The festive season is usually a wonderful time of the year for many. We get to relax after a long hard year, we get to spend time with loved ones and catch up with people that we have seen little of during the year.

It’s also a time when we generally have a few more pennies in our pockets because of bonus payments, and in the spirit of the season we tend to be a bit loose with our spending habits. Unfortunately January tends to be a bit of a wakeup call for many. Normal expenses persist, and new, often one-off expenses tend to appear, like back to school expenses. Some expenses such as petrol, airtime, food and entertainment also tend to increase over the festive period. We have extra time on our hands, and the need to entertain the kids is ever present.

Salaries often get paid early in December and then again towards the end of January which means that there is a much longer gap between incomes. This puts strain on the December income to fund expenses until the January salary is received, putting people under pressure to take on new, expensive debt. How does one beat the January blues and prevent festive cheer from becoming a financial hangover? We propose the following plan of action:

Craig Gradidge gives a few tips on managing your cashflow during the December holidays and surviving the January blues.

1.       Budget

They say that money is an evil master, but a good servant. The best way to reduce money to the title of servant is to run an effective budget.

Sit down with your spouse/partner before the middle of November and discuss the plans for the festive season. You want to get a plan in place for December and January, so have separate budgets for December and January, allocate relevant expenses and income to the two budgets. It’s important though that both budgets are drawn up at the same time for increased effectiveness. List your usual monthly expenses, and then incorporate a section for expenses arising out of the plans for the festive season. As far as possible, estimate and list all expenses that you expect will be incurred. Then write down all expected income such as salaries and bonuses, stokvel payouts, etc. It’s also important to include some provisions for unexpected expenses that will arise. Throughout this exercise it’s also important to be realistic about expenses and incomes.

If one has a regular savings or investment contribution it’s important to stick to these as far as possible.

Once all expenses and incomes have been listed, compare them to see what picture emerges. Is there a shortfall? How big is the shortfall? Is there scope to cut back on some expenses? The trick to an effect budget is honesty. If you are going to knowingly underestimate expenses just so the budget can balance then this will be a worthless exercise.

2.       Communicate

Once the budget has been finalised it’s a good idea to discuss these with the family, including the children. Often the hardest thing to do is effect cut backs that affect the children. However, the effects of financial distress can be more detrimental to the kids than a cheaper gift or fewer visits to the movies. Some argue that one should not burden children with financial affairs. Our position is that the sooner children understand that money is not in endless supply, the better. The important thing is to be open and honest about what is possible and what isn’t.

3.       Revisit the budget

It’s important that a budget is seen as a working document and not a once off exercise. To improve the effectiveness of the budget it should be revisited on a frequent basis to ensure that all is on track. I normally run my budget on an excel spreadsheet and delete expenses as they are paid. I can then quickly reconcile the amount of outstanding expenses with what is in the bank. It’s useful to revisit the budget before spending on big ticket items such as gifts, or where there is scope for variability such as grocery shopping. This helps in maintaining control over expenses.

The beauty of a budget lies within its simplicity. However, it requires discipline and honesty in order to be effective. Budgeting remains the cornerstone and foundation of good money management. It shows its value during times such as the festive season when income and expense patterns are significantly disrupted.