Finances in Order This Winter

The holiday season is upon us. For most people, it is the merriest few weeks of the year with lots of rich foods, partying, spending time with friends, and gift-giving.

But while this can bring us all a lot of joy, it also can also cost a small fortune. In the UK, the average adult will spend around £500 on gifts alone, totalling around £27 billion. According to the Bank of England, household spending in the UK rises by around 29% in December when compared to the other months of the year.

For someone earning the UK’s minimum wage (now called the Living Wage), that would mean working more than 122 hours of overtime if you factor in the typical deductions of Income Tax and National Insurance.

The same is true in other nations. In South Africa, spending during the festive season rises by around R5,673 per person, adding R210 billion to the economy. Meanwhile, things are even more expensive in the United States where the average American spends around $1,000 during the holiday season.

With so much to spend, it’s no wonder that some people can find the end of the year fiscally difficult. With that in mind, you might be looking for ways to get your finances in order to help make things easier. Thankfully, there are some simple steps you can make.

Set a Budget

Setting a budget is one of the most important things you can do to get your finances whipped into shape. Your budget will help to give you a better understanding of your income and outgoings, let you see how much you can spend on different things, and provide you with a baseline from which you can measure any other money-saving techniques.

While setting a budget is important, it doesn’t have to be difficult.

There are many ways that you can do it, including the low-tech method of writing it out with a pen and paper through specially-designed smartphone apps that can help you set a budget and track your real-life spending against it.

No matter which way you do it, your budget just needs to list your sources of income (such as from a job, savings, investments, or a pension) and then subtract your expenses. You should start with your “fixed expenses”, these are ones that you have to pay every month, such as rent, property taxes, and utilities. You can then see how much is left and assign it to different categories like saving, investing, entertainment, and discretionary spending.

If you’re feeling the pinch this holiday season, then it may also make sense to allocate a small amount to a “festive fund” to spread the cost of gifts, decorations, food, and parties.

It’s a good idea to save the same amount every month rather than “saving what’s left”, because it prevents you from falling into the trap of continually saying you’ll start putting money aside next month.

It’s also important to have some cash in your budget for things you enjoy, whether that be buying new clothes, going to watch a sports game, or having a meal out with your friends.

Monitor Your Budget

A budget that sits in your desk drawer under a pile of other papers or in an app that never gets opened again is about as useless as not having one at all.

That’s why it’s important to monitor your spending and compare it against your budget on a regular basis. As you first start getting your finances in order, it is likely that you’ll need to give it more attention, but over time, you can probably look at it less frequently.

Again, you can do it manually by just adding up how much you spend on each category, noting it down on a piece of paper. Alternatively, many apps can connect to your bank account and automatically categorise your spending for you. Some banks are also beginning to add these features to their own apps, making it even more convenient.

Monitor Your Budget

Monitoring your budget helps you to spot when you’re close to overspending, giving you the warning you need to reign in your purchases until the calendar changes again. In the first few weeks and months, you may notice that you need to tweak your budget a little as you gain a better understanding of your spending habits.

Once you’ve got a clearer picture of where your money goes, you can also begin to trim small amounts of your discretionary spending to allocate more to your savings and/or investments each month.

Find Ways to Save On Your Spending

Once you’ve mastered your budget, you can also begin making additional savings on the things you’ll be buying anyway.

Finding discounts, coupons and promotions is a great way to do this, provided that you only use these tools to cut spending on something you’d have bought anyway. For example, a 50% discount on a new coat is not actually a saving if you wouldn’t have purchased it without the discount.

You’ll likely be surprised at the things you can find money-saving tricks for. As well as all the typical things like groceries, you can cut your spending on many activities like going to the movies or dining out by choosing to go during off-peak periods, looking for coupons, or joining a loyalty programme.

Additionally, gamers have a few different tricks they can take advantage of. Free-to-play games have come a long way in recent years and now offer similar quality to paid-for blockbuster titles. For example, the free Call of Duty: Warzone uses the same game engine as the paid Call of Duty: Vanguard.

Similarly, online casinos also sometimes offer free spins to players as part of promotions or for completing challenges. These spins can be used to play video slot games in the same way as a real money deposit, though there may sometimes be some extra terms attached to their use.

Using tools like Google Shopping can also help you to save money on the things you buy by helping you compare offers from different retailers for the same products. You can also do this for financial services like credit cards and insurance by using websites like MoneySuperMarket.

By saving money with these techniques, you can still enjoy yourself while keeping more cash in your pocket. You can then choose to bank some of these savings or get more for the same proportion of your budget.