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It’s Wonderful to Be Generous but Beware the Financial Crisis
At this time of year, it’s wonderful to be generous but beware the financial crisis.
It’s the holidays; it’s a time when we tend to splurge on our loved ones and ourselves. We get carried away with the spirit of giving, and for some the list of people to buy presents for is endless.
It’s not only that the list is endless, but we want to buy the best. We don’t want the kids to miss out. As business owners, we buy the bigger more expensive presents as we feel guilty for not spending enough time with the family. We think that by being generous we make up for the time we didn’t attend a sports day, a parent day at school, a birthday party and the myriad of other events that are important to our family that we didn’t make important to us.
The challenge is how to fund this spending spree. December and January are the worst months for cash flow in many businesses. The combination of shutting down the office for a couple of weeks, team members on annual leave, and clients or customers not paying their invoices, all conspire to dry up the flow of money into your business bank account.
You’ve still got the bills to pay, the rent and wages. If you’ve done your budgeting and cash flow projections earlier in the year, you would have a buffer of money to cover these costs. But if you didn’t, you’re in for a financial crisis and a stressful time in the months to follow.
1. Personal spending budget
While I focus on the business budgets and cash flow forecasting with my coaching clients, it is important to have a personal and home spending budget which includes a budget for the holiday spending.
While this may be old-school, I think we can all learn from what my parents did. Dad gave Mum a weekly allowance to cover the essential costs each week. It was to cover grocery costs and treats for us kids.
My Mum kept a tight rein on the grocery costs (not that we missed out on anything) and managed to squirrel away an amount each week from the allowance. It was with that money that she bought our birthday and Christmas presents each year.
Now, I’m not sure whether some extra money was added to that, but I do know that the money she squirrelled away was for our presents. And again, like the food, we never missed out on the presents either. Sure, I never did get that horse I wanted, but we always got lots of presents.
2. Pre-Planning Gift expenditure
Pre plan your spending over the holidays. Put together a list of the people you have to buy presents for. See if you can cull that down. Put a budget amount against each person on the list and total it up.
Now go back again and consider whether you can cut down the spending on anyone on the list, particularly those who aren’t your immediate family. Can you make up presents yourself with some baking items or buy in bulk and divide it up into small packages.
Homemade gifts are well received by many people and often appreciated more than the store-bought equivalent. In this way, you can still be generous and give to the wider list of people, without it breaking your piggy bank.
When it comes to your family, while you don’t want your kids to be the only ones who don’t get the latest fad toy this year, equally you don’t have to mortgage the house for them to be happy.
3. Holiday costs
Take the holiday that you can afford. By all means, add in a few extras. But beware the trap of spending big on the holiday if you don’t have the cash flow to fund it.
There is a multitude of options to keep your kids engaged and happy without spending a fortune to do so. Think about what you can do around your home that doesn’t require paying for accommodation. For those who live in big cities, there is a multitude of options and places you’ve probably not been with the family that would make for a fun holiday.
Be Generous but Beware
If you can’t afford it, don’t spend it. If you do, you’ll be worrying about how you’re going to pay for it, and you won’t enjoy it at all. You will have a financial crisis in the coming months while you juggle paying the business bills and drawing funds from the business to pay for your holiday spending.
So, of course, be generous this festive season and give with love but beware of overdrawing on your funds.
“The opinions expressed by Smallville Contributors are their own, not those of www.smallville.com.au"
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