Budgeting for January – Make your rand go for longer

January for most households is a long, painful slog as the financial hangover from December starts to kick in.

A tradition of overspending and ingrained behavioural patterns conspire every year to tug at people’s purse strings over the December holidays – the reality is that for most of us, December has become a debt trap, the repercussions of which are felt long after the champagne corks have been popped.

This year specifically, South Africans should have greater pause for thought before they start (over) spending on Christmas gifts and holidays, given record petrol prices and skyrocketing food costs.

Sonja Visser, Chief Executive Officer of African Unity Life, cautions consumers to be careful with their bonuses and overall spending, as this current economic cycle will be brutal and unforgiving, possibly unlike any South Africans have experienced since 1994.

“Care should be taken with your finances over this period more so than in previous years, as it will also become exceedingly more difficult to play catch-up come January and beyond. Also, resist the temptation to make new debt to settle debt. This plunges people into a downward spiral that is very difficult to overcome,” says Visser.

Visser urges for common sense to prevail.

“We are not suggesting people not spend money over December, but rather to look at first spending on January essentials, like school fees and uniforms and putting away some cash for things like daily packed lunches and transport.”

Also, long-held wisdoms continue to apply: try to buy cash wherever possible; the price on an item if bought on terms is exponentially higher; search for bargains; make a list of needs versus wants and don’t feel compelled to shop just because ‘tis the season’.

“The pressure over the festive season to splurge is immense and while we may fill our stockings with shiny new items for all to see, for many the struggle of the new year is a quiet, painful and cashless one,” says Visser.

“The temptation over this period is to also cut back on crucial safety nets like insurance. Ask yourself why you got the insurance in the first place: for ease of mind for any unfortunate eventualities.”

Overall, South Africa’s economic outlook for the foreseeable future is grim and our attitude and approach to our finances should reflect this.

In commenting on the multiple fuel price increases and its overall impact on South Africans, Stats SA painted a bleak scenario:

“Indirectly, all consumers will be affected as the other goods and services they purchase increase in price to reflect the underlying increase in production costs.

“The pain is set to continue. The government’s capping of fuel price rises in September to give road users some reprieve was a once-off initiative. Energy Minister Jeff Radebe recently warned that prices would most likely continue to climb. With our wallets feeling much lighter, we wait with bated breath.”

Visser encourages people to cultivate a proactive attitude toward their finances ahead of the holidays and to focus their spending on essentials for January first.

“We must weigh up what is important to us in the longer term. Our lives cannot be committed to solely paying off debt but has to be one where we have financial freedom as we chose to adopt a different money mindset,” Visser concludes.