Family Money

The costs you need to pay attention to

March 15, 2017


Life has become incredibly expensive. It’s an undeniable fact that the current daily cost of living is exorbitant by comparison to past decades. If we look at our parents and how they lived, most households were run on one income that covered everything from two cars in the garage to family vacations. And because of the ease of life back then, families could include a number of children because a rand could be stretched quite far. But not anymore. If you were to really think about it, the image of a happy and successful family from our parents’ era is no longer what we can aspire to. Something as simple as adopting a pet is an enormous decision, nevermind expanding your family to include three kids and a house to accommodate them.

If you don’t manage these lifelong expenses, you will find yourself in hot water very quickly. And sinking because of financial ruin is a difficult thing to recover from. A good way of managing your finances is to become aware of what the cost implications are of landing up in debt. Most of us currently live with some debt. Assets such as a car, a house and even a cellphone is considered debt. Sometimes it’s good debt, like a house as it’s an appreciating asset. And sometimes it’s bad debt, like a car which depreciates the minute you drive it off the showroom floor. But debt is a reality. To find out how much the damage will be, you must consider your repayments and the interest rate you’ll be paying off. If you’re looking into applying for a loan, you should do some investigating first. Most financial institutions have included a tool called a personal loans calculator on their websites. You can stipulate the amount of money you would like to borrow and it will immediately recommend an interest and the exact amount of your monthly repayments. The best part of a personal loans calculator is that you can specify over how many years you would like to pay back the loan. You will be able to see exactly how much interest you’ll be paying and how it increases the longer it takes for you to clear the debt.

Opting for a loan has been considered an extremely negative thing to do. Because taking out a bank loan feels scary and the interest rates feel high. But if you consider what you’re paying on your retail accounts, you will find that their interest rates are even higher. Banks and financial institutions offer a more competitive and often more affordable repayment plan.

Ultimately you want to spend your money on what you need and clear yourself of unnecessary debt, like clothing accounts.

You have to have a house

But you must consider the cost implications in buying a property. Sometimes renting makes more sense but it is dependent on where you are in life. You could purchase a one bedroom flat and pay your bond just about as much as you would if you were renting the property, but expenses such as water and levies will be for your own account. Plus, any maintenance costs are your problem. You will need some money in the bank for emergencies, such as burst geysers and structural damage. These are costly. Therefore you should only invest in a property when you can well and truly keep it in livable shape. If this is not a possibility, renting makes sense and would be the best option. Also, wait to purchase a property that will in fact garner some income for you should you decide to rent it out or a profit should you sell it.

You have to have a car

A car is a depreciating asset as mentioned before. And while a couple of years ago a fancy and fast vehicle indicated sophistication and wealth, this idea is slowly fading. The smartest people purchase the smallest, most reliable and easily maintained cars to suit their lifestyle. If you have a family, you will need a five door SUV-style cabbie. But if you are a single person, settle for something tiny and slower which costs you a tenth of your salary as opposed to a third. If you travel long distances then consider a diesel engine as it will handle better with maintenance and it will cost you less in fuel. Be smart about the car you choose because, while the most beautiful vehicles will bring you joy, they can be difficult to get rid of when the going gets tough. Your car will only balance out after about three years of repayments. Trying to sell or trade in before this time will mean you’ll have to pay the bank the outstanding amount. Similarly, if you purchased the car on finance, that includes a balloon payment. That leftover money will need to be paid before you can trade in or sell the vehicle.

You have to have insurance

This applies to everything. Stuff is far too expensive to risk losing it and having to replace it. So you need household insurance and car insurance and so on. You are unlikely to survive the loss of a robbery that wipes you out of your entertainment systems and jewellery. The cost of paying off an accident that has either damaged your car or the other party’s car or both vehicles will make a serious dent in your monthly expenses. You also need insurances such as medical aid. The cost of private medical care in and out of hospital is incredibly expensive. In fact, it’s a very small portion of people who can cover those costs without medical aid. And if you don’t want your family to suffer financially should you pass away, then life insurance is important too. And a retirement annuity is a must, so that when you reach the winter of your life you have money to cover your living expenses.The list of insurances that you can sign up for is long and it can feel never ending but having some of the most important things covered in the event of an emergency is paramount.

You have to care for your kids

If you want children, then you should have them. And it’s true that attempting to be financially stable enough before having children is a fruitless goal because you’ll never feel truly ready. But if you have them, then educate yourself on what they will cost you. You need to account for their livelihood, their care and education and medical costs and so on. There’s a lot to think about so don’t over indulge. Make some sensible decisions and stick to your guns. Spoiling them will negatively impact your finances and set the expectations far too high, which can make life hard for them in the long run.

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