DECEMBER SPLASH, JANUARY CRASH – Don’t let the festive season leave you short when it matters most

NewsSportLifestyleEntertainmentOpinionOpinionDECEMBER SPLASH, JANUARY CRASH – Don’t let the festive season leave you short when it matters mostMoeshfieka Botha|Published 6 minutes agoCopy to ClipboardAsk AIBE RESPONSIBLE: Enjoy the holidays, but don’t blaas your geld

WHEN your December geld lands, there is a lot you want to do with it. 

​There is all the Christmas food, gifts for the laaities and maybe a trip to see family. Then comes January with school goodies, stationery and taxi fare.

​So before you spend a cent on the holidays, work out what you will need to get your household to the next payday.

​Thinus Marais, Financial Adviser at Momentum Financial Planning, takes a look at how festive- season spending, mounting debt and repeat two-pot withdrawals could undermine long-term financial security.

If your employer pays you early in December, that salary still has to last until your next payday. Write down what you’ll need for rent, groceries, electricity, transport, school costs and debt repayments. Put that money aside before deciding what you can spend on the holidays.

​If you get a bonus or a 13th cheque, it can help you catch up. But if you use the whole bonus to pay your credit card and then swipe the card for groceries in January, you’re borrowing again to get through the month.

Once the essentials are covered, check which debt charges the most interest. If you can, pay extra toward that account to save money; set aside a little for unexpected expenses. Even a small amount can help when the car breaks down, or you need to replace a pair of school shoes.

​Then look at what’s left for December. Set a limit for kos, gifts and outings. If you’re hosting, ask everyone to bring a dish. Agree on a gift limit with familie before anyone starts shopping.

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Image: Zanele Zulu/ Independent Newspapers

Think twice before dipping into your two-pot savings

The two-pot system was designed to give mense access to part of their retirement savings in times of genuine need, and for many households facing real hardship, it has provided important relief.

But withdrawals come at a cost. They are taxed at your marginal tax rate, so you receive less than you withdraw, and every rand taken out today loses years of potential growth. Repeat withdrawals compound that effect.

Every withdrawal also leaves less money in your fund to grow for retirement. If you keep dipping into your savings pot because your pay runs out before the end of the month, it would be wise to take a closer look at what’s eating up your income.

There is a big difference between withdrawing to cover an essential expense in a crisis and withdrawing year after year to cover a shortfall that never goes away. If the underlying problem is debt or a monthly budget that doesn’t balance, a withdrawal treats the symptom, not the cause.

There are no one-size-fits-all answers. Paying down high-interest debt, preserving retirement savings, meeting household obligations and enjoying the festive season all compete for the same money. A financial adviser can help you weigh those trade-offs based on your circumstances.

Here are some questions worth asking yourself:

The financial decisions made with December income can have consequences long after the decorations come down. The goal isn’t to take the joy out of the festive season, but to make sure the decisions you make this month still make sense in February, and in 20 years.

Speaking to a financial adviser can help you understand your full financial position, make informed decisions about once-off income and build a plan that strengthens your finances rather than postponing the pressure.

I suggest you keep it simple and get back to basics. Before you hit the shops, take 10 minutes to list what must be paid between now and your next payday. Set that money aside, then plan your celebrations around what’s left. You’ll enjoy December more knowing there is money for groceries, school shoes and the taxi to work in January.