LOUISE FAIRSAVE: Control finances
Christmas is here again. During this festive season we can commit to control our finances or we can allow the extra spending to build uncomfortable stress levels. Bear in mind, after all the early paydays, advances, bonuses, Christmas loans and such money sources provided during December, that January can be a very long month before more pay flows again.
With the pressures of the season in mind, here are six specific steps for managing your finances and for keeping the happy feelings of Christmas around for more of the year:
1. First, stop all further spending and take 30 to 40 minutes to prepare a budget for the remainder of December and the next couple of months. You need to identify all the priority payments like food, rent, utilities and so on to which you are already committed per month. The remaining funds are therefore left for your discretionary spending.
2. Of the discretionary funds, then make an allocation of how much you will spend on yourself and your household; on other family and friends by way of gifts or entertainment; and for charity.
In making a spending plan based on your allocations, you may need to go through an iterative process, adjusting the amount of the allocations for each category as you estimate what you plan to spend. However, it is important that you settle the allocation as the final iteration will serve as your control for spending. Note that however small the allocation, treat the charitable contribution as a ritual of wealth.
3. With the final allocation in mind, you can restart spending. However, it is essential to track all spending and allocate such spending per category in order to keep on track with what you have set for the available funds.
Three key pointers as you shop: (a) Shop with a list of who and what and/or how much you have in mind. Stick as close as possible to that listing. (b) Work with only cash payments, avoiding the use of credit cards. (c) Avoid taking on additional debt unless your budget reflects that that debt can be fully settled over the planning period.
4. If you do take a loan, or use credit of any form, track the interest cost. Are you making a rational decision?
5. The point of making a budget is to draw on a clear plan. It is important to stick to the budget. Cut or curtail spending in order to keep within your budget. For example, focusing on family gatherings rather than giving expensive gifts, general partying and consuming expensive alcoholic drinks can be a huge saving. Decide firmly what you need to cut to stay within your budget and follow through at each critical point.
6. Holding firmly to this process will garner you greater overall personal financial management. If you can control your money during this highly stressful season, it is likely that the rest of the year will be easier to manage. You will have gained a lot of information that will ease you into longer term planning for next Christmas season.
In addition, since Christmas is a time for family to gather and celebrate, this season can serve as a time to declare the family Christmas plan for next year. This approach is especially useful in guiding younger children to understand budgeting – earning, saving and spending
So, reduce the financial stress of this Christmas season for yourself and ultimately for your family. Discuss and agree on your plans for next year from now. Plan and budget from the beginning of the new year and see even better results.
Louise Fairsave is a personal financial management adviser, providing practical advice on money and estate matters. Her advice is general in nature; readers should seek advice about their specific circumstances. This column is sponsored by the Barbados Workers’ Union Co-op Credit Union Ltd.