With the holiday season here, we can all be tempted to overspend on travelling, entertainment, luxury gifts for our loved ones and indulging in non-essential goods.
The festive season is about spending time and celebrating with friends and family. The best thing you can do is spend within your means and not spend a cent you didn’t budget for.
Financial wellness has more to do with effective budgeting than people think. Once you understand that money is a tool for reaching your financial aspirations in life, you will start thinking about money differently.
You will start realising that money is not to be wasted and each purchasing decision needs to be done cautiously and accounted for.
Financial wellness starts with recognising your bad spending habits and replacing those bad habits with good spending or savings habits.
Instead of encouraging a friend or family member to pay for everyone’s meal at a restaurant when travelling, you can split the bill evenly between everyone.
Speaking to family or friends about money is still a sensitive topic. However, in our financial education programmes at Momentum Metropolitan, we have included this topic in our flagship programme Motheo Financial Dialogues.
Our independent monitoring and evaluation service provider have reported that this topic addresses much-needed psychological aspects of spending and saving.
Once a married couple places all their ‘cards’ on the table, detailing their income and expenses in a household budget, the relationship becomes stronger and reaching the family’s financial goal becomes easier.
Managing your finances starts with tracking your spending and aiming to save three to six months’ worth of expenses.
Some tips to help you get through the holiday season and beyond by making budgeting a habit and sticking to it despite all the temptations and peer pressure:
Make a list of what you earn versus what you spend.
The best way to make it easier to budget is to write down or keep an excel spreadsheet of your expenses for the month before you start to budget or you can use the WeThinkCode budgeting app to help you manage your expenses.
Split your income up using the 70/20/10 principle 70% of your net income is allocated towards living expenses like accommodation, transportation, electricity, food, clothing, school fees, and maintenance 20% of your net income is allocated towards saving and investing in yourself.
And 10% of your budget can go towards charity or helping your family members who are in need.
Settle debt with the highest interest first, like a credit card, home loan, or vehicle finance, while still paying toward your other smaller debts.
Don’t buy luxury items with credit. Save towards them and pay cash.
Calculate how many months it will take you to purchase the item at an affordable amount per month, place it in your budget and mark it as a short-term or long-term goal.
With each life event – marriage, divorce, purchasing a vehicle or finding a hobby that assists you to relax and find yourself – is a need to change the way you structure your budget.
If you cannot afford to pay your full instalment, contact the financial services provider and propose arrangements to pay less until you can afford to pay more. Rather than not paying anything, as this causes your credit record to be negatively impacted.
Go through your bank statements in detail as this will help you to do a monthly assessment of how well the budget was followed and compare between budget vs actual spending.
On payday, determine what you need to spend your money on. Do not overspend when you go to the grocery store. For example, purchase only the items you need in your household and pay all your bills on time.
If you find that your spending behaviour worsens during certain times of the month, or when you are emotionally drained, find healthier ways to boost your morale.
Budgeting might look like laborious work at first, but in the long run, it will secure you the financial wellness needed to acquire wealth and give you peace of mind. It is advisable to create an effective budget to manage your finances and track where you overspend money and stay out of debt.
• Supplied by Momentum Metropolitan
