People have probably never been more ready to kick back and enjoy the festive season, especially after such a challenging year.
However, it is important for consumers to exercise caution and manage their money effectively over this period. Lack of money management can lead to financial challenges in 2021.
Emma Mer, CEO of First National Bank loans says, “We always expect an upward trend in spending during the month of December and January. This holiday season, however, more than ever, South Africans need to learn from what 2020 has taught us; you never know when a crisis will hit. For that reason, curbing unnecessary use of credit ahead of 2021 is a good money management principle to follow.”
Mer unpacks five ways one can better manage their use of credit this holiday season:
Review your monthly needs
Prepare a budget – December and January monthly expenses are likely to be more than other months. Start off by ensuring that you can cover all your necessary expenses for December and January.
Don’t forget to make provision for the extras you might need such as extra funds for petrol, and money spent on catering for friends and family. Set a limit for these expenses and stick to them. Don’t forget to factor in your monthly repayment on current credit obligations.
Recently, FNB launched an innovative smart budgeting tool for customers, located under the nav» Money functionality on the FNB App. The new smart budget tool uses FNB’s dynamic data capability to create a level of accountability and real-time financial coaching. FNB customers will be able to take control of their spend, set budget limits and get notified if they are reaching their budgets.
Spending your bonus wisely
If you receive a bonus, the 80/20 rule will help you manage it well. Use 80% of your bonus in a responsible manner such as for paying off debt, saving for an emergency or putting aside for school fees. The remaining 20% can be used to spoil yourself or your family.
Use credit only when essential
If you have been planning for certain expenses and you are not quite there with your savings, you can use credit to top up your funds after having planned what you can responsibly spend. Aim to pay this off as soon as possible and remember to make provision for the extra repayments in your budget.
Find cost-effective ways of kicking back (e.g. using eBucks)
Depending on your eBucks level you could qualify for discounts and benefits. Explore how you could save and spend less by taking advantage of the benefits available to you and shop at an eBucks partner to maximise your reward level.
Continue to save wherever possible:
Start 2021 off by reviewing the debit orders and payments you make monthly (for example, your telco and insurance spend) in order to see if you can benefit from a cheaper or more suitable option.
If you’ve managed to save in 2020 but you have not yet decided how to make the savings work for you, reach out to your bank to discuss a dedicated savings account for these additional savings and set up a monthly transfer to the savings account.
“Avoiding spur of the moment inclinations to spend on credit or tap into a loan can be done with sound planning. Remember that this time of the year is about making memories and starting the new year off refreshed and in good stead, instead of having to worry about the burden of too much debt,” concludes Mer.