By Nicolette Mashile
It is the end of the year, and we are all ready to swipe our cards left right and centre and have the best time of our lives after a long stressful year. But there is a danger in being mindless with your finances. That danger is called budget leakage. Budget leaks happen when you are not sticking to your budget and you spend your money in ways that are not intended. Remember that your money is not just for December but must last you until January.
Budgeting is a money plan of how you will spend and save your money. You categorise your expenses so that you know how much you are allowed to spend, but the moment you go over that limit, then you put the entire plan in jeopardy, and January becomes Januworry.
Here are ways budget leaks come into existence. If you are aware of these, then you can try your best to avoid them throughout this festive season.
“Family over everything” is what most of us believe. But don’t let that derail your personal financial plan and strategy. At the end of the day, you are the person responsible for your finances, not extended family. Many spend more during this festive season because of black tax guilt - such as when you go home and the elders ask you to take on the house repair expenses. Or if the cousins are getting together and you accommodate that one who can’t pitch in for themself. Or you may even feel compelled to buy everyone presents because the whole family knows that you can afford it. Go into December knowing your story and how much you are willing to spend. Stand your ground always.
It is easy to lose track of your budget when you make small unnecessary purchases. For example, you might buy a chocolate for R10 thinking that it’s a harmless purchase, but multiple harmless purchases add up and result in you having spent R200 on chocolate without even realising it. Impulse shopping can even go with sales. Even though you are not purchasing the item at full-price, you are technically still wasting money, because you never intended to spend a cent on that item in the first place, half price or not. Impulse shopping is a habit that you can avoid by thinking about whether you actually do need the item. Take some time to think about it, and after a few days, if you feel like you still need it and you are able to buy it without taking away from the money you need for other expenses, then give yourself the green light.
It is the time of wanting to eat the nicest food and wear the nicest clothes. You want to host family and friends, or you are being invited to functions one after the other. Although you may have accounted for this in your budget and increased your normal food or clothing budget for the festive season, you can still be smart with your spending. Don’t go for the most expensive things when you normally don’t buy them. Milk at Checkers is just the same as milk from Woolworths. If you are hosting and you want to cook a delicious meal, first look around your house for things you already have before shopping. If you have identified a dress that you like, look around and see if the same style of dress is not available at another store for a cheaper price. You do not have to let your ego get in the way of you sticking to your budget. There’s no need to live a different life only to financially hurt yourself at the end.
Banking fees and interest
Yes, this is the little monster that most people tend to forget about. Every time you withdraw or make a purchase, a fee is charged. Although small, like impulse buying, it adds up over time. If you want to withdraw money because certain places do not allow for card payments, rather withdraw the money once at the beginning of the week, and stick to that. If it finishes then it finishes. Your bank fees will eat into your budget and leave you with less than you expected. Also avoid buying on credit or paying on account. It is convenient now, but come the new year, you will have to pay an instalment that you could have avoided, and you won’t even be paying the actual selling price, as interest will be charged.
Every financial decision you make now will affect your future financial state.
Always keep your budget at the top of your mind. Avoid overspending and constantly withdrawing. Even the little purchases add up, and don’t ever feel bad about putting your finances first before people. Remember you are building a life for yourself, and developing the right habits now is very important for growth.
Nicolette Mashile is the co-host of the SABC1 talk show Daily Thetha, an actress on Generations and the founder of Financial Bunny, a financial literacy platform. She has recently written a book, What’s Your Move? A collection of ordinary financial lessons.