Bekithemba Mafulela from Allan Gray.
If the thought of the fast-approaching festive season sends you into a panic and sees you mentally tallying up added expenses, such as gifts, getaways and groceries, you may need a financial strategy to help you cope.
“A heightened emphasis on spending may make you more inclined to stretch your budget. The trick is to not be lured into making choices that can land you into financial hot water, or become bad habits down the line,” says Allan Gray’s Bekithemba Mafulela.
He says that while it has been a tough year, with many experts calling for belt-tightening, the danger lies in thinking that the festive season will afford you a much-needed break from counting your pennies.
“Unfortunately we may be in a period where things get worse before they get better. This means that we should all look at frugality as the new normal, adopt a savings mentality where possible, and look for ways to rein in spending.”
Below Mafulela gives four tips to help you cope with the added financial stress that often comes with this time of year.
1. Maximise your windfall
“If you are lucky enough to get a windfall in the way of a bonus, or any other unexpected income, you may want to think differently about how you use your money,” says Mafulela, adding that you may want to use the opportunity to look at your finances overall.
“Ask yourself whether you are directing enough towards your future and if your debt is under control.”
He suggests maximising your windfall by allocating a portion to pay-off some outstanding debt and by saving some before you start spending.
“Reflection, planning and not drinking too much of the holiday season Kool-Aid can go some way to giving a windfall longevity. This will almost definitely make you happier for longer than spending more on stuff you don’t need.”
A small treat can make investing the major portion of your money an easier pill to swallow. It may also help to keep in mind that investing is just deferred spending – you put money away to grow so that it can meet your needs in the future.
“Eventually that money should return to you as spending; delaying your gratification just means that you may have more to spend later.”
2. Gifts that don’t cost the earth, but last
In the last five years the Deloitte South Africa Holiday Survey found that respondents’ number one gift was cash, followed by gift vouchers, by both men and women. If your culture or faith encourages gift giving over the festive season, consider alternatives to expensive, and oftentimes, undesired consumables.
“Consider opening an investment, such as a unit trust or tax-free savings account, on behalf of someone you love. This type of gift has the potential to open up future opportunities,” says Mafulela.
He says that starting a unit trust or a tax-free investment can cost as little as R500 per month, which is less than a DSTV subscription, for example.
3. Be aware of the festive season spending cues
Being aware of subtle (and not-so-subtle) influences can help when everything around us is pushing us to spend.
Mafulela says that key retail periods, such as the popular ‘Black Friday’, are designed to make you spend more, through targeted deals and with tactics such as ‘mega savings’.
“With more of our spending happening online, retailers can personally target our desires with adverts for products we’ve shown an interest in. Adverts built on our personal profiles have more of a chance of loosening our wallets.”
He says that brick-and-mortar stores are designed to make you spend, with roadblocks and labyrinths along the aisles to nudge us to stop and buy.
“Baskets mean more to fill. We subconsciously aim to fill up our shopping baskets without thinking about it – a trolley doubly so. When you’re looking for one or two things don’t pick up a basket.”
4. Adopt a savings mentality
We are all human and the festive season spending can get to even the most disciplined of us. But don’t lose heart. Come January, when you embark on your post-holiday detox add spending to your list of no-gos. A spending detox is about getting control back by reining in unnecessary expenses and breaking the habit of swiping your card willy-nilly.
“This is a gradual adjustment in attitude to the way you spend. Making small behavioural changes and developing a savings mentality will go a long way,” concludes Mafulela.
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