How much do you really cost? Are you in touch with the amount of money it actually takes to sustain your lifestyle? Well, most married people will not have the answer to this but if If you are single, you manage your expenses by yourself, they are yours to accommodate. Whether it is rent, food, transport, school fees, entertainment etc. You have a better grip on what it actually takes to sustain you than somebody who is married.
For many couples, it’s about splitting the bills. School fees, rent or the mortgage may be paid by one party while the other person handles the household bills… Then the two people still have their own personal expenses – self-care, entertainment, transport and this list goes on, it’s different for everyone. If it is a two-income household, there is definitely more money flowing in and it is utilized in separate ways.
Most people make the mistake of thinking that what they pay for are their expenses. When we do budgets in the Centonomy class you find that people neglect all the other things they use but do not necessarily pay for. Your expenses are what you use or consume irrespective of where the money comes from. For instance, let’s say you don’t directly pay the rent, you still live in that house, It still needs to be acknowledged as part of what your lifestyle costs. If the other person stops paying the rent, you would still need to live there or pay rent somewhere else.
Moving on swiftly, let’s forget the term budgeting for now. We tend to think of a budget as a way of allocating income across expenses. This exercise is not about that. Get a pen and paper or open that spreadsheet. Think about your life in its entirety. What do you cost? Rent/mortgage for the house you stay in, maintenance costs for the house, the food you eat, the school your kids go to, transport, entertainment, domestic help, gas, electricity, subscriptions, service charges, holidays. These are some of the examples of expenses that will be there irrespective of one or two incomes.
It’s not just in a relationship that this gets muddled up!
Some of us have expenses catered for by our employer like airtime, fuel, house or car allowances etc. Please take that into consideration. It may be scary to look at this number. You may have felt very independent until you actually face this and realise that you cannot sustain that lifestyle by yourself. However, the point of this is to make you aware not to just scare you. You will come to a complete understanding of what your chosen life costs and therefore how to plan accordingly.
Your salary is not what you cost but this other figure. If you think it is too much you can then knowingly choose what to cut back on. Before this, you may not have realised that you were being wasteful in some areas. You are spending on something e.g. Cable TV because you have always done it but you don’t really need it. You are buying food inefficiently because you don’t really feel the pressure since someone else pays the rent.
When you know what you cost, you are better placed to build proper financial plans!
For example, it is important to have an emergency fund that can sustain your life for three to six months at any given time. You would use this figure not the way you were thinking about expenses before. You may be planning to invest in a way that brings you income to sustain your life, knowing how much you cost gives you a basis in terms of figures. You end up making the right decisions because you know the figures.
Life is not assured and things may happen. One person may lose their source of income or get sick. There could be a separation or divorce that happens. It is good to be aware of what costs you money so you can actually make an informed decision about whether you can still afford that complete lifestyle or where the cuts have to be made. Changes will also not catch you by surprise. Be aware that you will read this article and want to run away from knowing the truth. You will find a reason to delay this. It may look easier, for now, to get by on ignorance but it will come to hurt you later. This awareness will bring about a change in the way you deal with your personal finances that will only put you in a better place.
Waceke runs programs on Personal Finance Management, registration is currently open and ongoing through our website centonomy.com For more information get in touch with her through waceken@centonomy.com /Facebook-Waceke Nduati /Tweet @cekenduati