How to spend your 13th cheque wisely
09 September 2016
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On mobile, on digital, on demand, this is Old Mutual Live, the Money Coach edition. Hello and welcome, my name is Chris Gibbons. With me in the Old Mutual Live studio is John Manyike, Head of Financial Education at Old Mutual. John welcome, good to have you with us.
John Manyike: Thank you Chris.
CG: Now, it’s not so very far now to the end of the year, the summer holidays, Christmas is coming, the Festive Season. Hopefully a little bit of extra in the shape of a bonus maybe, a 13th cheque maybe, stokvel pay out maybe.
Plan wisely for the Festive Season
But John, I’m sure you know the problem as well as I do. No sooner do I receive that money than it’s all gone. We also get paid well in advance for December. Suddenly, we’ve only just said hello to the New Year and I’m broke again and the end of January is miles away. John, I need you to help me spend wisely during the Festive Season, where should I start?
JM: Your household budget is the foundation of any good financial plan. The plan with a lot of us during the Festive Season is that because we’re caught up in the moment of the excitement of the Festive Season, we’re going to be spending. Everybody is spending and advertising. We actually don’t set a limit to say how much are we going to be spending during the Festive Season. That often happens because we actually don’t have a financial vision with our money. If you don’t have a vision, or a goal with your money, it’s easy to spend aimlessly.
I believe that for a lot of households, the first thing that needs to happen is to say, what are our goals? What is our vision? If we’re going to be spending money during the Festive Season, what budget are we going to set for that? Obviously having taken into account a number of other things that are equally important.
A great opportunity to pay down debt
CG: One obvious one, should I use my bonus money? We’ll call it ‘bonus money’, should I use that bonus money to pay down debt?
JM: That’s the ideal situation. If you know that you’ve got this debt that you’ve been carrying for quite a while. It might be worth your while to actually use your cash injection during that period to actually pay off your debt. Use that opportunity to charge down debt. So that you know you can start the New Year on a clean slate.
Can you imagine starting a New Year being debt? Free because you paid it off with, whether it’s your 13th cheque or your stokvel payout, whatever the case may be. Wherever you would have found money during the Festive Season.
CG: Here’s the thing, aren’t I entitled, please, to have a little bit of fun? It’s been a long year, heaven’s above, what about my family and my kids. Surely they deserve a little something, it’s Christmas after all.
Planning is the key to still having fun
JM: Absolutely, hence the reason that you need to actually sit down as a family and plan. Have a family meeting and say, okay, these are our obligations. We also need to have a bit of fun, but you need to actually budget for it. You need to set a budget, set the limit for it during the Festive Season.
Bearing in mind that you’ve got back to school expenses in January. Remember, for those employers who pay salaries early in December, it can become a challenge for a lot of people. If you’re not used to living off a budget for six weeks, it can be very challenging.
Rather buy, for example, you know you’re going to pay your debts for January in December. When you get paid in the middle of December, treat it as a normal month. Pay those things that you normally pay; your electricity, maybe school fees for children for January. Then on what is left, that’s where you can start planning how much fun you can have, if there’s anything left over there.
CG: If there’s anything left over… A lot of people listening to Old Mutual Live Money Coach come from very poor backgrounds. How does that change the way they deal and think about money, deal with and think about money?
JM: We need a mind-set change here. For a person who grew up from a poor family, you knew that you were many and it was not an easy life. We almost feel this obligation to square up with poverty whenever we’ve got a huge lump sum. We want to go on a spending spree and we just want to go buy things and bargain.
This is why I believe a lot of people would buy groceries in bulk in December. It’s because we are in a survival mode and we believe we just need to stock up a lot of food and so on. Food security is top of our pyramid. When in fact we should actually be having a holistic view. That’s why having a vision is very critical, having a family meeting, discussing household budget, it’s very critical.
No such thing as a free lunch
CG: It’s the vision and it’s the budget and then of course it’s sticking to it.
CG: Doubly difficult over Christmas.
JM: Very difficult. But also, even if you set a limit to say this is what we’re going to be spending over Christmas, you need to shop wisely. We know that you’re going to have lots of offers, in some instances you’ll be offered; buy now, pay in January. Buy now, pay in March. But what you don’t see is that they’ve actually already built in the interest into the whole facility. You need to be very careful, shop wisely.
CG: Are you telling me that all these Festive Season specials, aren’t really that special?
JM: There’s no free lunch Chris, so you need to look at the fine print.
CG: No such thing as a free lunch, that’s 100% true. But something else that’s 100% true, cash is king.
JM: Absolutely, cash is king. It’s amazing what you can get away with cash. I’m not talking about using cash in a bad way, I’m talking about negotiating. Sometimes it helps to approach the store and say this is what I have and negotiate, cash is king. They might as well take what you’re offering.
CG: You’re listening to Old Mutual Live, the Money Coach edition, on demand, visit dogreatthings.co.za. John, let’s just recap, spending wisely in the Festive Season, what are the basics again?
The basics to getting it right in December
JM: Have a budget, have a vision and shop wisely. Compare prices, shop around. Use cash, cash is king.
CG: And start planning for that Festive Season now.
JM: Start planning for the Festive Season now. In fact, make sure that even when you get your money in November and December, take into account that January is going to be a long month. If you’re going to be paid early, pay off your normal debts as you usually do. Set, whatever your budget for transport to go to work, your back to school expenses. Make sure those things are catered before, before you start having fun.
CG: This has been another edition of Old Mutual Live, the Money Coach edition, my name is Chris Gibbons. With me in the Money Coach studio has been John Manyike, Head of Financial Education at Old Mutual. John, if the listeners want more information, where would they go?
JM: You can email us at email@example.com or even if you want to ask for one of our free financial education workshops. I’m saying ‘free’ because it’s made available to our customers and stakeholders at no cost. However, Old Mutual would make sure that we carry that cost as part of our social responsibility.
CG: Terrific and there’s also a Facebook page?
JM: You can like our Facebook page, which is On the Money Financial Education Programme or follow us on Twitter, which is OM_OnTheMoney.
CG: John Manyike, thank you for that. Please, get in touch any time if you have any questions, for either John or for me or for both of us. Any topics you’d like us to cover on Old Mutual Live Money Coach. Just feel free to send them direct to me at firstname.lastname@example.org. We’ll be delighted to hear from you. Until the next time, thank you for listening. Old Mutual Live, on mobile, on digital, on demand.