The festive season is often accompanied by New Year's resolutions, outdoor activities and spending sprees. While you should use the time to blow off steam, it is also a good idea to get your house in order and to reassess your financial situation and investments - especially those in the real estate market. If you are one of the lucky few who received a bonus, you might be tempted to treat yourself to a holiday or some technological device. However, the New Year will most probably see a hike in insurance premiums, medical aid contributions, school fees and other expenses, and in the long run it would be to your benefit to use any extra money to pay outstanding debt. Financial advisors will often advise you to pay credit card debt first as it is most likely subject to a higher interest rate than other debts. If you are in the fortunate position of not having any short term debt (which is usually subject to much higher interest rates than long term debt like a mortgage), consider using your bonus for an additional payment on your bond. Extra payments on your mortgage will save you vast amounts of money in the long run. In addition, you could take some time to draw up a new budget and reflect on whether a property investment or reducing your current expenses is a good idea. If you are currently renting a house or an apartment, you could opt for a cheaper option. People often move to new cities or suburbs at the end of a year and this could be a great opportunity to get your hands on a flat to rent in that fantastic complex you've had your eyes on for while. If you need a bit more space, you could also take the time to look at advertisements of houses for rent in your local newspaper or on a reliable property website. Keep in mind that moving closer to work or to an apartment where the water and electricity expenses are included can also amount to substantial savings over time. Make a list of all the expenses associated with your living arrangements. Is there any room for reductions?If you have some money that you would like to invest, you could also consider buying real estate and renting it to a tenant. Recent house price data released by South African banks suggest that house prices are still under pressure and while there is uncertainty about when the market will finally show substantial growth, it is an opportunity for savvy investors to buy property at a very reasonable price. However, you should give the type of dwelling as well as the location careful thought. While the rental income in some suburbs will cover a significant part of your monthly bond repayment, certain locations will make it harder to find a reliable tenant and you will have to cover a larger percentage of the monthly installment yourself. You should also carefully screen any potential tenants - check their credit history, ask for copies of their pay slips and if necessary also for a referral by previous landlords. Property remains a great long term investment - just be sure you make an informed decision before you take on the real estate market in 2011.
