Christmas – with its family commitments, parties and gifts – is a budgeting nightmare. Maya Fisher-French gets tips from our #MoneyMakeover advisers
Our contestants are all fired up about turning their finances around, but first they have to get through the festive season. In South Africa, we see a surge in loans in the middle of January because December’s pay cheque has run out. So what tips do our Momentum financial advisers have on how to stay clear of debt and maximise any bonuses or 13th cheques? Create a holiday budget
All the candidates wrote up budgets to understand the extra costs they will be incurring this holiday. As most of them have already found extra money due to financial discipline over the past two months, they have realised that their festive season expenses – often involving unnecessary spending – can be paid for from their income without drawing down on savings or taking on debt.
They would rather focus on reaching their financial goals than going big this year, and most have decided that there is no money in the budget for gifts, and they would rather focus on travel and entertainment.
Tumelo’s budget factored in higher fuel costs because she will be travelling long distances to visit family.
“She is keeping her spending as low as possible so that she can continue to reduce her credit card debt,” says financial adviser Mduduzi Mpusula.
Charles has decided not to travel back to his family home this year, but has made provision for entertainment.
“They plan to host their friends for a braai lunch and funds are already provisioned for, which will use Charles’ transport money. From the R1 400 monthly petrol bill, going to work in the first week of December will cost him R350 and so the surplus of R1 050 will be used for lunch,” says financial adviser Khomotjo Ramoloto.
Dipolelo has a fairly large festive season budget, which includes transport, gifts and family entertainment. He plans to spend R600 on a bicycle for his son and he will have to spend an additional R600 for his sisters to travel to spend the holidays with him and his family. On December 26, he has planned a family trip to Pretoria Zoo with his sisters and family, which will cost him R800. He’ll also spend R1 000 on family braais.
“Since his sisters will be with him, I would like to think he will want to shower them and his fiancée with gifts. However, he made a provision for R3 000 as extra spending and is determined to stick to it this festive season,” says adviser Moshiase Okeke.
“[Candidates] said that thanks to the Money Makeover competition, they are more aware about overspending. I suspect that they will end up buying some gifts, but we will be able to see in January whether it had an effect on their finances,” says Frank Magwegwe, head of Momentum personal adviser services at Momentum Retail. Tip
It is good to have a festive season budget, but you need to stick to it. When you go shopping, take a list and leave the credit and store cards behind. Draw just enough cash to cover your planned expenses.
DEZEMBA Prepare for January
Although receiving a pay cheque on December 15 feels like a windfall, the reality is that it has to last for 40 days. Remember that there are also many additional expenses in January and you need to ensure that you have money set aside for January’s bills. If you can, pay your monthly bills early.
Dipolelo has several commitments in January and will not be receiving a 13th cheque, so he needs to plan carefully. Most years he needs to buy a school uniform, bag and shoes for his son, but fortunately this year these are still intact.
He will need to pay for school books, stationery and school fees, but he has planned for these and will continue to pay school fees from his monthly budget.
An expense that will cause some strain is his registration fee for his master’s degree in town planning. His employer’s bursary will reimburse him, but only in March – he needs to secure his place in January.
This money will come from his additional work over the next three months and, once he is reimbursed, he can again fast-track his furniture account repayment. Tip
Give gifts that help ease a burden. As a child, we always got a Christmas stocking from “Father Christmas” and it was filled with all the things we would need for school, like stationery, school shoes and a school bag. Also ask family members to rather give practical gifts such as clothes to your children, which will take the burden off you. How to use the extra money
Most of the candidates will be receiving their bonuses in April.
Izimangaliso is the only one who will be receiving a 13th cheque. A portion will be used to pay for her daughter’s school fees, books, stationery and uniforms. The rest will be paid into a 12-month fixed deposit account to help build up her emergency fund.
The problem with only using your bonus or 13th cheque to settle debt is that you never use it to start building wealth, and your bonus simply becomes a way to continuously fund your lifestyle. Tip
Use some of your bonus to start an emergency fund or boost your investments, not just to pay off debt.