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Personal investing

How not to break the bank this festive season

The end of 2019 is fast approaching and with many looking forward to downtime during the festive season, this shouldn’t mean breaking the bank, according to Lettie Mzwinila.

For many the festive season denotes fear as it means extra costs and going into debt to afford expenses such as presents, travel, holidays and celebrations. It pays to have a saving and spending plan specifically for the holiday period, especially as January is around the corner, which means increased costs in the form of education, if you have children, and higher medical aid premiums.

Reports indicate that if you belong to a medical aid, you can expect to pay up to 12% in increased contributions in 2020. A plan is particularly important considering the reality that many companies may not be able to pay their employees bonuses, or 13th cheques, due to a difficult economic year.

Pay increases, which many have come to rely on, are also not keeping up with inflation, according to the SA Reserve Bank’s recently released quarterly bulletin, which found that private sector workers experienced a pay increase of only 1% – an all-time low – in the first quarter of 2019, compared to the year before.

This means that living costs are rising faster than salaries, so everything is more expensive, and difficult to afford.

South Africans also recently took to social media to voice their woes when it comes to salaries and pay day with the hashtag #SalaryDepression, lamenting the fact that salaries are not paying enough to cover the rising cost of general monthly expenses, such as food and fuel.

Bear in mind that these feelings will be heightened come the start of the new year, as many may receive their final 2019 pay cheque early in December, with the next salary payment much later in the new month; in some cases this can be up to 45 days.

If you are worried that there may be too much month at the end of your money come January 2020, here are some tips on how to rein in spending during the festive season so that you can start the new year on a financial high.

1. Prepare with a plan

Put a realistic budget together that accounts for your holiday spending as well as the demands of January. Your budget may also include ways to cut down spending, e.g. using vouchers, looking out for specials on items you may need over the festive season, and group discounts on activities or entertainment.

Consider how much you can afford to spend on groceries, gifts and entertainment on top of your standard monthly outgoings and build in a bit of room for unexpected expenses. If you spend less than intended, you could consider saving the balance.

2. Look at your debt

While it may be easier said than done to not spend when there may be a burden of expectation on you, like expensive family traditions, buying everyone gifts, or paying for others’ holiday expenses, the question is, can you afford it? This is especially problematic if you are already in debt. If you are feeling family or peer pressure, it may be better to have a frank conversation by letting everyone know you can’t afford it. You may also be surprised at the reactions of your friends and family, especially if they are in a similar situation but were too scared to say anything.

If all else fails, recommend starting new family traditions that won’t see you digging into your pocket or maximising your credit card. Your January bank balance will thank you for it.

3. Consider your gift choices

The 13th Annual Holiday Shopping Survey from Accenture released in October 2019 says that there is a growing trend that consumers are moving away from buying physical items, in favour of ‘experience’ or ‘service’ gifts, such as travel, concerts, lawncare, home cleaning and spa treatments.

Taking this in a slightly different direction, consider opening an investment, such as a unit trust or tax-free investment account, on behalf of someone you love. Starting a unit trust or a tax-free investment can cost as little as R500 per month.

4. Invest in yourself

And if you are lucky enough to get a bonus or a substantial pay raise, consider starting a new investment for yourself, or making an additional contribution to an existing investment with a portion of this money, rather than spending it all during the holiday period. As always, it is a good idea to talk to an independent financial adviser for direction.

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