December is sweeter if you’re expecting you a bonus and your social calendar is probably filling up. But read this before splurging on a new wardrobe or that phone that just launched.
The excitement around getting a bonus is valid – you’ve worked hard this year and deserve a reward. FNB Consumer Education Programme Manager Dhashni Naidoo notes that a bonus is a recognition of the hard work you put in throughout the year and a time for celebration. And if you’re wondering if there are responsible ways of spending these funds, she affirms that bonuses also provide us with an opportunity to achieve our financial goals.
“When we think about spending our money, we need to do so responsibly. The 80/20 principle is a good one to adopt. This is where you channel 80% of your bonus towards achieving financial goals, such as reducing debt or saving and investing, leaving 20% as a reward to yourself for those nice-to-have items.” What does this look like in practice? She offers some tips and advice on spending responsibly, which we’ve termed the Dezemba Survival Guide.
Reduce Debt
Make additional payments towards debt and try to reduce higher interest-bearing debt first. This helps you to save in the long run by freeing up cash you usually put towards debt repayments.
Save for emergencies
Put some of that money towards emergency savings. Aim to save the same as three months of your expenses in this account.
Invest for the future
Speak to a financial advisor about this. Higher interest rates mean the cost of borrowing is higher. But it also means you’ll earn more interest on savings and investments.
Interest earned on positive balances means you have the opportunity to earn additional income in the form of regular interest income. If you haven’t already started your investment journey, it’s a good time to start. Speak to an advisor or your bank, do your research and empower yourself with information
and knowledge about investing. Learn about the different types of investment vehicles and match your goal with an appropriate product.
FIRST-MONTH SURVIVAL
People refer to January as Janu-worry because it feels like the longest month of the year. Many South Africans receive their December pay cheque earlier in the month. Dhashni cautions that the knock-on effect of festive-season spending is usually felt in the new year. But she says you can avoid feeling the pinch with careful planning and budgeting.
“The trick is to put aside money to get you through January before the December spending spree starts. Be disciplined about not tapping into your January savings and resist the temptation to overspend in December. As this eats into January’s budget.” You can do this by:
• Reviewing your household budget and identifying where you can reduce costs usually related to luxuries such as entertainment, eating out and high-value drinks and food. You could also look at minimising your variable expenses.
• Getting creative in the kitchen and trying to reduce your grocery bill. It also helps to pack a lunch for work instead of eating out.
• The new year means new beginnings. You might want to look at getting rid of items you no longer use by selling them to earn extra income.
BUDGETING IN DEZEMBA
Dhashni affirms that it’s possible to budget in December by planning months in advance.
“Think about additional costs you’ll incur and work on a savings plan to help you save for those, as it’s critical to cater for those in a budget or spending plan.”
She enlightens that this entails making a list of the things you know you’ll spend money on and how much you think they’ll cost. “These might include travel if you’re visiting relatives, extra food for extra-special meals and people you’ll be catering for, festive gifts and family outings. Start planning now to see what’s possible.”
And if you find you need to cut back on luxuries and keep it simple, Dhashni’s advice is to “decide what you absolutely need and focus on that. If there are things in your budget that you want but aren’t necessary, think about cutting back.”
RESPONSIBLE GIFTING
• Agree on a spending limit with family that’s affordable for everyone.
• Secret Santa is a great way to limit costs while still enjoying the spirit of giving
• Recycle gifts and re-gift items you don’t use, especially if you know a family member or friend who’d love to receive them
• Shop sale items throughout the year. Make a list of the people you want to buy gifts for, wait for big sales, then put the presents away for Christmas. Reward yourself with the future in mind.
While you may be tempted to reward yourself for your hard work now, you can do that without compromising on financial rewards in the future.
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