Getting paid earlier than usual brings welcome relief during the festive season when we will inevitably spend more than usual. But before you rush out to blow your salary, remember it needs to last up to 40 days before your next salary comes in!
Statistics show that there is a significant increase in the number of so called “pay-day” loans around the beginning of January. This is because households have spent that early December income before paying their end-of-month bills. In many cases, they have not put money away for January expenses. Take the following steps if you want to avoid a financially stressed start to 2018.
Prioritise your regular expenses and pay all your end of month bills as soon as your salary hits your bank account. An early payment into your mortgage or vehicle finance has the added benefit of saving on interest. If you have debit orders that you cannot change, calculate how much you need to keep aside. If you’re not disciplined enough and worried you may end up spending the money, put it into a savings account linked to your bank account.
Hot tip: Make a note to transfer the money back into your transactional account before the debit orders are due.
Make provision for January expenses such as school fees, uniforms and books. You can also transfer that money away into your savings account to ring-fence it.
If you received a 13th cheque or even a tax rebate, there are a couple of ways to use the extra cash to improve your finances. You don’t have to do them all, but commit to selecting at least one:
- Take your smallest debt, pay it off and then close the credit facility. There is no point in using this windfall to improve your finances only to be back in the same situation the following year.
- Start/boost your emergency fund. You just need to start with R10 000 put safely away for unexpected life events so you won’t have to worry about keeping credit lines open. If you already have a basic emergency fund and your debts are paid off, then focus on growing that emergency fund to cover three months of expenses.
- Save tax and boost your retirement provision. You can invest up to 27,5% of your bonus tax-free into your company retirement fund or personal retirement annuity.
When your bills are paid, some debt settled and savings put aside, you can spend the remainder of your paycheque on celebrating the festive season, guilt-free.
Until next time, take care.