Make budgeting a priority this festive season

With the holiday season upon us, we can all be tempted to overspend on traveling, entertainment, luxury gifts for our loved ones and indulging in non-essential goods. Festive season is about spending time and celebrating with friends and family and 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 made needs to be done in a cautious manner and accounted for.

Financial wellness starts with the recognition of the bad spending habits you have 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 traveling, you can split the bill evenly between everyone.

Speaking to family or friends about money is still a sensitive topic. [However] once a married couple, for instance, places all their cards on the table so to speak, detailing their income and expenses in the form of a household budget, the relationship becomes stronger and reaching the financial goal of the family becomes easier.

Managing your finances starts with tracking your spending, aim to save three to six months’ worth of expenses.

Here are 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 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 rather pay cash. Calculate how many months it will take you to purchase the item at an affordable amount per month, then place it in your budget, mark it as a short-term or long-term goal
• With each life event – be it a marriage, divorce, purchasing a vehicle, or finding a hobby that assists you to relax and find yourself – there 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. In other words doing a comparison 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.

Claire Klassen is a consumer financial education specialist at Momentum Metropolitan.