How to budget for the unexpected

Be savvy... Andrew van der Hoven, head of relationship banking at Standard Bank, offers tips to consumers on creating a budget.

 

He explained that creating a budget was useful in helping consumers stay in control of their finances, but many become unstuck because they forget to take account of uncommon but important expenses.

“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,” he said.

He highlighted the impact that various forms of tax could have on your budget, explaining that while income tax was usually deducted from a salary, capital gains tax from the sale of stocks or property or other forms of income have the potential to ruin budgets if consumers did not keep an eye out for them.

Another expense Van der Hoven highlighted was child maintenance, which in the event of a divorce, often affected both parents.

“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,” he explained.

He concluded by urging consumers to not rely on income that may not come in, as this would negatively impact their budget.

“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 said.

Other expenses consumers should factor in when budgeting include:

  •  Needy family members: In tough economic conditions, we are often called upon to help family or friends out of financial difficulties.
  •  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.
  •  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.
  •  Holidays: People often plan a holiday on impulse and rely on credit cards to cover their cocktails, but holidays cost a lot of cash and leaving this out of your budget could see you with big monthly payments.

 

  AUTHOR
Khanyisile Ngcobo
Journalist

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