After the festive season, one always feels a pinch in one’s pocket. However, if you create a budget you can stay in control of your finances in 2017.
Many people become unstuck because they forget to take account of uncommon but important expenses. In theory, a budget should structure our spending, but human nature causes us to deviate from our plans and many expenses sneak in without being accounted for. Surprise costs like car repairs, unplanned getaways, school trips and medical costs can throw your monthly spending plan.
Head of Relationship Banking at Standard Bank Andrew van der Hoven says the following tips are relatively manageable expenses. “We routinely forget to consider some significant expenses as well, and these can wreck even the most carefully planned budgets,” he says.
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.
“If you earn an income from sources besides your salary, then a good tax adviser is worth their weight in the money they save you,” suggests Van der Hoven. “The self-employed are also vulnerable to tax shortfalls, so a tax adviser is even more important for this group of individuals, especially if they are VAT registered.”
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.
3. Needy family members
In tough economic conditions we are often called on to help family or friends out of financial difficulties.
“If you have not budgeted for this possibility, it could upset your cash flow,” Van der Hoven points out. If the loan or donation will cause you financial hardship, consider options other than cash assistance. Family support is an area most people don’t budget for, because the expense of supporting our immediate family is demanding enough.
Says Van der Hoven: “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,” Van der Hoven points out. “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,” Van der Hoven says. “Upkeep can be expensive if you leave it to the last minute, but if you save 2% to 4% of the value of your home and the same on your car, you should be able to manage unexpected costs comfortably.”
People often plan a holiday on impulse, and rely on credit cards to cover their cocktails and canapés, 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,” cautions Van der Hoven.
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