Plan before spending

2018-11-28 06:02
Consumers are encouraged to spend wisely this festive season.Photo: Supplied

Consumers are encouraged to spend wisely this festive season.Photo: Supplied

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“A plan helps you get a better idea of how much you can spend over the holiday period. You can also see how much you will need to keep for January – especially because there is a big gap between December and January paydays.”

This advice is given by Vera Nagtegaal, executive head of the insurance site Hippo.co.za, in a press release.

She believes consumers need to tighten their purse strings and have a plan in place to avoid financial pitfalls.

Simply making a list of wishes and financial commitments is not enough – consumers need to have a clear understanding of income versus expenses between December and January.

Nagtegaal says a 13th cheque or bonus – or both – should also be part of the financial planning for this period.

“The plan must be realistic; otherwise it is doomed to fail,” she says.

While budgeting is important, consumers must also keep a close eye on any spending using a credit card – especially if it is unplanned.

According to Nagtegaal, data of the National Credit Regulator shows that the value of credit granted tends to spike in the last three months of the year, and tapers off in the first quarter.

The types of debt that tend to increase in this period are unsecured credit agreements, credit card debt and short-term credit.

Nagtegaal says this trend is a cause for concern, and that consumers should avoid taking on any credit simply to cover unnecessary expenses such as Black Friday or festive season sales in December, as it will leave them worse off.

“Repaying debt incurred over the festive season becomes an added burden on one’s budget for the new year, so often the effect of low financial discipline might leave you paying for it well into the following year,” she says.

“It is important that you truthfully evaluate your financial position and your needs.”

Discipline is identified as the key to navigate the festive season and make it a lot less stressful.

“If funds allow, paying school fees, rent, and other fixed costs such as monthly debit orders in advance can ease pressure. It is also helpful to keep money to buy uniforms, stationery and other items that will be necessary at the beginning of the year.”

Having a savings account, such as a seven-day notice account or a stokvel arrangement, can also be a helpful tool to stow away money before it is spent on unnecessary items.

“Consumers who struggle when it comes to impulsive spending should develop a system of accountability with someone they view as financially responsible. This person can be the voice of reason by providing a second opinion on whether a desired purchase is classified as a ‘want’ or a ‘need’.”

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