Buy online3 Key financial management tips to help you avoid debt this festive season
By Siphelele Sokhela, Brand Manager at 1Life Insurance
The festive season often presents a lot of financial pressure. From buying gifts for loved ones, to travelling, or hosting family for the holidays – all these things require spending and proper financial planning is critical. Given the current economic challenges, however, many individuals run the risk of falling into debt this festive season if conscious spending is not prioritised.
When we conducted the 1Life Insurance Back-to-school Survey last year, it became clear that often at the start of the year, many families do not have the financial means to cover their daily needs. The outcomes showed that over 50% of households do not save for back-to-school expenses, and often overspend during the holidays – which leads to many individuals relying on loans to cover expenses. Some disclosed that they often rely on family to support them during this time too.
This is not a sustainable way to live or manage finances. While a loan may offer temporary relief, it often leaves you stuck in a never-ending debt cycle – where you run the risk of taking out more loans to cover your current debt.
Here are 3 financial management tips to help you avoid debt this festive season.
- Draw up a budget… and stick to it!
Establishing a realistic and well-defined budget is the first step to creating a healthy spending habit. In most cases, people buy holiday gifts without knowing how much they can spend based on their income or what they want to spend. Avoid overspending by setting a budget and sticking to it despite tempting discounts and offers available both online and offline.
Remember that while a budget is a great tool, it needs to be set realistically – providing a nice balance between having enough to cover your living costs, while also setting aside enough money for rainy days. To ensure that you are setting a realistic budget, partner with a financial advisor. With their market knowledge and experience, financial advisors are able to help you draw up a reasonable budget to keep track of your spending and free up income for investment purposes.
The great part is that this budget can be used beyond the festive season – helping you establish and maintain good spending habits that will lead to you breaking the unnecessary spending cycle and generating wealth for your loved ones.
- Enjoy within your means
Regardless of what time if the year it is, living above your means is costly. Many of us fall into the illusion that just because I can pay for it, I can afford, and this is not a wise way to gauge affordability.
How do you know you are living above your means? Here are some signs that indicate that you are living beyond your means.
- You have no emergency fund
- You live paycheck to paycheck
- You are constantly worried about how you are going to pay the bills.
- You are not saving for retirement
- You are stuck in a cycle of credit card debt
This festive season, consider spending on only on things that you have saved and budget for. Make the necessary adjustments that will allow you to enjoy the festive season, without breaking your budget. For example, if you always travel in the festive season, consider hosting family or friends at your home instead, while putting some money aside to travel after the peak season.
- Resist the urge to lapse on your premiums
The festive hype can often create an illusion that we can let our guard down when it comes to our insurance cover, but if you pay close attention, you realise that it can also bring a lot of risk. For example, crimes such as vehicle theft often increase at this time. Furthermore, the risks of being involved in a vehicle accident are extremely high during this time, let alone the never-ending risk of contracting serious illnesses as long as we are alive. These are all unfortunate events that we often do not anticipate, but they do happen.
Considering the risks, it is important that we have the right cover, such as life cover, dread disease cover etc. in place, and ensure that our premiums are up to date. This way, in the event of an accident, a dread disease diagnosis, or you pass away, you and your loved ones are covered financially.
This festive season, remember that the financial decisions you make today have a long-term impact on your finances in the new year. Spend wisely and stick to your budget – with the financial future of yourself and your loved ones in mind.