Whoever made the observation that “money is like air, if you don’t have it, you won’t breathe” was right because in January, most of us are cash-strapped and feel as though we can’t breathe.
But the little you have left can sustain you until that glorious payday arrives if you use it wisely. Charné van der Walt of Stellenbosch-based Lemons into Lemonade, a financial planning company, says the first step is to pick yourself up and move on.
Yes, we’ve splurged and swiped, sometimes for things we didn’t really need but Charné says, “Feeling guilty or pity for yourself will not change anything. It will only add to your stress and prevent you from thinking creatively about possible solutions to your financial situation to get you through the month. Look at yourself in the mirror and say out loud: ‘Okay, I’ve made a mistake. It’s over. I will not let this define me and I will get through January.’”
Charné adds that this kind of attitude will get you through tough times.
Here’s what you can do until your next payday:
1. Prioritise
Create a budget. Yes, it might seem ridiculous because you have little money available but this is the only way to spend your money smartly.
Angelique Ruzicka, the editor of personal finance website justmoney.co.za says: “You have to be honest with yourself about what you can afford and what you can’t. Prioritise the essentials such as bills and school fees, and cut back or, preferably, eliminate the luxuries such as dinners outings or going out to the movies.”
2. Cut down on unnecessary costs
It will be worth your time to go through your budget again to see if there’s any other costs you can eliminate. Take transport, for instance, with petrol being sold at around R13 a litre, it takes an enormous chunk out of your budget.
Angelique says, “Travelling by car can be really expensive. You have to pay for petrol and parking, among other things. See if you can save money by commuting to work using public transport or joining a lift club.”
If travelling with other people in a car is a bit too personal, then find out if there’s a bus service you can use. Don’t feel sorry for yourself about having to use public transport, rather take it as an opportunity to read a book or even write one.
The other big expense people make is buying takeaways for lunch. We waste thousands of rands throughout the year on lunches every day. So, for this month, take last night’s supper leftovers to eat at work instead; but you must have groceries to begin with.
One way to do this is to shop smartly.
“Downshift to a cheaper brand and reap the rewards. If, for instance, you always buy the premium brand of margarine, downshift to the retailer’s own brand or a cheaper brand,” says Angelique.
You can also register for free for reward cards where you can qualify for additional savings or get coupons you can spend in-store. Also, make sure that you create a meal plan for the week or month. This way, you can buy only what you will use to prepare dishes.
Financial expert Charné van der Walt gives tips on how to get your finances in shape for the new year:
- Make an appointment with a financial planner and review (not necessarily replace) your life assurance, short-term policy and/or your investments.
- Go through three months’ bank statements and make sure you know how much you’re spending.
- Make a list of financial dreams and goals and split them into short- (one to two years), medium- (up to 10 years) and long-term goals (more than 10 years). Make notes about how you can make them a reality.
- Surround yourself with people who’ll support your financial sacrifices in order to reach those dreams and encourage others to do the same.
- If you can afford to pay double the minimum amount for the rest of the year on all your active accounts, do it. It will save you a lot of money.
3. Negotiate with your creditors
Free up some extra cash by finding out if you can make an arrangement to skip certain payments, just for this month.
“It has become difficult to make payment arrangements with credit card companies and clothing stores other than paying the minimum amount owed, so if you can do that at least, great,” says Charné.
“On all your other expenses, find out with whom you can maybe skip full payment and catch up in the next month or three. The key here is to communicate and have consent to do this as this can negatively influence your credit record if you do it without authorisation. Do this using preferably an email so you have proof in writing of your temporary arrangement. You could also negotiate with your insurance company.
“Some have an option to skip a premium or two on certain investments but don’t use this unless there’s no other choice (these ‘premium holidays’ are normally limited on the policy’s lifetime so rather keep them for real emergencies),” she adds.
READ MORE | ‘You can’t be a payday millionaire and broke the day after’ – 5 excuses why we overspend
4. Hibernate
A vibrant social life with endless dinners out with friends is a major budget drainer. Angelique suggests putting the party on pause. If you’re going out, do it with a strict limit on what you can afford to spend.
“Avoid situations where you might be forced to split the bill. There’s always someone who spends more on dinner than you do, and you don’t want to pay for someone’s lobster dish when you are struggling financially.
“It’s not fair on you when you’ve tightened your belt and ordered the soup of the day when someone else expects you to pay for their fine dining course. When it comes to a birthday, explain to your friend in confidence that you are struggling financially and promise to buy them a gift when you can afford it. They will understand,” she says.
READ MORE | Get money savvy – 5 expert tips to start saving in your youth
5. Resist the loans
If, after trying all of the above, things still feel incredibly tough, don’t go for a payday cash advance.
Angelique says, “While these could help you out in the short term, they could create more financial headaches for you in the long term. Payday loans are expensive (you are charged a lot of interest) and they can get you into debt even more deeply. If you are going to take on any form of credit, do some research first to see whether there are any cheaper forms of credit available.
“Find out what the interest rate is on your credit card and how many days interest-free credit you have available. If your credit card interest is cheaper than the payday loan, for instance, rather use your credit card.”
As much as January is a difficult month financially, it’s also a good time to reflect on where you want to be in 10, 20 or 30 years. Write down what you need to implement now in order for you to reach those financial dreams.
