After such a long and challenging year, many of us are looking forward to throwing ourselves headfirst into the holiday season, during which we will lavishly spend money on our loved ones and ourselves. When it comes time to confront the repercussions of the financial mistakes we made, well, isn’t January the month for that? 

According to the findings of the Financial Sector Conduct Authority’s (FSCA) Baseline Financial Survey, which was made public earlier this year, all indicators of financial literacy in customers have fallen, one of which is “financial control.” The loss of financial control is not a good omen as we head into the holiday season, which is typically a time of year that is linked with spending that is not kept under control. Despite the fact that this overall decline is quite troubling, it is not looking good. 

Keep in mind that not having proper control over one’s finances is directly related to having debt and that the use of credit is on the rise. Based on TransUnion Industry Insights Report for the second quarter, credit card origination quantities (the assessment of accounts created) increased by 37.9% year-on-year in the first quarter of 2022. This is in stark contrast to the year-on-year decrease that was seen during the same period in 2021, which was 42.7%. In addition, it was found that roughly three-quarters of all cards originated from Gen Zs and millennials, which indicates that younger customers have an increasing desire for credit. 

According to the findings of the poll, those on the lower part of the real incomes measurement scale dealt with income shortfalls by borrowing money from relatives and friends, while those on the higher end of the scale decided to liquidate their savings. 

Income is not necessarily a factor that influences or is linked to one’s ability to regulate their finances. People in higher LSM categories frequently do not make use of fundamental financial skills such as saving and budgeting when they should. However, the repercussions of their inability to cope tend to be substantially less serious compared to those at the other end of the spectrum. As a result, consumer financial education programs prefer to focus on these segments because they are the most likely to benefit from the education. 

How Much of the Control Are We Actually Able to Take?

But aren’t South Africans merely victims of our circumstances, what with the unstable economy, rising petrol, and grocery prices, loadshedding, crime, and the lack of available jobs? How much of the reins of the financial ship do we truly have in our own hands? The great news is that it’s even better than we thought.

The degree of extrinsic and intrinsic control that we have over our finances is determined by a combination of these two types of influences. The former are typically referred to as macroeconomic factors, which can include productivity, development, unemployment, inflation, or deflation, as well as investment. They might be thought to be beyond our ability to control, such as being laid off from our job. 

However, even while we might have less influence over the external causes, we still have a say in how we react to the events that are related with them. For instance, we do not have control over inflation, which causes our income to have less purchasing power than it did in the past. What we are able to exercise control over, however, is the manner in which we will alter and control our budget in light of this reality. 

On the other hand, internal factors are those that have to do with the decisions that we as individuals come to after weighing the available resources, costs, and alternatives. We have a much greater degree of control over these. It is essential to our overall financial well-being that we have a solid understanding of the distinction between external and internal causes, as well as the part that our own decisions play. 

How Do We Have Control Over Our Finances?

Maintaining financial control is analogous to maintaining physical fitness in the sense that you need to consistently use these muscles in order to stay one step ahead of the competition. When the concepts of financial control are rigorously used, it will lead to better decisions regarding money. When it comes to where, when, and how we spend our money, practicing thoughtfulness and restraint will, in turn, assist us to better improve our sense of monetary control. 

The creation of a budget is the first step. As an expert in consumer financial education, I instruct individuals on the foundational concepts of financial literacy. When I inquire as to whether or not they have a budget, the most common response I hear is “I do keep a budget, but I don’t jot it down – it’s in my mind.” 

In our experiences, we have discovered that the best approach to increase budgetary management is not only to visualize our budget but also to note it down and put it into action. Doing so is the most effective method to do either of these things. Comparable to following a diet, the more we exercise self-control, the more comfortable we will become with it, the more our self-assurance will increase, and the better we will feel about ourselves. As we get towards the end of the year, it is more crucial than it has ever been to keep a firm grip on one’s financial situation. 

Around this period in the year, the vast majority of working individuals are awarded their yearly bonus, and December paychecks are frequently issued earlier than usual. When we have a solid understanding of how money may be used as a tool, it is much simpler to keep our spending under control, despite the fact that the current status of South Africa’s economy makes it difficult to accumulate savings and keep them intact. 

“You cannot always control what is going on outside,” the writer and keynote speaker Wayne Dyer once observed. However, you are always in charge of what occurs on the inside.”