BUDGET BUSTERS: Six things to add to your monthly budget

Creating a budget can help you keep control your finances, but people often come undone by forgetting the uncommon, but yet important, expenses.

In theory, a budget should structure one’s spending. However, human nature often leads a person to deviate from their plans, allowing unplanned expenses to sneak up on them.

Unexpected costs such as car repairs, getaways, school trips and medical costs can throw one’s monthly spending plan into disarray.

“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,” said Andrew van der Hoven, Head of Relationship Banking at Standard Bank.

Mr van der Hoven listed the following six expenses people often forget to budget for:

1. Taxes:

If you’re 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.

“If you earn income from sources besides your salary, then a good tax adviser is worth their weight in the money they save you. The self-employed are also vulnerable to tax short-falls, so a tax adviser is even more important for this group of individuals, especially if they are VAT registered,” Mr van der Hoven suggested.

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. Relying on this form of income could be challenging.

Conversely, the parent who paid the maintenance could 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 parents, even if it’s only a few hundred rand a month. This can provide a lifeline if payments are not made or extra money is required to support a child,” said Mr van der Hoven.

3. Needy family members:

In tough economic conditions, people are often called upon to help family and friends out of a proverbial financial rut.

“If you have not budgeted for this possibility, it could upset your cash flow,” Mr van der Hoven pointed out.

If the loan or donation will end up causing you financial hardship, consider options other than assistance in the form of cash.

Family support is an area most people don’t budget for, because the expense of supporting our immediate family is demanding enough.

“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:

Many people make the mistake of focusing on the spending element of a budget, rather than the saving, especially for their retirement.

“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,” said Mr van der Hoven.

5. Home and car repairs:

Most people are reactive to home and car repairs, and don’t consider budgeting for a new roof or tyres.

“If you own a car or home, you will eventually have expenses beyond insurance and petrol,” Mr van der Hoven added.

He explained upkeep could be expensive if left to the last minute. However, if a person saved between two to four per cent of the value of their home and the same on their car, they would be able to manage unexpected costs comfortably.

6. Holidays:

People often plan holidays on impulse, and rely on credit cards to cover the expenses.

However, holidays are costly and leaving this out of your budget could result in further strain on your pocket at the end of the month.

“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,” he cautioned.

Finally, Mr van der Hoven said while some individuals excluded the abovementioned items from their budget, others made the mistake of betting on an income they may not receive.

“For example, if you rent out a property or are expecting a bonus or a windfall from the taxman, the absence of this money will cause severe strain on your budget. So, when you budget, use the money that you have, not the money you plan to have. Plan for the worst-case scenario and if the money comes in, it’s a bonus,” he concluded.