We all know that familiar urge to rush to malls during the festive season for some shopping. This often leads to financial regrets in January – when you suddenly realise that you’ve buried yourself in debt and there’s added pressure of making ends meet come month end.
Insurance company 1life sums up six ways you can use as part of your financial preparation for December.
Don’t borrow money for presents
When you use credit you’re basically borrowing from your future income. While swiping your credit card may seem like the best way to pay for goods, you could end up paying almost double the cost in interest.
Cash is king
Pay for everything you buy with cash as much as possible. This will make you aware of how much you’re actually spending. People have an emotional attachment to cash and generally find it more difficult to part with it than simply swiping a debit or credit card.
Use the envelope system
Set aside a certain amount of cash in an envelope for each category/person you need to buy for. Make sure that you keep your receipts in that same envelope so that you can track your purchases. Having the receipts may also come in handy if you need to return or exchange anything.
Avoid impulse buying
You can avoid this by making a detailed list before you start shopping. Keep this list with you so you can only buy what’s necessary and don’t go over budget. Also, do some research by comparing the price of the goods you want so you can have an idea of how much you’ll need.
Calculate what your January expenses will be
If you receive your salary earlier in December and, if you are lucky enough, a bonus as well, don’t be under the illusion that you have a large bank balance. Take into account that you’ll still have to make it through January. Set aside money for groceries, school fees, stationery, uniforms and regular monthly expenses. If it helps, transfer this cash to a separate bank account.
Think about long-term debt reduction
Did you know that you could drastically reduce the term of your bond simply by paying your annual bonus into your bond account every year. You could use your bonus to contribute to this or split the amount and boost your retirement savings. It will take some serious self-discipline – think of it as a long-term festive gift to yourself and your loved ones.
This festive season, keep your finances top of mind to avoid the stress you’ll put yourself and family in 2015. If you start making small financial changes now, you’ll reap the benefits of true financial freedom. Budget correctly, save for the future and learn about how money can positively affect your life if you understand how to use it effectively.
