How to be wise with your spending

Photo: Getty Images/Gallo Images
Photo: Getty Images/Gallo Images

If you're one of the lucky ones who  scooped a bonus payout this year,  use it wisely.

This is what financial  advisers recommend as they stress  the need for consumers to rid  themselves of debt.  But it’s easier said than done  when your salary is barely enough  to cover the essentials. 

Thobeka Gxowa (39), a cleaner at  a private hospital, earns R3 500 a month.  The mother of three pockets a bonus, but  her windfall will go straight to paying her  immediate debt so that she can get more  credit in the new year. 

“I earn peanuts and incurred too much  debt at the end of the year,” she says.  “When everyone celebrates, I’m forced to  settle outstanding debt and I’m left with  nothing.” 

Her extra income will be gone so fast  that Christmas and New Year will be  covered by the cash and groceries she  receives from stokvels.  And as she starts budgeting for school  stationery, she fears she’ll have to get new  loans before the end of January.   

It’s all too easy to overspend during the  festive season, cautions Eunice Sibiya,  First National Bank’s Head of Consumer  Education.

We asked Eunice and other  experts for advice on how to handle your  year-end finances. 

DON’T GET CARRIED AWAY  A break from work is the perfect time for  fun and spending money with family and  friends.“But look after your money first,”  Eunice advises. “Avoid spending more  time at shopping malls, buying expensive  gifts and spending money you don’t have. 

Plan before you’re paid early in December.  “The biggest mistake we make when it  comes is to go shopping with family  members and friends. Shop alone and  have a shopping list to ensure you’re less  distracted and don’t overspend.”     

SHOP SMART  Bruce Fleming of the Financial Planning  Institute. suggests starting to shop for  presents earlier in the year, to spread the  expenses over several paycheques. 

He points out that by shopping out of  season you’re also sure to find better  deals  which will save you money, instead of  paying high prices at the end of the year. 

“Resist the temptation to buy on credit  and hire-purchase agreements because  this could add to your debt hangover,”  Bruce cautions. 

Eunice also suggests that the adults in  the family may agree to forego buying  gifts for each other. 

SETTLE DEBT 

Mary notes that it’s important to pay off  short-term loans first because they attract  high interest.  “It does not make sense to invest, for  example, for an annual 10 % interest,  instead of paying off loans with 22 % or  more interest,” Mary says. 

“First pay off the most expensive debt,  like personal loans or credit card debt.”  advises Bruce. 

THINK LONG-TERM  Eunice says, “When your monthly salary  and bonus are deposited, pay January  bills that are due immediately. Take out  extra cash from your savings account and  pay your bond [or your rent] so you’re not    tempted to overspend at sales specials.” 

Mary Fourie, Chief Operations Officer  at Kanan Wealth, recommends looking  at an even bigger picture  than that. She advises  workers like Thobeka to  save 40 % of their bonuses  in long-term investments,  such as retirement annuities,  and use the rest to settle  any outstanding  debt. 

Saving money for a rainy  day should always be a priority, according  to Bruce.

Even if you have a lot of debt to    settle, “consider putting 15 % of your  bonus into your retirement annuity to  bolster retirement savings,”  he suggests. 

So before you rush out  to the shopping centre to  splurge on things you don’t  need, take a moment to  think about lessening your  financial load in the new  year with any extra cash  you earn or receive this holiday.