Six things you should budget for, but don’t

Don't let surprise costs like car repairs and medical costs throw your monthly spending plan out of kilter.

February 17, 2016

2 minutes read

MBOMBELA – Financially responsible adults tend to operate their finances in terms of a monthly budget.

In theory, a budget should structure your spending, but people deviate from their plans and expenses sneak in without being accounted for.

Surprise costs like car repairs, unplanned getaways, school trips and medical costs can throw a monthly spending plan out of kilter.

People lose control of their finances because they forget to take account of uncommon but important expenses, explains Mr Andrew van der Hoven, head of relationship banking at Standard Bank.

“These are relatively manageable expenses, but we routinely forget to consider some significant expenses as well, and these can wreck even the most carefully planned budgets.”

Van der Hoven says creating a budget helps you stay in control of your finances.

He recommends six things you must include in your monthly budget planning:

1. Taxes

If you are a full-time employee your tax bill is usually taken care of, as tax is deducted from your salary each month. However, capital gains tax from the sale of stocks or property, or other forms of income may trip you up if you don’t keep an eye on it.

2. Child maintenance

Both parents are affected by this obligation in the event of a divorce. The receiver of the support may budget for the income, but the liable parent may not hold up their end of the bargain for a number of reasons, so relying on this income can be a challenge.

Conversely, the parent who pays maintenance may be hit with unexpected bills outside of the agreed payment, such as medical costs.

“Putting aside extra cash for this expense is a good idea for both parties, even if it’s only a few hundred rand a month,” says Van der Hoven.

3. Needy family members

In tough economic conditions, we are often called upon to help family or friends out of financial difficulties. If the loan or donation will cause you financial hardship, consider options other than cash assistance.

“You are under no obligation to help, but if you know you will capitulate, this type of emergency must be planned for.”

4. Retirement savings

This is an old faithful, but many people make the mistake of focusing on the spending element of a budget, rather than the saving.

“Saving for retirement should be an integral part of everyone’s budget. See a financial adviser to get a realistic view of how much you will need to save to live comfortably once you stop working.”

5. Home and car repairs

Most people are reactive to home and car repairs and don’t think to budget for a new roof or tyres.

“If you own a car or home, you will eventually have expenses beyond insurance and petrol.

“Upkeep can be expensive if you leave it to the last minute, but if you save two per cent to four per cent of the value of your home and the same on your car, you should be able to manage unexpected costs comfortably.”

6. Holidays

People often plan a holiday on impulse, and rely on credit cards to cover their cocktails and canapes, but holidays cost a lot of cash and leaving this out of your budget could see you with big monthly payments.

“Vacations are a part of a balanced life, but not if you fall behind on other bills, as this will inevitably cause a financial imbalance.”