Avoid being a pay day millionaire

Six months into the year, South Africans are feeling the financial pinch as the full effect of the worst drought in recent years has started affecting food prices, while hikes in the interest rate, petrol and electricity prices are also a reality.

Avoiding being a payday millionaire is one way to get through the month with cash to spare. Most of us are guilty of this behaviour, at some time or another. We rush off to the shops on or soon after payday for our monthly shopping, but end up splurging on things we neither need nor can afford.

If this scenario sounds familiar, follow these tips to help you change your behaviour:

  • Formulate a Vision and always have financial goals to aim for in life. Speak to your financial advisor.
  • If you behave like a payday millionaire, analyse what causes you to spend unnecessarily. If it is the traditional payday family meal that busts the budget, pre-plan for this meal and set a tighter budget. If taking the kids with you to do month-end shopping means you buy things that you normally wouldn't, leave them at home.
  • Shop with a list - if it is not on the list, don't buy it. And only buy month-end grocery specials if it is items that you need; Consider doing weekly instead of monthly shopping. You benefit from special offers right through the month. So take your monthly grocery bill and divide it by four to give you an idea of how much to spend every week. Shop with a weekly list, and stick to that weekly budget.
  • Live the month in reverse if the last week before payday is difficult. Except for your fixed expenses that must be paid at the beginning of the month, mimic the last week of the month's spending in the first week and progress from there. This could leave you in a much stronger financial position before the next payday. If you have money left, save it or pay off debt. Don't forget these golden rules of good financial planning.
  • Draw up a monthly budget and stick to it.
  • Pay yourself first.
  • Pay off your debt as soon as you can and carefully consider taking on new debt.

John Manyike is head of Old Mutual's financial education unit.