Oran Hall | Taming year-end spending
Do you normally spend January rueing the spending decisions you made in December? Let us see how you can make January 2019 different.
We are fast moving into the season when many are jolly and spend heavily to make it so, then spend the months after rather miserably.
Perhaps you did not save systematically during the course of the year for the extra spending this season. Perhaps you did not make a budget at all or made one generally but not one for the holiday season. It is late to make a budget for the year at the end of the year, but you can still make a holiday budget. Your current income should drive your spending plan for the season, and there should be no room for spending January's income before January.
The following recommend-ations should help. Determine the spending priorities early with your family. If you are into gift giving, determine whose experience you will season with a gift. Set a limit on how much you will spend on gifts overall and on the gift for each person.
Determine how much you will spend on entertainment. Join with family and friends to undertake entertainment activities and the associated costs. Consider having some activities at home rather than going out.
Make a shopping list and stick to it. It will help you to resist buying on impulse. To further resist the temptation to buy on impulse, avoid environments where the temptation to do so is strong, and avoid the company of family and friends if being with them encourages it.
Manage your credit card well - even those with special benefits, such as frequent-flyer miles. In particular, cap online shopping, which credit cards make so easy. Avoid having to pay credit-card bills that you are not able to pay in full; interest rates on those balances are not friendly.
Although it is risky to carry cash around, use cash as much as possible. To reduce the risk, use a debit card, but be careful and consider the full gamut of expenses you must cover in the spending cycle when shopping.
If you overspend in one area, cut spending in other areas to keep within your budget. And give yourself an incentive for keeping within the limits of your budget.
If you are one of the fortunate ones to receive extra cash - a bonus or remittance, for example - avoid blowing it away. There are many good uses to which you can put it - paying down debt, saving, investing, or contributing to the acquisition of an asset capable of lasting for a long time.
Let your savings and investments remain as they are unless they were designated earlier to be used to acquire assets or to cover a designated expense. Avoid liquidating them prematurely, and keep the end in view at all times. Never lose sight of your long-term goals.
Keep short-term considerations in mind as well. Emergencies come when you least expect them to, so resist the temptation to encroach on emergency funds.
Avoid spending money you have not yet received. Factor in time for delays. If you are paid by commission, go slowly on your plans to spend it, considering the risk of transactions not going as planned. It is not wise to count your medals before the Olympics.
Bear in mind other commitments insurance premiums, loan repayments, school fees. It is easy to forget about some of these because they are not monthly commitments, but it is important in any case to reserve funds each month for them.
Plan for the necessary things; important assets have to be maintained. Painting of the house, for example, is important for some individuals this time of year. This is not an annual activity, but the funds to do so can be set aside over time.
Have a system of reviewing the management of your finances, especially if you are in a family setting. Appoint a firm member to be the finance manager and have all family members buy-in on the finance plan. Encourage all parties to be open at all times and to be faithful to the plan.
You will hear the non-stop advertising and see the deals and discounts in your faces, but it is up to you to determine how you respond.
If you fall short this year, next year can be better with earlier planning. Determine the goals and put the supporting financial plan in place early.
- Oran A. Hall, principal author of 'The Handbook of Personal Financial Planning', offers personal financial planning advice and counsel. Email email@example.com.