Money Management

How to Get Your Finances in Shape After the Holidays

December 27, 2022

Not proud of how you spent your money during the holidays? It is easy to lose control of your finance and go over your budget during the holidays. And this can be worse if you go into the holiday without plans or a budget. But all's not lost. You can use January to get your finances back in shape.

January provides a good window for taking control of your finances for many reasons. Temptations to spend are usually low. First, there is little peer pressure as your friends and family will also be looking to get their finances in order and with the holiday offers gone; everything will suddenly look too overpriced to buy. You can leverage this window and start 2023 on the right foot financially.

Even if you didn't overspend during the festive season, you still need to utilise the financial benefit of January. You might have that one bad habit you've been looking to drop or replace, and you can use this month to do that. This will allow you to start the new year with a clean slate and set a precedent for managing your money for the rest of the year.

This article will explore steps you can take to get your finances in shape after the holidays and what you can do to make the positive changes last the whole year and beyond.

Atone for your Overspending by Doing a No-spend January

After overspending during the holiday, a no-spend January can help you regain control of your finances. A no-spend challenge involves going frugal by cutting non-essential expenses and focusing on saving as much money as possible.

You will pay the normal bills like rent, food, transportation, and utilities. However, you will skip expenses such as eating out, save your discretionary and entertainment budget, and not buy new clothes or furniture or go for a weekend getaway. It might sound like self-punishment, but it is not. It is a practice that will help you reset your finances and can be rewarding in the long run.

Apart from helping you save extra money, no-spend January will help you change your bad money habits. You will be able to get your bad spending habits such as impulse shopping, people-pleasing, and paying for too many subscription services in check. It will teach you good habits like planning purchases, living within your means, and spending money on worthy thighs.

To complete a successful no-spend month, you will need motivation. Start by identifying your goal for doing it, create a viable plan, and track your expenses every day. When you slip, learn to forgive yourself and get back on track.

Join A Money-Saving Challenge

A money-saving challenge can be a helpful way to save money and develop positive financial habits. It can provide motivation and accountability to help you cut expenses to meet your saving goals. A money-saving challenge is important for people who dug into their savings during the holidays. It offers them a chance to get back on track.

Money-saving challenges can provide a structured and organised approach to saving money. This can be particularly helpful for individuals who struggle with saving discipline or are just getting started. These challenges make the process fun and fulfilling, helping you plan for the future, get your finances in shape and build a safety net without breaking a sweat.

Some money-saving challenges you can take on in January and use to save for your goals include:

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The 52-Week Challenge: This challenge involves saving a specific amount of money each week, starting with a small amount and gradually increasing it over the year. For example, you might begin by saving Ksh100 in the first week, then Ksh200 in the second week, and so on, until you save Ksh5,200 in the year's final week.
The Savings Jar Challenge: This challenge involves setting a specific savings goal and putting aside a certain amount of money each day or week to reach it. For example, you might set a goal of saving Ksh50,000 in six months to buy a washing machine and put aside Ksh2,100 per week to achieve it.
The 30-Day Challenge: This challenge involves choosing a specific area of your spending, such as dining out or entertainment, and reducing or eliminating it for 30 days. This will free up money in your budget to save for specific goals.
The Savings Sprint Challenge: This challenge involves setting a savings goal and trying to reach it quickly, such as in a month or a quarter. You can have a specific goal, such as saving Ksh60,000 in three months, and use various methods to reach it. The strategy can vary from cutting expenses and increasing income to finding ways to earn extra money.

Take Full Control of Your Money

Getting lost in the holiday festivities and forgetting about your finances is easy. When this happens, it is crucial that you take immediate steps to regain control. Failure to do this makes you susceptible to bigger troubles like financial instability, which can be devastating.

Taking control of your finances means setting a budget and making a plan to manage your money in a way that helps you achieve your financial goals and live comfortably. It involves making smart decisions about spending and saving money to help you reduce debt and build wealth. Other ways to get control of your finances include:

Prioritise essential expenses and focus on needs instead of wants
Track expenses diligently
Evaluate your attitudes and beliefs about money
Increase your knowledge about personal finance by self-education or talking with experts
Rebalance your investment portfolio as needed

Set Your 2023 Goals

With the new year starting, saying you will change your habits, invest more, or take more risks doesn’t cut it. You need realistic resolutions and goals that can keep you motivated to achieve your aspirations. And that requires more than writing a list. You must devise ways to ensure you don’t abandon your financial resolutions before Valentine’s Day.

One of the best ways to attain your goals is to set Specific, Measurable, Achievable, Relevant, and Time-bound— S.M.A.R.T. goals. To do this, break down your goals into smaller, more manageable steps. This can help you stay on track and progress towards your goals, even if they initially seem overwhelming. Let’s look at three examples:

Instead of having a resolution like “reduce debt in 2023”, - have one that says, “Pay off a certain amount of debt by a specific date, e.g., end of July.”
Instead of “Earn more money in 2023,” - say, “I will increase my income by a certain percentage every quarter.”
Instead of “build an emergency fund,” - say, “I will save a certain amount of money every for an emergency fund.”

Stay Clear of Consumer Loans

Consumer loans are a type of loan you take for personal use. Consumer loans are spent on purchasing personal goods or services. They’re different from loans incurred to start of business. In most cases, they can be a burden on your finances. This can be significantly worse when trying to get your finances in shape.

So why should you avoid them?

They are predatory: Most consumer loans have high interest and are short terms. For instance, if you take a consumer loan of Ksh50,000 from a digital lender, you will pay double-digit interest rates and expect to repay in a month. If you delay, you will be penalised and risk getting listed on CRB.

They lead to overspending: In most cases, you will likely take consumer loans to pay for something you can’t afford. This shows you have bigger underlying problems, i.e., living beyond your means.

Overreliance on consumer loans can slow down or prevent you from successfully reshaping your finances after the holidays. You will put your future earnings at risk preventing you from saving. And worse, you will be at risk of getting into a debt trap that can sink your finances further.

Prepare For Significant Life Events Of The Year

Good or bad, small or large, planned or unexpected, many events can happen between now and December. Some of these events can have a significant effect on your finances. You must start preparing for them in January to prevent them from ruining your finances.

There are many ways to prepare depending on the type of event. You should build emergency funds for unexpected ones like a car breaking down, medical bills, or funeral costs. A rainy day fund will prevent you from financing these events using your savings or debt.

Additionally, you should get ahead of your planned events, like getting married, having a child, or traveling. Open a goal-saving account after budgeting how much it will cost and start saving. You should keep this money in liquid investment vehicles. It will make them easily accessible whenever you need them. You should also consider getting all the vital insurance that could prevent you from overspending out of pocket.

Protect your Income

Loss of income is a hanging cloud that gives most people, especially the employed ones, sleepless nights. You are always at risk of being deprived of your ability to make money. This can happen for many reasons. Sometimes it's self-inflicted, but in most cases, for reasons beyond your control. Maybe you got ill or disabled. Or your company closed or performed retrenchment. All these events can render you jobless.

If you don't prepare to protect your income, you will find yourself in a financial crisis when it happens. If you don't have backups or plan to get back on your toes in case you lose your job, you should use January to start creating those plans. You can take various steps to prepare yourself for loss of income. Some common ones include:

Investing in income protection and disability insurance that can replace a part of your income
Investing in income-generating assets
Having a solid emergency fund that can last you until you find a new job
Learning new skills and improving existing ones to improve employability and keep you valuable to your current employer
Creating passive income streams by starting a side hustle, freelancing, or consulting

Replenish your Emergency Funds

Did you use up your emergency funds in 2022? Then, you know how useful they were when they came in handy when you needed them most. To protect yourself and ensure that you weather any financial storm in 2023, you should prioritize replenishing your rainy day fund ASAP.

There are multiple steps you can take to achieve that. The easiest one is prioritizing this goal and saving for it aggressively. While it helps you rebuild your emergency fund quickly, it will have other drawbacks as you might need to pose your other goals. Some other steps you can try are:

Cut expenses and track spending to free up some money to replenish your emergency account
Find ways to generate extra cash, like selling unused stuff, renting out your belongings, etc.
Increase your income by asking for a raise or starting a side hustle

WRAPPING UP

When in the process of getting your finances in shape after the holiday, the most important thing you need to do is develop the right money mindset. This will help you stay on track in January and for the rest of your life.

Changing your habits and learning to hold yourself accountable takes time and effort. Going into 2023, commit yourself to taking the necessary steps to improve your financial situation and keep yourself educated. Learning about personal finance can help you make better financial decisions and give you the knowledge and skills you need to manage your money effectively.

Finally, avoid repeating your mistakes. Start planning for the 2023 holidays now. Saving Ksh3,000 every month to build your holiday fund will prevent you from having to use your savings during the festive seasons.

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Farah Nurow is an experienced Content Writer who enjoys writing creative and educative articles meant to provoke readers' thoughts. He loves sunny weather and thick books. You can connect with him on LinkedIn.