Spend this Christmas or save for New Year

 

Ugodre Obi-Chukwu

I was packing my stuff from a friend’s house some years back in Aba in anticipation of a return to Lagos. The air around town was that of frenzy even though my mind was thousands of kilometres away. As we chatted about what plans he had for Christmas, he bluntly told me this was going to be a very dry Christmas for him and he had no shame about it. There wasn’t going to be any Christmas clothes, parties or ceremony. He was going to go low-key with rice and chicken the only exception. I was surprised because he had a good job and earned a reasonably good salary.

For most families, this is a period for holidaying, house warming, partying, launching and splurging in general. Traditionally, this is the period where prices of goods and services go up as people empty their accounts to spend in readiness for the yuletide. The pressure to spend will be there – our children, relatives, spouse, friends, colleagues, marketers, and the beautiful advertisement we see on TV. There is little reason to go low-key even though come January, many will start the New Year very broke and the cycle of hardship begins on a rather bearish note.

This makes me wonder, do I spend big and save little or spend little and save big? I think it depends on these factors:

Income

I want to believe that the amount of money you spend come Christmas will largely depend on your income for the month. The strange thing about December is that the salary you get (which is typically paid early) is meant to be spent in January whilst November salary is for December. However, the season and all the frenzy it comes with make us believe that December salary is for December. For those who earn a “thirteenth month” salary, spending for Christmas in December is an easy decision to make. However, if your November salary is not enough for you to spend for Christmas then you might as well consider having a low-key celebration.

Debt

A lot of middle class Nigerians are getting very used to consumer debts such as car loans, credit card debts, personal loans and even mortgages. It’s quite understandable considering the rate of growth in the economy. The end of the year is also when you should take a look at your financial situation to be sure the year went according to plan. If you have a high debt then I suggest you consider liquidating a huge part of that debt over spending for Christmas. If you have a poor financial standing then December is certainly not the best time to borrow.

Budget

The word budget always sounds dry to a lot of people because they believe it hardly works. I understand that but then I also think the act of getting to write down a budget gives you a bird’s eye view of your spending expectations and its limits. By the time you scribble down how much you plan to spend on clothes, Gifts, Rice and Chicken, Parties etc. the picture becomes much clearer and you have no choice but to push back. Prepare your budget and be ready to cut back when it is clear things will be hard in January.

Economy

The Nigerian economy is currently facing tough economic crunch. The fall in crude oil prices and the attendant devaluation of the naira is sure to affect the prices of goods and services in 2015. Bearing this in mind, I expect everyone to tighten their belt and keep some money aside for a very difficult 2015. The year is also an election year, so government will probably not start executing its budget until later in the year. There have also been many who opine that the devaluation of the naira and falling oil prices may affect jobs and disposable income. If it looks like your job is in a vulnerable sector of the economy, then I suggest you choose saving for January over spending in December.

School Fees

This is another important cost most will have to bear as early as the first week in the New Year. Christmas holidays are typically short for most schools as they reopen immediately after the New Year. For example, children in universities will need to go back with pocket money and school fees (if it is a new semester). Children in secondary schools and below are obviously beginning a new term and will require that their school fees be paid up-front. If you do not have this set aside already after you receive your December Salary, then I suggest you do. That could also mean sacrificing spending huge this Christmas for saving in January.

Targets

Most people should by now be preparing to announce their New Year resolutions to either themselves or to anyone who cares to listen. Your resolution is essentially your targets for the year and should in fact include your financial expectations. As mentioned above, the way you end the year is critical to how the New Year will start and run. Your closing cash balance this year will be your opening balance for the New Year. If you do not plan to have a positive opening cash balance because of Christmas, then I suggest you change your mind.

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