How can I avoid a December budget blow-out?

South Africans have a habit of spending a lot in December as many of us go on leave at year end, travel and/or reunite with families, celebrate Christmas with gift giving and usher in the new year with parties.

In addition, employees are often paid early in the month and the self-employed may find work dries up, which affects your cashflow.

Avoiding a budget blow out takes a bit of planning – the earlier the better, but if its December already and you haven’t figured this out, make a start by getting a clearer idea of your spending and putting plans in place for next year.  

Consider your additional spending

The first step to avoiding a financial blow-out in December is to consider what additional expenses you may incur. Recording them is the start, but also start thinking how to trim them, especially if your plan is to use credit to make ends meet.

If you celebrate Christmas think about the cost of:

• Gifts for family and friends;
• The Christmas day food and drink;
• Christmas extras – the Christmas cake, stockings, decorations, flowers; outfits and
• Celebrations before and after for other family members and friends.

If you there are people you want show your appreciation to for their efforts over the past year, consider the cost of payments or gifts for them – school teachers, security, employees, your domestic worker, a carer for an aged parent or disabled relative.

If you celebrate New Year consider:

• The cost of the night out – eating out and or any event or venue you plan to go to plus the cost of transport;
• Food and drink if you are celebrating at home;
• The cost of an outfit for the night;
• The cost of any celebrations on New Years day.

If you are going away consider the cost of:

• Travelling – flights or petrol or public transport;
• Visas, passports;
• Travel insurance;
• Whether you need new clothes or luggage;
• The cost of your accommodation;
• The cost of entertainment;
• The cost of food while you are away that exceeds your normal food spend; and
• The cost of getting your pets looked after while you are away.

If guests are coming

If people are coming to stay with you and won’t be contributing to your household budget, consider the additional costs for:

• Food and drink;
• Take outs;
• Transport and outings for your guests ;
• Electricity and water; and
• Cleaning services.

REMEMBER
You may also face additional expenses in December and January, especially if you are a parent who needs to spend on school stationery or uniforms or sending an older child to study further. Add these to your December/January budget.

How to fund it

Once you know what costs you are in for – even a rough estimate - consider how you will pay for all these things.

Will you be receiving additional income in December – a bonus, for example, if you are employed or additional income if you have a business that does well in December?

Alternatively, consider what you have saved specifically for December.

No additional funds
If you don’t have any money to tap into for the additional expenses, you will need to consider:

• Limiting what you spend;
  
  
• Cutting back on other spending;
  
  
• Possibly borrowing from your savings for other goals but making a plan to repay this before you lose too much growth; or
  
  
• Spending on credit, which comes at an additional cost in the interest you will incur, and making a plan to repay that credit as quickly as possible.

Be sure you don’t use the money you need to cover your necessities and debit orders in January. If you are paid early, shift the money that you need for those expenses into a separate account immediately and only pay it back to yourself when you need it – possibly on your normal pay day.  

Get out of the cycle of a budget blow out

To get out of the cycle of budget blow out each year, in the first year, try to limit your spending to what you can repay within, for example, six months.

As soon as you pay it off, save at least the same amount for the rest of the year so that you have savings to pay for some, but ideally all, of your additional December costs next year.

Reduce the amount you spend on credit and increase the amount you save each year until you are saving ahead in a separate account for all your December expenses. Remember to adjust the amount you need by inflation each year and to accommodate any additions to your family.

Having money saved for December will allow you to take advantage of deals well before December and to shop early without additional pressure to buy whatever is available closer to the holidays.

Be wary of spending triggers

The best laid plans on how to balance your December budget can come unstuck if you fall prey to these spending triggers:

Retailers encouraging you to spend with tempting displays of their Christmas stock;

Pressure to book a holiday, make plans for guests or buy gifts at the last minute;

Emotions unleashed by summer holidays, the jolly season, end-of-year parties or family celebrations;

Pressure to treat family in ways you cannot afford. Being honest and setting expectations upfront will help you spend less without guilt or feeling emotionally blackmailed by family members who assume they will be treated. If you have created expectations by overspending in the past, it is time to break the cycle by explaining honestly to your family how things are for you financially.

Losing track of your goals - these should be in mind when set your December budget – is your real goal to save for something like a deposit on a car or a house, pay off your debt or fix your retirement savings? Don’t be tempted to let your goals take a back seat – make this time of year about connections rather than how much you spend.

Pressure to appear successful to family or friends or buy things to make up for time you or another family member did not spend with family. The most successful people make and achieve their goals.