How to build better spending habits

By Tanita Conradie, CFP®*

January has a way of sending you the bill for December: when the holiday is over, many South Africans are left with a knot in their stomach when they think about their bank account. It's that ‘how did I let this happen again?’ feeling.

If that sounds familiar, you're in good company. It happens to people at every income level, and I've had a few of those Januaries myself.

With the December break fast approaching, I thought this a good time to talk about ‘lifestyle creep’. This describes what happens when bad spending habits take over as your income grows, leaving less money for savings and investments.

And the December period is the perfect example of how we break our discipline and spend as if we’ve got unlimited income.

The problem is that this seasonal overspending can easily become a habit that’s hard to break. We’ve all heard stories about living beyond your means because everyone else is driving a flashy new car, taking extended overseas holidays or living in a palace of a house.

How to keep lifestyle creep out of your budget

The good news is that beating lifestyle creep doesn't mean giving up the things you enjoy. A few small habits, kept up through the year, make a bigger difference than any resolution we make in January.

It starts with knowing where the money goes, and I'll admit a budget isn't anyone's idea of fun. But it's hard to decide what's worth spending on until we can see what we're spending now, and it's often a surprise.

The same goes for a raise. When more money starts arriving each month, it's very easy for our spending to grow to match it without us noticing. 

Moving part of the increase into savings or your retirement fund on payday, before you get used to having it, means it's working for you and you won't miss what you never saw.

A year-end bonus is the easiest money there is to spend, because it feels like a reward for a year of hard work, and it is one. 

What makes a difference for many of us is deciding what it will do before it arrives: some for the emergency fund, some for debt or retirement, and a slice that's purely for fun, so you can enjoy that part without guilt. 

A new car can look like the perfect reward, but the petrol, insurance and maintenance keep coming long after the excitement has worn off.

Then there are the treats. Something we once saved up for can slowly become something we expect, and that's fine if you still love it. It's just worth asking now and then whether it's still a treat, or whether it’s become part of what you spend every month.

It also helps to remember what all of this is for. Whether it's an emergency fund, your children's education or your retirement, those goals are what your money is really working towards, and the more of them that are covered, the more you can enjoy the rest without a second thought. 

How that balance looks will be different for everyone.

Make next January feel different

None of this is about giving up the fun. If your goals are being looked after, go ahead and enjoy the holidays, the meals and the gifts. That's what all that hard work is for.

Picture the first week of next January: the bills are covered, your savings are still on track and there's nothing to dread. A little planning now can give you that feeling, and it doesn't have to be perfect. A few small changes are enough to start.

* Tanita Conradie, CFP®, is an advisor at Brenthurst Sandton.