It may be hard to believe, but December is just around the corner.
If you’re always struggling to make ends meet during the festive season or if you are typically out of pocket come January, now is the perfect time to think about your expenses over the holiday.
Mellony Ramalho, African Bank’s group executive: sales, branch network, says we often don’t plan properly for the festive season, and end up overspending and having to take on unnecessary debt, which can be crippling as the new year’s financial responsibilities start knocking.
“If you are planning to see family and friends during December and want to take gifts, groceries and money, now is the time to start saving or possibly buying and putting items away.
"Remember, prices generally increase a month or so before December in anticipation of the festive season buying frenzy,” she says.
If you find that you’re always in the red in January and can’t afford things like school fees and groceries in the new year, here are some tips to ensure you get festive budgeting right:
Write it down: Make a list of the things you need to buy, or establish what money needs to be allocated towards purchases.
Then make sure you have a plan to save for that or start buying your presents now so you can spread the burden rather than cram the present obligations onto December’s bonus or salary.
Consider other options to cash: If you are good at repaying debt, you can consider other ways of paying for items.
“You can save and buy in December knowing that, while items may be slightly more expensive, you won’t be paying interest on them as would be the case if you had bought on credit.
Alternatively, you could look into a lay-bye option, a hire-purchase option or buying on credit,” says Ramalho.
Be careful of hire-purchase agreements: This is an arrangement where you buy goods by paying an initial deposit (for example, 40% of the total) and repay the rest over a period of time at an agreed interest rate.
“The upside is you get to take the item home straight away. The downside is that you will be paying interest on the amount still owing and if you don’t pay an instalment, the item will be repossessed,” warns Ramalho.
Deal with reputable lenders: “When you apply for credit, it is important to ask for a quotation or a pre-agreement that shows the different fees and costs that will be added to your agreement.
"Secondly, you need to make sure you deal with a reputable company that is registered with the National Credit Regulator, so you know that you’re being treated fairly,” says Ramalho.
Leave your credit card at home: If you’re bad at managing debt or tend to overspend, leave your credit card behind.
Compare prices: Alexander Forbes certified financial planner Rita Cool advises checking the prices of goods online before you go shopping.
“In the period leading up to Christmas and other holidays, there are usually a lot of specials available. If you know your prices, you will know if you are getting a good deal,” she says.
Be prepared: If you have a dedicated savings account for the festive season, make sure that you can access it.
“If you use a notice savings account, check that you’ll be able to get your money out in time. If you don’t give enough notice, you may be charged a penalty,” warns Cool.
Use your rewards: “You might have accumulated points or rewards on your credit or shop card through the year; use these points to buy gifts. Some programmes even give you more in value if you buy vouchers that you use at participating stores,” says Cool.
Whatever your plan is this Christmas, the key is to stick to it.
Ramalho says: “You will see the benefits when the festive season approaches. You can also start the new year off debt- and worry-free.”
YOU COULD ALWAYS CANCEL CHRISTMAS
Eight years ago, Martin Lewis, founder of British consumer champion website moneysavingexpert.com, penned a post asking: “Is it time to ban Xmas presents?” He encouraged his fan base to use an email system he’d set up on his website, which enabled them to send each other a Christmas pre-Nupp. Nupp stands for No Unnecessary Present Pact.
The idea is that you agree with your friends and relatives not to exchange gifts at Christmas.
“My targets aren’t the parcels from parents or grandparents that sit under the spruces, it’s more the ever widening circle of present-buying that people feel a need to fulfil,” says Lewis on his site.
He went on to argue that people have disconnected from the way in which they give gifts and that it creates an unfair obligation on the part of others.
“Generosity could actually be hurting the recipients, not helping. By giving a gift to someone, or their children, you create an obligation for them to do the same, whether they can afford to do so or not.
"If that obligation is something they will struggle to fulfil, you’re actually letting them down,” he explains.
Instead of being concerned about being the Christmas grinch, consumers sighed with relief.
One fan, Julia, tweeted: “@MartinSLewis, I finally took your advice and told my family I can’t afford Christmas presents. What a weight off my mind. Thank you.”
There’s no reason you can’t take on this thinking in South Africa, especially if you struggle to make ends meet in December and January.
Email or text your friends and family and ask them to agree to a pre-Nupp.
It means you won’t have to buy uncle Vuyo the usual socks and aunt Josephine won’t have to buy you another dodgy Christmas mug.
Agree to only get gifts for any closely related children if you don’t want to spoil the Christmas cheer entirely.
Christmas has become commercialised and it’s high time that we don’t fall for all the marketing hype and the nonsense practice of exchanging cheap gifts that put us in the financial red every year.
It will save you a lot of money in the process.