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Home
and Family
Going Overboard
by Rosally Saltsman
Making a budget has long been a tool for managing one's
finances. It is a well known fact that many, if not most,
people can't stick to a budget. The main reason for this is
that people don't usually make an accurate budget to begin
with. In general, we tend to underbudget our expenses and
overbudget our income, whereas it should be the other way
around. Therefore, the first step in planning a realistic
budget should be to state the worst case scenario.
Many chareidi people work independently and rely on freelance
work. Even if they have steady clientele, they have to take
into account that sometimes the clientele go on vacation,
there are the festivals to consider and often people have to
cancel appointments or put off having something done for
personal reasons. So even if you have steady customers, you
have to take unexpected things into account.
Things will come up for you as well; you're not feeling well,
you have to go out of town for a simcha, you have your
own simcha, your child will need extra attention and
so on. So when estimating income, take contingency into
account. Even if you have a steady income, there are
sometimes cutbacks, unexpected deductions or other unpleasant
surprises like National Insurance suddenly informing you that
you owe them 1,000 shekels from three years ago. But National
Insurance often makes adjustments in your favor as well, so
you tend to break even with them, though these lucky breaks
are unpredictable.
Similarly, when budgeting for spending, you can always expect
the unexpected. The source of the unplanned-for expense will
change from month to month, therefore making it seem less
like a regular ocurrence and you won't notice it or take it
into account. An unexpected expense is not an anomaly; it's a
given. One month you may have to buy more than expected for
guests, another for gifts, a third, something major breaks
down. Also, when budgeting for a major repair or event, add
on another couple of hundred to a couple of thousand shekels
to the estimate. The more the thing costs, the more you
should overbudget. Ask friends who had a similar cost how
much extra they paid over the estimate they were given.
When planning their budget, many people consider only their
daily or weekly expenses. They don't take yearly expenses
into consideration like trips to the dentist, getting a test
on their car or even help in the house before Pesach etc.
Even an expense that you incur every few years, like painting
your house, taking a major vacation and buying a new
appliance should be budgeted in as part of your monthly
expenses and the money you'll eventually be spending on it
should be put away on a monthly basis if possible.
Unfortunately, the way things often work in Israel, you buy
something, find out how much it costs and then pay it off
sometimes over years. It should work in the opposite way: you
find out how much something costs, budget for it and then buy
it. While this is hard to do in Israel, the very least we can
try to do is anticipate our costs as realistically as
possible. Forewarned is forearmed.
This knowledge protects us from being in the vulnerable
position of having unpleasant surprises sprung on us. When
being given an estimate, we should ask, "Does that include
everything? Labor, parts, overtime, repairs?" Often when we
buy, rent, or build something, we miss something in the fine
print of what this does and does not include. BE VERY CAREFUL
with the small print.
Budgets need to be constantly reviewed and revised. Cost of
living increase should also be taken into account. If you
budgeted 2500 shekel a month for food and you find that
you're really paying 3,000 -- adjust your budget, otherwise
within a year you'll be 5,000 shekel over the budget. If you
think you earn 5,000 shekels a month and you find after
deductions (always calculate tax and social security,
retirement funds, insurance etc.) that you really earn 4,000
or that you anticipated earning 1,000 more than you did,
write it down and recalculate.
Budgets are not static, they're dynamic; as people age and
kids grow, their needs and, subsequently, their spending
habits, change. Budgets should be reviewed every year to take
the new familial reality into account. The worst case
scenario from overbudgeting is that you'll be left with some
money and that's really the best case scenario in the final
accounting.
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