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Plan properly

18 November 2004 Angelo Coppola

Karen Ford, Absa Group Economist, says the question of course is, ‘what would be the best way to allocate any additional money available to the household?’

The first and most obvious answer would be to save. Putting money away into a money market or unit trust or savings account for a rainy day will never be regretted.

But an even better form of saving is to settle interest-bearing debt such as credit cards, personal loans or furniture accounts. Lump sum payments into a mortgage bond or vehicle repayment can also make a huge difference to your cash flow later on.

A qualified broker or financial adviser can offer invaluable advice on how to invest money for future use.

The combination of spare time and money can be put to good use by taking care of matters people usually choose to avoid. Before setting off on holiday, it is vital that all legal documents such as wills are in order and that all life and other insurance premiums are up to date.

A realistically drawn-up budget that allows for the unexpected is essential. It can carry you through the festive period and help you to survive the dreaded month of January.

Before the Christmas shopping spree begins, draw up a list of everything that will be needed after the holidays, but before receiving your next salary. Either put money aside for these items or buy things such as kids schooling requirements in advance.

Minimise gift shopping. Set limits as to what the maximum amounts are that you are prepared to spend on each gift and do not exceed these. On the contrary, the Christmas rush can be avoided by buying bargains and specials during the year and storing them.

Alternatively, offer personal services such as babysitting, instead of buying tangible gifts. Electronic or personalised handmade Christmas cards are also cheaper than ready-made ones.

Keep credit card debt under control and do not exceed the limit. Use the budget facility to finance large purchases, so that the payments can be spread evenly over a suitable time period.

Consolidate accounts and use only one credit card rather than having to pay several cards off simultaneously. Always use your credit card in person and limit internet and telesales purchases to reputable suppliers only.

Most debit cards can now be used at various retail stores using a pin number. This is safer than carrying cash and convenient too. It is also cheaper to shop and draw money at the same till point. Avoid drawing small amounts often, as bank charges mount quickly.

Avoid emotional shopping and impulse buying. Draw up a list of what is needed and commit to it. For planned large purchases, look for bargains and sales.

Before buying items on hire purchase, shop around for the lowest interest rates or use your existing bank facilities which are normally cheaper than store credit.

Clear up clutter and donate unwanted goods to charity or earn extra cash by pawning them.

Lastly, live within your means. Communicate your household financial situations clearly with your partner and make the necessary provisions to last until the next payday.

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Each year ordinary consumers and their financial and wealth advisers flock to dozens of asset manager ‘outlook’ presentations to find out about economic and investment trends, and the next ‘hot’ company. What do you want asset managers to share during these events?

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