It’s that time of year again when our financial planning will be put to test. It’s true that the holidays bring so much cheer, but the expenses that come with it can also bring out our inner Grinch.
Most Filipinos are guilty of overspending during Christmas holidays. For one thing, we want to give the best presents, throw fun parties, and prepare a lavish feast on Christmas Day in the hope of making the occasion more memorable. For another, we just can’t resist the discount deals that tend to sweep over the malls during the –ber months. While all these can cause our money to flow out fast, preparing well in advance to make the numbers add up will do the trick. Here are some effective strategies to follow so you avoid overspending:
Save before you spend
In the hierarchy of priorities, some people tend to put “saving” at the bottom, not realizing that it’s important to set aside a portion of their paycheck for the rainy day.
Make an effort to create a budget and stick to it. A good starting point is by saving at least 10 percent of what you earn. You can use this as your holiday budget once the “season of spending” starts, but make sure to figure out first what you can afford and decide on your spending limit.
Setting aside 10 percent of your income is the modified version of 50-30-20 rule. The 10 percent savings is only part of it as you have the rest of the 90 percent to allocate expenses for. As a general rule of thumb, put 50 percent of your income toward necessities that are non-negotiable such as groceries, transportation, bills, rent, and the like. Thirty percent of your income may be allotted for your wants, like that movie you’ve been meaning to see, or that pair of sneakers you’ve been dreaming to buy. Since we already established that 10 percent of your income will form part of your savings instead of 20 percent, you can use the remaining 10 percent for occasional indulgence or unexpected purchases - a cab ride that will spare you from being late, a coffee break that will make you function better, and whatnots.
The 50-20-30 rule is a basic guide for spending and saving, but you’re free to tweak it to whatever works for you. The most important thing is you make it a point to save before you spend.
Keep a cost diary and a piggy bank
Keep the receipts if you can, too. When you keep track of your expenses, you will be reminded of how much you’ve been spending on certain areas of your routine and lifestyle. When you identify which aspect you spend most, you get to make the necessary adjustment almost immediately. This is one of the most effective means to stick to your budget. It is easy, it isn’t time consuming, and there are even apps that keep track on your spending.
Keeping a piggy bank also works. You can start by putting the loose change or spare coins at the end of the day. It may not be much but you’ll be surprised by how much you’ve earned once you’re ready to crack that piggy bank open.
Avoid the credit card, limit yourself to cash
The idea of being able to afford anything is tempting, but just because that cute black dress is up for sale doesn’t mean you should grab it. Before you swipe your credit card, make sure that you don’t end up busting your budget. A credit card’s purpose after all is to lend you money - money that you do not currently have – but with corresponding interest.
Once you learn how to limit yourself to cash, you may also start carrying only larger bills. Bills in smaller denomination are said to be easier to spend than a single one thousand peso bill.
Let it sit in the cart
The convenience of online shopping is what tempts buyers to load up their cart. No holiday traffic, no long queues to the cashier, and no sweaty people trying to pass through you to get to the shoe section. It is just you and a virtual shopping cart that is almost too easy to load. With online shopping, the items that you’re looking for are just a click away so it’s quite tempting to go on a shopping spree. Chances are, the items that need and those that merely strike your fancy would end up in your cart altogether.
When this happens, let the items sit in your cart overnight. That way, you’d have enough time to reconsider your purchases and remove the unnecessary stuff once the initial thrill has passed.
Reconsider those ‘sales’
It’s the holiday season so don’t be surprised that sales and promos are everywhere. Now if you’re spending an extra P400 in order to get that 10 percent discount, then you’re only cheating yourself. If your cart needs a thousand peso worth of purchases so that you can avail of free shipping, try to do the math and see if the numbers still add up. These seemingly good deals will make you feel like you’re winning but they’re just trying to get you to buy more.
Bundled products that are on sale would also induce impulse buying because they would make you believe that more is cheaper. This kind of thinking will convince you to buy that 10-pack Christmas chocolate that’s probably expiring soon. After all, bundled products gives a false impression that you’re getting more for what you’re paying. The least you can do is muster the courage to turn away, otherwise you’ll find yourself hoarding instead of saving.
Sure, the holiday spirit is all about giving and merriment; but sometimes, it can be a budget-buster too. This is why it is important to save and spend wisely to make sure that you won’t start the year with a huge debt haunting your paycheck. Christmas is the most wonderful time of the year so don’t let your holiday expenses ruin the experience.