The best time to plan your personal finance for 2020 is now

2019-12-24 11:12

Don’t wait for the New Year. Draft a budget now for the festive season, writes Mapalo Makhu.

With the year coming to an end, a lot of us are feeling fatigued and cannot wait for the holidays. We want to kick off our shoes, relax and spend time with our loved ones. I am, however, reminded of what Warren Buffett said: “Someone is sitting under the shade because someone planted a tree a long time ago.”

We always wait for the new year to set new goals or pursue the things we want.

But instead of waiting for the new year to get your finances in order, the best time to start planning is now. Before the holiday season is in full swing, reflect on the year that was and make plans for the coming year.

If you fail to plan, you plan to fail.


1. Set a budget for the festive season: If ever there was a month when people waste money, it has to be December; we always seem to underestimate just how much we spend over the festive season. There are a lot of lifestyle expenses over the holidays.

If you have children, you will probably seek out fun activities to keep them busy and there is a lot of entertaining as well. Having family and friends over can be financially demanding.

The best way to avoid overspending is to create a budget now, specifically for the holiday season. Allocate a fixed amount for all the entertainment, eating out and gifts. If you can, transfer the funds into a different account from your normal day-to-day account, do so. Or, if you want to take it a step further, you can use the envelope method to budget for holiday expenditure. Using the envelope method, you will draw cash for your entertainment budget and put the money in an envelope. Every week you spend what you have budgeted for in that week until you deplete the funds. This ensures that you stick to your budget and you do not end up spending money you will need for your debit orders come January. Again, by planning ahead, you decrease the chances of starting off the New Year with a financial hangover.

2. Increase your income or lower your expenses: It dawned on me that there are only two ways in which people can achieve their financial goals, either they cut down on their expenses or increase their income. For example, in a discussion I had with a group of women about money, one said her “side hustle” was to sell cakes so she could afford weekend getaways and also get her nails done. She realised that her grooming and trips would put her budget under strain and looked at another way to earn extra income for the things she wanted.

If you want to pay off debt, build your emergency fund or increase your investments, ask yourself how you will achieve this; are you going to increase your income or will you cut back on what you want from your budget?

3. Create a will: A will seems to be a document that most people think of last when it comes to planning their finances. I cannot stress enough the importance of a will. Death is inevitable and its consequences don’t just affect you, so it’s best to plan effectively for those around you.

If you can start planning your finances now, even if things don’t go 100% as planned, as they often don’t, you will still have a financial road map to keep you on track and remind yourself of your goals.

A will is a document in which you state how your assets should be distributed once you die. Not only that, if you are a parent to minor children, a will gives you the opportunity to appoint a guardian for your kids, someone you trust and know will do a decent job at raising them.

Drafting a will does not need to be an expensive exercise especially if your estate is not complex. You can make a will with a bank or with an attorney. Although you can DIY, you will have to dot the i’s and cross the t’s to ensure that your will is valid.

4. Commit to paying yourself first: The quickest way to reach short-term and long-term financial goals is to cultivate the habit of paying yourself first. Paying yourself first is saying that you will live with whatever is left after you save or invest.

It is committing either a percentage or fixed amount of your earnings to go towards your savings or investments. Having access to money is powerful. I am not talking about the costly banks’ money where you pay interest. I am talking about knowing that you have funds in your savings and investments for when you need it or being able to seize an opportunity when it arises without worrying about where to get funding.

Read: Invest your bonus or pay off debt? How to get financially ready for 2020

Think about it, if you work for an employer, the taxman pays himself first through taxes and yet we fail to commit to pay ourselves first by saving and investing what we earn.

People often wait for the big paycheque to start saving or investing, but if you have not built good money habits from when you earned a little, there is a big chance that you will not be that great at handling more money.

5. Check your credit score: Checking your credit score is one of the easiest and quickest ways to assess your financial situation, and it is free.

Your credit score is your history of financial behaviour. It tells lenders whether you pay your financial obligations consistently or not.

Having a healthy credit score works to your advantage because you can borrow money at a lower interest rate, making the loan less expensive.

You are entitled to one free credit score a year from any of the following credit bureaus:

TransUnion; Experian; Compuscan; CPB (Consumer Profile Bureau); VeriCred; and XDS (Xpert Decision Systems).

If you fail to plan, you plan to fail.

This rings true to our finances as well. If you can start planning your finances now, even if things don’t go 100% as planned, as they often don’t, you will still have a financial road map to keep you on track and remind yourself of your goals.

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