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Rands And Sense: Balancing The Budget

working the budgetIf you’re a new, first-time parent, you are probably still in awe at the miracle that has been bestowed upon you. You are no doubt overwhelmed by the changes in your lifestyle, the changes in your relationship with your partner and you are slowly (but surely) making the adjustment from being a couple to being a family.  

The fact is that babies require a lot – a lot of attention, a lot of love and to raise a baby from birth to the age of 18 requires a substantial amount of cash. The costs of raising a child in South Africa has been calculated (birth to 18) to be a whopping R1,681,470.00 for the average middle income family, this cost does not cover university or college tuition fees. That works out to a little more than R90,000 a year!

Bearing this in mind, parents need to quickly adjust their way of thinking and begin to look at their finances in a different light. Without a meaningful budget, families spend their hard-earned cash with little awareness and without ever having proper control over their finances. As parents, we need to change this way of thinking and realise that for the next 18 years, we are wholly responsible for this new life.

With a budget in place, parents will notice quickly where their money is going and how they can cut back on expenses and start using their money to meet the needs of their family. It is important to draw up a realistic budget which includes essential expenses as well as non-essential expenses. The essential expenses should include costs like, rental or bond, utilities, crèche or childcare costs, groceries, petrol, insurance, credit card repayments etc. The non-essentials include entertainment costs (this will cover babysitting charges, an evening out), gifts, etc.

For a budget to work, a couple must be committed to sticking to the budget and there needs to be a provision in the budget to include for any emergency or unforeseen costs.  This is particularly important for a family with young and growing children, as each new month seems to bring emergency or unforeseen costs, from doctor’s bills, to medication, shoes, etc.

 

Make your money work for you

We all like to splash out and buy whatever we need or want, when we need it but the fact is that patience is a virtue and if we practice patience, and stick to a budget, we’ll be able to save for the things we want (without paying high interest costs).

  • Credit cards – they are often a saving grace but they come at a high cost. Remember you are not spending your money (unless you have a positive balance), therefore use the credit card sparingly. Do not buy non-essential items on a credit card, as you will probably end up paying three times the value of the item. Using the credit card in emergencies is a wise move, but try to settle the overdue balance as quickly as possible, to avoid penalty payments.
  • Renting – the cost of renting property in South Africa is increasing and if you are currently renting your home, serious thought should be given to buying a property. Most banks offer first-time homeowner’s home loans, which means that a buyer can qualify for a home loan without having a large deposit saved and it may be possible to include transfer costs into the loan. Rental is often more expensive than home ownership, and what’s more a home is a permanent asset.
  • Savings – with a baby in the home, there will always be a need for extra cash. As the child grows, the need for extra cash will increase. With children growing continually, they are in constant need of new clothes and shoes and when they start at school, there is always request for tuck-money or money for a book.
  • Education polices – the costs of tertiary education is quite literally mind-boggling. You may find it to be premature to start saving for your infant’s future education costs, but it  is far better than trying to find the thousands of Rands that will be required at a later stage. If the funds are not used for educational costs, the saved money can be put to other good uses, such as a deposit on a car.

 

How to cut back and start saving today

A lot of families find themselves in a catch-22 situation, in that they don’t have the extra cash to save. However, with a realistic budget in place, ways to cut back and save will soon become evident:

  • Look out for wholesale nappy deals or nappies on special and stock up. This applies to any household’s items – stock up and save. Don’t buy baby formula in bulk however,  as baby may be required to change formula.
  • Buy bigger size clothing on sales, this will work for infants and toddlers but will backfire with teenagers, who want the latest fashions.
  • Think about doing Internet shopping, not only is a very convenient method of shopping (with a very nominal charge), it will remove all temptation to purchase extras and prevent non-essential spending. It will also save on petrol and it is a far easier way to shop for a new mom.
  • If you have DSTV or Top TV – it may be a good idea to keep it rather than letting it go. Couples with a small baby are usually home-bound for the first few months and the extra channels may come in handy, during the evenings in. The subscription fees are often cheaper than renting DVDs and a lot cheaper than movie tickets.
  • Weigh up the pros and cons of returning to work. The cost of childcare is steep and if couples reduce spending and do away with non-essentials, moms (or even dads) may be able to stay at home with baby (at least for the first year). Parents who are at home will have extra time to prepare meals; this will save on takeaway costs.

Savings will require that few sacrifices be made, but the small sacrifices will of a worthwhile benefit in the long run, and will go a long way to covering the R1,681,470.00. However, although this cost has been calculated – a price cannot be put on the immense joy that a new baby brings into the home, and most parents will probably pay double (if not triple) amount needed to care and provide for their brand new son or daughter.

Moms and dads often put their needs (or wants) last on their budget and are happy to do without a little extra – don’t let this be the norm with your budget. Be sure to add -date night’ to the entertainment budget and go out and enjoy the fruits of your labour. This should be seen as an important part of the of budget spending as parents must make time for each other.  A date night need not cost a fortune; it can be as simple as going out for an hour to enjoy a coffee together.

– For budgeting and baby costs, use Calora’s tool: www.calorababy.co.za/baby-costs-calculator

 

 – Kathy

 

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