By Rebekah Funk
Sjoe, you made it through Janu-worry 2020. Well done. After exhaling that deep sigh of relief, get ready to follow these five time-tested money tips from the experts to ensure you can save more and spend better come the December holidays 2020.
1. Save in increments
The December holidays can push even the best penny-pinchers into debt. It’s why we should treat Christmas like a prospective trip abroad ‒ something to be saved for in advance, says Lorna Knoetze, Sygnia’s Head of Retail Administration.
“First, tally up last year’s spending on Christmas holiday events, gifts, food and other expenses to get a rough idea of your budget. Decide if there are items you could cut back on, or if you’d like to spend more next year.”
“Next,” continues Knoetze, “calculate how much you’d need to save from January to November to hit your savings target in 11 months. If you need to save R5 500, for instance, you’d need to sock away at least R500 into a Christmas fund each month.”
2. Out of sight, out of mind
The best way to avoid the temptation to spend your Christmas savings throughout the year is to set up automatic deductions and then forget about them, advises Knoetze. “You’ll be pleasantly surprised when Christmas expenses are nearly fully covered by year end, without much extra financial effort.”
She recommends setting a calendar reminder to check your account in late October, in case you need to give advance notice to withdraw funds. “But other than that, treat the account as off-limits to achieve your savings goals.”
3. Lock and load
Knoetze recommends keeping your December funds out of reach in a high-yield savings account where your money will have more potential to earn interest than if you’d kept it in a safe at home.
South Africa’s big five banks offer between 0.76% and 9.25% interest for open savings accounts which can be accessed at any time and have a minimum deposit of between R25 and R100.
However, if you think you’ll be tempted to withdraw your savings or would like a higher interest reward, deposit your Christmas cash in a blocked or fixed savings account, where it takes more time and effort to withdraw your money.
4. Re-evaluate the reason for the season
Think about all the gifts you gave and received last Christmas ‒ how many were thoughtful or even necessary? And why do we hold onto expensive traditions that don’t mean much to us?
Consumer spending generates vast amounts of economic waste ‒ to the shocking tune of $85 billion each festive season, according to Joel Waldfogel, economist and author of Scroogenomics: Why You Shouldn’t Buy Presents for the Holidays.
“When we buy for ourselves, every dollar we spend produces at least a dollar in satisfaction, because we shop carefully and purchase items that are worth more than they cost,” he writes. “Gift giving is different. We make less-informed choices, max out on credit to buy gifts worth less than the money spent, and leave recipients less than satisfied.”
Despite our best intentions, many of the items we give constitute “deadweight loss”; they’re not needed or wanted, and end up in a landfill contributing to our current global climate crisis, argues Waldfogel, who suggests re-prioritising gift-giving habits to reclaim the true spirit of the holidays.
5. Save… while you spend?
The notion of saving while you spend might sound crazy, but it is possible with cash-back credit cards ‒ though most financial advisors agree they’re only for the super disciplined.
Cash-back credit cards give you a percentage of your purchase back each time you swipe your card at an accredited retailer. Programmes like eBucks (FNB), Greenbacks (Nedbank) or Kulula Moolah (for flights, hotels and car rentals) can be easy ways to benefit from the money you already spend monthly on essentials like groceries and petrol.
“Depending on your rewards level, banks pay anything between 1% and 6% on everyday spending and I’ve seen up to 50% on fuel spend,” writes Dean Gerber, a residential property investor and contributor to Fin24. “There are certainly many hoops to jump through to get to the top loyalty earning bracket.”
“However, at the least you should expect to earn 1% back on your credit card spend. If you can channel an annual spend of for example R100,000 per year (R8,300 per month) to your card, you could earn an extra R1,000 per year.”
But be warned, stresses Knoetze: banks earn large amounts of interest (22% or more) if you don’t pay your balance on time each month. “While some cards do have interest-free periods that give a little extra leeway to pay back the funds, you’ll need to know the ins and outs of each card to avoid the debt trap of interest charges and fees for cash withdrawals.”
“If you find that having a credit card is consistently causing you to overspend, perhaps ask your bank to lower the credit limit or cancel the card entirely,” she adds.