Festive financial planning: Keeping your debt down this holiday

By: Nthabiseng Moloi, MiWay Insurance Head of Marketing & Brand

It has been a year of doom and gloom for the South African economy, with the rand in free fall, VAT increases impacting consumers across all income groups and petrol price hikes sending the cost of living sky high. As a result, consumers have turned to credit to fund their lifestyles, with financiers tracking a 20% increase in credit applications over the past year according to the latest Consumer Credit Market Report.

With Christmas bonuses in the offing and positive murmurs from the Treasury suggesting brighter times ahead, many may feel tempted to forego sensible saving habits in favour of festive splurging – a strategy that can have significant ramifications by the time the New Year is rung in.

As we enter what has been rightly dubbed the ‘silly season’, it is more important than ever before to exercise caution and to avoid the threat of debt, which can so easily accumulate during a month characterised by gifts and countless gatherings.

Before you throw caution to the wind and leave your financial worries for another day, here are a few savvy strategies to get you through the festive season unscathed:

1.     Prioritise paying back

While the prospect of an end-of-year bonus might have you ready to book that dream holiday or start ticking things off your Christmas wish list, it is important to remember that debt is your biggest expense and paying it off will free you up to spend more liberally in years to come. So rather than splurging on expensive gifts, rather use any additional funds to pay off credit cards, store accounts and home loans, which will help you to ease into the new year on a strong financial footing.

2.     Rework the plan

No matter which way you look at it, December is likely to be a costlier month than any of its predecessors, so rather than simply blowing the budget, consider reworking it instead to incorporate attainable financial goals. That way, you will not simply discard your budget and write it off as ‘December damage’, but rather work towards a slightly amended goal that incorporates some festive frivolity.

3.     Find ways to save

If you are heading away on holiday, expenses can accrue very quickly, especially without easy access to supermarkets and typical tourist trap prices in effect throughout the season. So rather than splurging unnecessarily, consider planning ahead, buying all non-perishable items in advance so as to bring down your bill. You will also find yourself saving considerable amounts simply by working on a cash-only system for the duration of your holiday. By drawing a set amount, rather than swiping at any given moment, you will be far better able to keep tabs on your spend and ensure you do not return home in the red.

4.     Only buy what you can afford

As the festive season ramps up into high gear, it is easy to succumb to the countless temptations available in every shop window. But while swiping now and dealing with the consequences later might seem like a sensible idea at the time, the reality is that you are going to have to pay for your purchase at some point, likely with a heap of interest attached. So before buying anything this holiday season, simply ask yourself whether you can really afford it and make your purchase decisions based solely on your answer.

5.     It is the thought that counts

South Africa is well known for its gifting culture and come the festive season, malls run amok with consumers in search of the perfect gifts for all their nearest and dearest. But rather than aiming to pack your stockings to the brim, why not opt for the simpler and more financially savvy ‘Secret Santa’ option, whereby everyone simply buys one gift for a designated family member. That way, everybody gets something and nobody needs to be out of pocket as a result.

6.     Consolidate expenses

The final month of the year is also a great time to start looking ahead and to apply changes you have experienced over the past 12 months to your 2019 budget. Perhaps you got married, purchased a new house or started a new job – all of these factors can have a pronounced effect on your financial wellbeing and can make you liable for lower insurance premiums, so make sure to check with your broker before penciling in your final budgets. 

With the financial outlook for 2019 looking decidedly rosier than that of its predecessor, now is the perfect time to get your own accounts in order and ensure that you start the New Year on a firm financial footing. By committing to your own financial wellbeing and planning accordingly, you will be far better placed to dial down the debt and start making your money work for you.