Fix your 2023 finances by fixing your financial mistakes during the holidays

It’s important to correct your holiday season financial mistakes before you think about what to do with and about your finances this year.

Most of us are also feeling a little down after the holidays and usually head to the malls to do our back-to-school shopping, using the limited funds in our already overdrawn accounts.

“As all retailers know, the average consumer is not immune to the temptations that line their shelves and the moment we see a potential uptick in our post-holiday blues, all good intentions go out the window and we often find ourselves themselves. in a worse financial situation than before,” says Corne Welman, Franchise Director and Financial Advisor at Consult by Momentum.

Instead of telling consumers what to do with their money, Welman instead shares some things you shouldn’t be doing in 2023, like not taking money out of your investments for a vacation, not ignoring the power of your retirement savings to reduce taxes, review your risky portfolio and not use your emergency fund to pay for luxuries.

READ ALSO: Leave the budget in 2022 and start 2023 with a spending plan

Don’t take money from your investments to pay for a vacation

Many people experience feelings of guilt or despair about their holiday splurges, Welman says, especially when they’re suddenly faced with school fees, work-related expenses and a slew of discounted bills as the new year begins.

The first port of call for most people will be to use savings or investments to pay off their debt and move on, but that would be the wrong decision.

“This can bring more risk with this divestment with factors such as market timing, currency and systematic risk eroding all the money you have saved and holding you back for more than a few months of savings.”

She says it’s best to talk to your financial advisor and come up with a plan to manage your debt in a way that doesn’t affect your savings or jeopardize your retirement plans.

READ ALSO: Consumers paying off debt despite economic pressures

The power of your retirement savings to reduce taxes

Welman cautions that consumers should not fall into the trap of skipping one or more of their retirement annuity premiums, as they may end up negating their tax-saving retirement benefits, which an easy way to bolster your disposable income for the coming year.

“Rather, invest that money wisely and where it belongs – towards your retirement – and take advantage of the tax breaks offered to incentivize those savings.”

Review your risk portfolio for financial mistakes

If the last three years have taught us anything, it is that our future is not always in our hands, he says. Risk products such as life insurance, income protection and disability coverage may seem like grudge purchases, but they are critical to safeguarding your and your family’s financial well-being.

“At the beginning of the year, we may have every intention of reviewing our portfolio with our financial advisor, but if you don’t prioritize it, you see half a year has passed and you’ve left this important task too late.”

Your risk profile is constantly changing, along with your lifestyle and circumstances, and it is important to review these changes and how they affect your cover on a timely basis, to ensure you retain an adequate level of protection.

“Don’t even think about reducing your risk coverage without professional advice. There are often better ways to free up funds that don’t potentially compromise your financial well-being.”

READ ALSO: Proper budgeting can save you from financial ruin – here’s how

Don’t use your emergency fund to pay for good-time luxuries

After the pandemic, many consumers had a strong need to book a luxury vacation or buy something expensive to compensate for the difficulties of the past few years. Welman suggests that instead, you should look at what the pandemic taught us: We don’t need tons of material goods: the only thing that matters is our health and the health of those we love.

“We saw how quickly things can change and realized that the future is unpredictable. Therefore, we should build an emergency fund, as we never know what may be around the corner. We learn from the past and let’s not repeat our mistakes.”

Also Read: Stick to Your Budget to Avoid a Stressful ‘January Worry’

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