South Africans who are under pressure to find ways to make their money stretch a little further as the cost of living continues to rise, should not overlook the value of setting and sticking to a simple budget – one with contingency savings built in.
When it comes to budgeting, a simple list of essential and non-essential expenses against your income is all that is required. This will give you a decent understanding of where your money is going every month. But what about those nasty surprises?
According to Graham Craggs, spokesperson for Budget Insurance: “Many people forget to include some key expenses which can derail an otherwise well-planned, well-thought-out budget.”
Here are five things that people often overlook.
1. Car maintenance – You’ve carefully budgeted for your monthly car repayment, annual licence fee, car insurance and petrol. Then your cambelt or clutch suddenly fails and there goes that holiday you’ve been diligently saving for. The best way to budget for car maintenance is to take out a motor warranty and/or service plan which will not only cover mechanical failure but scheduled services too.
2. Home loan interest rate changes – In January, interest rates increased to 10.25%. This increase prompted some home owners to cap their bond repayments which has both advantages and disadvantages. The main advantage of doing so is that if the interest rate rises again, your interest rate will be fixed. As for the disadvantages, if the interest rate should happen to decrease, you’ll most likely regret your decision. Try to negotiate the best possible interest rate when purchasing your property and use a bond originator to compare offers from different providers. If you already have a bonded property, consider having it refinanced with another provider at a lower interest rate.
3. School expenses– Parents often forget that when it comes to school, the spending doesn’t stop at school uniforms, stationery and school fees. Birthday gifts, fundraisers, pictures, camps and other outings can put pressure on your monthly budget so it’s wise to plan accordingly for these incidentals.
4. Pet expenses – If your beloved pet is injured or falls ill, the veterinary expenses could add up to thousands of rands. It’s advisable to put money aside each month for vet emergencies in addition to saving for pet food, vaccinations and grooming.
5. Home maintenance – If Murphy has his way, your gutters will collapse during the month that you can least afford it. Again, good routine maintenance is key, but it’s also wise to set aside funds each month for scheduled maintenance as well as unplanned repairs.
“The last thing that you want to do is have a ‘we’ll cross that bridge when we come to it’-approach. We urge South Africans to set aside their contingency funds first and then spend in accordance with what they have left”, concludes Craggs.