Christmas is just around the corner – Aim for a financially sound Christmas and a Happy New Year

The writer

Why does January feel like 60 days? The joy and euphoria of the Yuletide coupled with the need to impress family and friends more often than not lead many people on the path of overspending during the period. They end up broke in January.

Overspending during the holidays is a common habit that is difficult to drop. However, with careful planning and financial discipline, you can achieve a balance between an enjoyable Christmas and a sufficient budget to get through the month of January. Here are some tips:

Avoid Last-Minute Spending

One of the biggest mistakes people make during Christmas is buying things at the last minute. It is common to see heavy traffic at shopping centres, malls and even the streets due to the last-minute Christmas shopping. Unfortunately, this approach doesn’t give enough time to compare and get the best deals or prices. It pushes us to buy on impulse, especially when we don’t have enough time. Waiting until the last minute for holiday shopping can be costly. In our rush to try to find a decent present for family and friends in nearly empty aisles of a store, we may end up spending way too much on an item. It can end up feeling poorly thought through   because our buying options are limited.  Shopping ahead helps us avoid these errors. November maybe a good time to shop perhaps with a good number of outlets offering discounts.

Make a Spending List/Plan

To avoid impulse buying during the holidays, get a spending plan and a shopping list. Make a list of the items you want or need to buy and how much you can specifically afford for gifts. Determine your spending budget beyond gifts. When you put together a budget and a plan for your Christmas spending, you realize what you can get and what you cannot get. A great quote on budgeting goes, “A budget is telling your money where to go instead of wondering where it went”. Ensure that your spending plan and budget are comprehensive, by considering other expenses beyond gifts and household purchases. This means planning for outings, events, concerts, hosting of guests, donations and any other activities you may engage in. A budget tells us what we can’t get but it doesn’t keep us from buying it anyway, so by all means have a budget however be disciplined as well.

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Do Not Spend to Impress

Christmas is a time to show love and appreciation to friends, family and people who have been helpful to us throughout the year.  It is important to keep in mind that the expression of love and appreciation is not measured by the cost of the gifts we give, but the thoughtfulness behind them. It may be a wonderful idea to purchase a gift for everyone in your life, however it is impractical and expensive. Before making your holiday list, consider other methods of expressing your appreciation such as acts of service, thoughtful messages, calls and home visits for the people in your life. Remember the simpler the better.  

Be Careful of Credit Purchases

It is tempting to overspend when you do not feel the immediate impact on your finances. Spending with your credit card or making purchases with credit payment plans often lead people to unknowingly dig a deeper hole in their finances than they realize.  You might think you can simply pay it off later, and while that is an option, it’s never easy to dig yourself out of a financial hole once you’ve created one. You end up paying off debt long after the holiday season and negatively affecting the following year’s finances. If you plan to use a credit card during the holiday season, ensure that the limit on the card is in line with your budget to avoid the temptation to overspend. Alternatively, stick to outright payments and ensure that the funds at your disposal do not exceed your budget. Creating a budget is the easy part, sticking to it takes discipline and thinking about the future.

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Plan Beyond the Holiday Season

Some employers pay salaries earlier than usual in the month of December, including other benefits such as the thirteenth month salary. This practice often creates the illusion of having excess money to spend during the holidays, hence the temptation to overspend without realizing that the next paycheck is farther than usual. Now we know why most people perceive the 31-day month of January to be a never-ending month. To make sure that January feels the same as any other month, plan to pay yourself a salary for January as part of your budget for December. This salary should cover your usual monthly expenses. For major expenses such as kids’ school fees and rent payments, save specifically towards them throughout the year as it will be difficult to cover them fully within your December budget.

You can prudently start saving in a steady and consistent manner by making regular contributions over the course of the year. The ideal way to effectively plan for your expenses is to invest a portion of your monthly or periodic income in a money market fund which is structured to protect your capital whilst generating decent returns and providing access to your funds when needed. This way, you would have adequately prepared to afford gifts for your loved ones, enjoy the holiday season and cover your major expenses whilst living comfortably all year round.

And after you’ve done all the above make sure you stay safe during the yuletide. Observe all COVID protocols and stay healthy!

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By Miriam Maku Amissah

The writer is the Head of Sales at Stanbic Investment Management Services (SIMS)