle to afford rewarding employees with bonuses.
Use your early December pay cheques for January expenses
With the festive downtime and annual holidays, businesses often pay employees earlier in December. This pay cheque is intended to be used for the January’s expenses. Some consumers however, may see this as an early windfall, and use it to finance their festive plans.
Don’t be tempted to reverse debit orders
As a result of poor planning and being cash strapped, consumers find themselves reversing debit orders in order to use the money for other commitments. This will only get consumers deeper into debt come January because it means being debited twice. This will not only put the consumer under pressure at the beginning of the year, but it will have a negative impact on their credit record due to missed payments.
Plan affordable trips
Spending time with the family should not be a daunting task that leaves consumers in deep debt. It should be fun and come with fond memories. Find reasonable places to accommodate the family, consider self-catering facilities to minimise the cost and come up with cost-free activities that everyone can enjoy.
Careful planning and responsible spending are far more rewarding than taking advantage of festive deals or using additional credit facilities to accommodate a way of life that isn’t affordable. Instead, save up for the year ahead and try to live a credit-light lifestyle – one where you only use credit facilities for the absolute necessities – one with enough money to pay your loans as well as spend on yourself and loved ones when needed.