I spent a productive morning sitting at a lovely café trying to work out my household budget for the year. It’s going to be a tough year financially (but hopefully a good year emotionally) and there are so many factors to balance. Firstly, we need to assume an interest rate hike, food prices going up and of course most expenses (school fees, insurance, security etc.) will all go up the traditional 10%. Secondly, I need to ground this budget on my goals for the year, which I discussed in my last column. They were: 10% extra to my bond every month, “emergency” needs to be added as a budget line item (my key learning from last year was that EVERY month saw an emergency from car tyres and broken pipes to a broken computer and extra medical bills) and spend less on food. Thirdly, I have a fixed income this year with no additional consulting, so there will be no occasional ‘cash injections’ from extra work and I need to make this budget work well! Living within my means and having no debt is another resolution for the year
So two cappuccinos later I think I finally made it work – on paper anyway – I added the line item for emergencies as well as the 10% increases that I’m aware of; I slightly reduced the food bill (which means more shopping at Checkers and no Woolies) and I just managed to squeeze it all into what I actually earn! But there is absolutely no fat on this budget – which means very tight adhering to the budget.
Another lesson from last year was to write down every single expense, no matter how small, and review it at the end of every month, with the kids. Having it all written down really helped on the months when we did overspend and needed to resort to the credit card; as a quick review of our spending showed us the reason, and the next month we were more vigilant and reigned in the expenses somehow.
So I think there are two aspects to successful home budgeting: first you need a budget, but then you also need to be accountable – write down all expenses and check them against your budget every month. I think that might help us to survive in these crazy financial times.
In my next column I’m going to take some time to think about what we do with our money – the ‘big picture’ choices we make – why do we spend our money on the things we do, and are we happy with these choices?