Avoid a Financial Hangover this Festive Season

Avoid a Financial Hangover this Festive Season

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The festive season isn’t called the silly season without reason. Many of us lose our sense of control over many things including our wallets and end up with a financial hangover in January.

Many people receive their December cheque half way through the month and will have spent it all before Christmas day. This means that they have nothing to carry them through until the end of January.

Some people wonder when their employers are going to pay that cheque into their account hoping it will be on, say, the 18th or 19th of December already. Does this imply that their November money is already finished?

If they use up their December money before Christmas what are they going to do until the end of January? Probably use their overdraft or credit card and spend the next 11 months paying that off just in time to repeat this exercise next December.

This scenario plays itself out year after year. So here are a few thoughts that may help you avoid the January hangover and still enjoy the festive season.

Making your cash last

Start by creating a simple festive season budget. This doesn’t have to be a complicated thing, a simple list on a sheet of paper, in a note book or the back of your diary will do.

 

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Your December income probably has to last until the end of January so make a list of all of the things that you need to pay for between now and then. This could include:

  • Your normal monthly expenses for December and January
  • Extra new-year expenses such as new school uniforms, sports equipment, stationery, deposits for school/university fees.

Once you have set this money aside you can now allocate money towards gifts and holiday.

Gifts:

Firstly determine the amount that you plan to spend on gifts.

Next identify the people you need to buy gifts for. List all of the people such as mom, dad, children, grandparents, brothers and sisters. Don’t forget other relatives and then work associates and colleagues, staff members and bosses. You may even want to include the hairdresser, teacher, the garbage collectors, gardener, maid, car guard and so on.

Next to each name write how much you would like to spend on each person.

Then think about what each person might like to receive as a gift. If you know them well enough you might ask them for a gift idea or wish list. As you buy the gifts, cross them off of the list and reduce the balance that you still have available for gifts.

You might want to buy gifts for the higher priority people in your life first (like your spouse) just in case you come across something that costs more than you originally budgeted for which means that someone else (like the garbage collector) might get bumped off of the list.

Holiday:

Figure out how much you want to spend on the festive season and then divide that amount by the number of days you are going to spend on holiday. That is the amount that you can spend each day.

You could keep a note book/pad in which you jot down your expenses each day deducting them from your total available cash. Another alternative is to use the simple envelope system where you draw your holiday budget out of your bank as cash and then divide that cash amongst an envelope (or plastic bank packet) for each day.

One benefit of this system is that it is really simple to keep track of your spending, another is that it helps you prevent overspending because you actually part with hard cash and you never spend more than you have – once the envelope is empty it is empty.

Each day you simply put that day’s bank packet into your pocket or purse and you can spend without guilt.  If you have ‘cheap’ day you can save that money for a more expensive day later on (or vice versa).

These are just a couple of suggested ways to control your cash this festive season. Find one that works for you so that you can have fun this festive season without guilt or a financial hangover.

Paul Leonard
Paul Leonard CFP® is an executive director of Consolidated Financial Planning. He runs the Eastern Cape region and is intimately involved in the Corporate Solutions division of the company. He has become well known throughout the Eastern Cape for his daily personal finance insert called MONEY TALK on Algoa FM, and was the national runner up of the Financial Planner of the Year awards in 2006. Visit www.consolidated.co.za for more information.