Embrace your inner Scrooge: that's probably your best financial strategy for survival this festive season.
A Deloitte survey shows two-thirds of South Africans want to spend less or the same this holiday season compared to last year. (On average, they want to curb their spending by 0.6%.)
This is in large part because half of those polled are concerned that they might lose their jobs – in 2008, almost 90% considered their jobs secure.
Hundreds of thousands of retrenchments have already wrecked household finances and debt payments have now reached almost 80% of disposable income. About 8.6 million South Africans now have negative information on their credit records.
Here's how to protect your finances this December:
Abel Tshimole, a manager at the National Credit Regulator, suggests drawing up a budget to determine what you can spend on entertainment, presents and other items. "Stick to this if you want to remain in control of your finances."
First, make sure you understand how much money you really have to spend this holiday season.
Have your bank statements at hand and be honest about what you'll have left after your regular monthly expenses, says Andy Gilder, general manager of the financial product comparison website Justmoney.co.za.
"And don't cheat by including how much you expect to get from a 13th cheque or annual bonus – if you are lucky enough to get a bonus, see it as just that, not a guaranteed way to get through the month."
Make a list of all your expected expenses – accommodation, entertainment, gifts, extra fuel - this holiday and make sure you know where the money for all of this will come from. If there's a shortfall, decide where you will have to scale back.
“Our data indicates that the biggest killer over the festive season is the flagrant use of credit,” says Gilder.
“Every January we are inundated with applications for two products in particular – debt management and debt consolidation options. I think this indicates that local consumers are relying on plastic to get through the festive season, particularly when it comes to buying gifts.”
He proposes that you keep to your spending limits with the “envelope strategy”.
Decide with your partner and family members how much you will spend on specific budget items (like gifts and entertainment).
Draw that money in cash and put the exact amount into sealed envelopes.
"No plastic, no extra cash, just the maximum amount you are prepared to spend,” says Gilder. “It should go a long way to ensuring you stick to the budget."
In the run-up to Christmas, also be wary of deals that entice you to buy on credit.
Don't get distracted by "no deposit" deals as these can often end up costing you far more in interest repayments over the longer term, advises Tshimole.
"It may make you feel better for a short while to splash out on feel-good gifts for your family, but remember that you'll be left with a high price to pay at the end of it," Tshimole says.
"If you fail to keep up with your repayments, you could lose your most valuable assets, including your home and car."
To avoid this, Gilder suggests drawing up a shopping allowance long before you head to the shops to get presents for the family.
Employ the envelope strategy, draw the cash and put the allocated amounts for gifts in different envelopes.
When you go shopping for presents, go with nothing more than the envelopes.
"A convenient side-effect of creating a ceiling on how much you are prepared to spend is that you'll suddenly find it easier to shop for your gifts – you can't be tempted into spending more than you bargained for and so your options become limited,” says Gilder.
Giving gift vouchers will also allow you to stick to your budget – or donate a specific amount to a good cause on behalf of your loved one. The online donations site Greater Good SA (www.myggsa.co.za) makes this very easy.
Some families opt for only giving gifts to kids – or a "secret Santa" strategy, where adults only receive and give one gift, to save money.
Avoid presents that may waste your money. Do your homework carefully to find out what the receiver really wants – otherwise your gift will end up at the back of a cupboard or being regifted to someone else.
If you are only seeing friends or family after Christmas, buy presents on sale in January.
When it comes to gifts for your children, make sure everyone understands what the budget is.
There is an interesting shift towards educational games for children under the age of 12, the Deloitte survey shows.
"It appears that current tough economic conditions have influenced the choice of gifts for children. Parents are putting a huge emphasis on educational games this year and this is possibly because in tougher times they are more mindful of the need to equip their children well for the future," says Kay Walsh, senior economist at Deloitte.
South African shoppers indicated a clear preference for educational games, followed by clothes/shoes and creative constructions (Lego, mega blocks, painting and drawings).
Local teenagers, on the other hand, can expect music, clothes and shoes and gift vouchers as the top gifts, the survey shows.
Saving for January
Overspending in December won't be that much of an issue if January wasn't such an expensive month.
"Consumers often forget that they still have to pay household accounts such as lights and water in the next year and will need to pay for other costs such as uniforms and school fees," says Tshimole.
Start setting money aside for all the additional start-of-the-year expenses early in the previous year.
Food prices at holiday destinations can be expensive and the price of meat usually shoots up during December. Try to plan your menus before you go on holiday, taking potentially expensive non-perishable items and frozen meat with you.
Car trouble over December will wreck your budget. Service your car before you go on holiday.
Also, given the alarming road accident rate in SA, it may be wise to consider taking out accident cover, which will pay out for costs not covered by your medical scheme and may cover a number of expenses in case of an accident.
This kind of cover is relatively cheap and no medical underwriting is required.
A financial firm recently launched an accidental insurance package (aimed at the peak driving season over December and January) for a once-off cost starting at R50. Cover, valid for up to three months, includes R500 000 for an accidental death and hospitalisation of R1 500 a day.
Don't be too hospitable
If you expect visitors this holiday, make sure they won't ruin you financially.
Try to be firm about sharing food and other costs.
Don't take a holiday from your problems
If you have a problem with debt, don't put off dealing with it until the New Year, when there's a rush of crisis-stricken people on creditors.
"Speak to your bank and try to negotiate a repayment schedule," Tshimole says. "Or talk to a debt counsellor and see if they can help you."
Start planning for December 2011
The best way to ensure that you won't overspend in the festive season is by saving for it.
Use a monthly debit order to put away an amount to use for end-of-the-year expenses.
Or start a stokvel with friends – peer pressure can be more effective than self-discipline. Every month each member contributes an amount, which is shared at the end of the year.
Suzette van Niekerk, a financial planner at Exceed Private Client Services, recommends paying school fees over 11 months instead of 12, which will give you some breathing space at the end of the year.
Booking and paying your holiday early in the year will also be cheaper, she says.
Stock up on Christmas gifts throughout the year at sales.