It’s important to fix your financial mistakes this festive season before you think about what to do with your finances this year.
Most of us also feel a little depressed after the holidays and usually go to the mall to do our back-to-school shopping, using the limited funds in our overdrawn accounts.
“As all retailers know, the average consumer is not immune to the temptations that cover the shelves and when we see the potential to pick the post-holiday blues, all good intentions go out the window and we often find ourselves in a worse financial situation than before,” said Corne Welman, head of franchise and financial advisor at Consult by Momentum.
Instead of telling consumers what to do with their money, Welman instead points out some things they shouldn’t do in 2023, such as not withdrawing money from investments for vacations, ignoring the power of retirement savings to reduce taxes, checking again. risk portfolio and not use emergency funds to pay for luxuries.
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Don’t take money out of your investments to pay for a vacation
Many people feel guilty or despair in the festive splurges, said Welman, especially when they are suddenly faced with school fees, work-related expenses and many overdrawn accounts when the new year begins.
The first port of call for most people is to use their savings or investments to pay off debt and move on, but that would be the wrong decision.
“This can lead to more risk with this disinvestment with factors such as market timing, currency and systematic risk destroying all your hard saved money and making you save more than a few months.”
He says it’s best to talk to a financial advisor and come up with a plan to deal with your debt in a way that doesn’t affect your savings or jeopardize your retirement plans.
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The power of your retirement savings to reduce taxes
Welman warns that consumers should not be caught in the trap of skipping one or more pension premiums, as they can eliminate the benefits of pension tax savings, which provide an easy way to increase disposable income for next year.
“However, invest this money wisely and where it belongs – into your pension – and take advantage of the tax breaks on offer to boost those savings.”
Review your risk portfolio for financial mistakes
If there is one thing the last three years have taught us, it is that our future is not always in our own hands, he said. Risky products, such as life insurance, income protection and disability cover may seem like a grudge buy, but they are essential to safeguarding the financial well-being of you and your family.
“At the beginning of the year, we may have the best intentions to review our portfolio with a financial advisor, but if you do not prioritize, you will find half a year ago and you are too late to leave this important task.”
Your risk profile changes all the time, along with your lifestyle and circumstances and it is important to review these changes and how they affect your cover in a timely manner, to ensure you maintain an adequate level of protection.
“Don’t think about reducing risk without professional advice. There are often better ways to free up funds that don’t have the potential to compromise your financial well-being.
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Don’t let us have an emergency fund to pay for the luxury of fair weather
After the pandemic, many consumers have a different desire to make a good holiday or buy expensive things to compensate for the hardships of the past few years. Welman suggests that you better look at what the pandemic has taught us: we don’t need material things – what matters is our health and our loved ones.
“We see how fast things change and know that the future is unpredictable. Therefore, we need to build an emergency fund because we do not know what lies ahead. Let’s learn from the past and not repeat our mistakes.
Also read: Stick to your budget to avoid stressful ‘Januworry’