This is the spending season, but most of us don’t have much money to spend. High interest rates, high prices and global meltdown mean there is less in our pockets to splurge. The good news is that most people are in the same boat, so cutting back won’t make you feel like a scrooge. But the most important rule this season is not to let your debt climb. Get moneywise and use clever ways to stay within budget.
Budget: You can’t live within your means if you don’t know what those means are. Work out how much you can spend on gifts and entertainment.
Back to cash: I find this the best way to stick to a budget. Draw cash and put it into envelopes for your spending categories. When that entertainment envelope is empty there is no more entertainment. Seeing the cash helps you to keep track of your spending.
Budget per gift: Use the envelope system for gifts and label each envelope with the name of the person you are buying for. If you go to the store armed only with the cash in the envelope, you will not be able to overspend.
Cash in reward programmes: If your credit card is linked to a reward programme this can be a great time to cash it in. FNB’s Ebucks, for example, lets you buy from various stores as well as offering discounts on purchases. Some reward programmes allow you to cash in for shopping vouchers which you can then use to purchase gifts. The Health Spa Guide (www.healthspa.co.za) allows you to swop your SAA Voyager miles for spa treatments.
Cash back: When shopping use your debit card to draw cash from the merchant. This is far cheaper than drawing cash from an ATM. Most major retailers such as PicknPay and Checkers, for example, offer this service.
Cut up the cards: Do not be tempted to use your store cards to buy gifts. You will be paying off the debt long after the joy of giving has expired.
Healthy entertainment: Paul Abrahams of BoE Private Clients suggests rather than going to the local shopping mall for movies, fast food and fashion, head outdoors for a bike ride, hike or picnic and include friends and family. It is better for you and will cost you a lot less.
A R40 000 Petrol Cut
On average a tank of petrol costs R100 less than a month ago. If you fill up twice a month that is a R200 a month saving. Don’t spend the savings. If the world economy gets back on track and demand for oil increases, we could see petrol prices rise again.
So don’t get used to living on this extra money. If you owe money on your car increase your repayments by R200 a month. A car debt of R100 000 would be paid off six months earlier, saving R5 000 in interest or R14 500 in repayments. If you don’t have car debt, use your extra cash to settle credit card and store debt. If the petrol price stays at these levels or drops further, start a debit order into a savings fund. In 10 years’ time the petrol price cut could mean a nest egg of R40 000.