PERSONAL FINANCE: How to break the curse of Njaa-nuary

The year is almost over and the holiday season is near. Just like in other years, December comes with many demands for your money. From sales signs urging you to buy things at a bargain to Christmas trees laden with fake gifts reminding you to buy gifts for your loved ones, wallets are under siege. There are also requests for donations by organisations or people who urge you to contribute some money so that the less-fortunate get to have a happy Christmas.

By this time business has started to slow down and some offices are preparing to close for the Christmas and end-of-year holiday. This means more time on people’s hands to meet for random coffees and lunches and then there is the actual holiday plan. You may be travelling or having guests over, and even if you are the guest, you may not want to walk through your host’s doors emptyhanded. December tricks us into a relaxed, laissez faire mood which often loosens our purse strings. Then all of a sudden, January comes upon us like a rude shock. You see, while we were enjoying December, life went on. The rent, insurance and school fees fell due. After the long Christmas and New Year party, you come back to your life and remember that you still need to eat and your mortgage, credit card car loan and other debts still need to be paid, whether you are broke or not. Many people find themselves in a lot of trouble in January. Christmas will not wave a wand on your problems and obligations and drive them away, but with just two weeks to Christmas, what, if anything, can you do differently?

If you have been reading my articles, you know that there is a difference between needs and wants. Make a list of your needs and wants this holiday season (remember needs are things you cannot do without.) Eating is a need, but eating at a restaurant is a want. School fees is a need, but a designer school bag to go with the uniform is a want. Rent is a need, but paying for a holiday in a hotel or vacation home is a want. Now before you get scared, I am not telling you not to have any wants (fun) this season.

Just make the list so you can decide how to allocate the money you have at hand.  The first priority must be given to the needs. Yes, you want that new phone, that holiday that you had not paid for in advance and that meal at a restaurant, but you will suffer more if the rent, food and school fees are not paid for. So at this point it doesn’t matter what you want, deal with what you need.  List it down and calculate the amount of money needed. Do not get tempted with thoughts like negotiating with the school over a payment plan in order to have more spending money, or lying to the landlord that you got robbed, or that a meal can be skipped. That money (for your needs) has to be put in a separate account.  Your instinct over December will be to spend money. So don’t lie to yourself by keeping it in your current or everyday transactional account.  It should be in a place where you can’t access it easily e.g. via Mpesa, cheque or card. Even better pay for what you can in advance. Pay school fees now rather than waiting for January 3rd to do it.

Pay rent for December and January. Let your electricity bill for once be in credit. A lot of people I give this tip to are hesitant because they feel like the landlord or school is sitting with ‘their money’. Yes he/she is but this system is also saving you from the shop or bar that would otherwise eat up your rent. What we are trying to avoid here at any cost is falling behind on payments. If this has happened to you before, you will appreciate that it is possible to spend the rest of the year catching up.  And if you happen to borrow to keep up the bills, that becomes a new burden with interest costs.

REALISTIC PICTURE

Once you have a good grip on the needs, you now have a very realistic picture of what you can afford to spend on the wants. You should have a figure to work with. Chances are it will be nothing close to what you would have wanted it to be. That is OK.  You might find that after taking care of the needs, you can no longer afford to do some of the things you wanted to do, but that shouldn’t be a problem. You won’t die if you don’t splurge your money on December festivities. It is OK to find alternative ways of spending time with family, friends that do not involve a lot of money. So back to the figure that you may be looking at. You have to make choices. What is truly important to you?  If you bought a new phone but didn’t buy your children gifts, will you be OK with that? Is being able to travel for a weekend away more important to you than going out every night?  Is the furniture that is supposedly on sale more important than being able to help someone else? These are all individual choices, but to answer this, figure out what you will be glad you did when January comes. What will you remember? What do you value?  Time always passes and December too shall pass.  The holiday season is not and will never be a surprise, so if you want to spend it in a certain way, plan ahead for it.

Waceke runs Centonomy 101, a personal finance coaching programme. To sign up, email her at [email protected] | Facebook.com/centonomy