Debt-Free Forever by Gail Vaz-Oxlade (best english books to read for beginners txt) 📗

sometimes infrequent expenses. Sometimes people refer to these as “unexpected” expenses—I’m not sure why, since some of the things they include as “unexpected” aren’t unexpected at all, just irregular. “Unexpected” is really just another way of saying, “I don’t want to have to think about it.”

Be honest. Did you really think you were going to get through the year without your seven-year-old car breaking down at least once? Did needing new tires actually come as a surprise? Did you think the window that got broken last summer was going to mysteriously repair itself?

Home maintenance is one of the areas where people act all surprised when the bill comes due. The rule of thumb is that you should be budgeting between 3% and 5% of the value of a home for annual maintenance. Older homes require more financial investment. Brand-new homes require almost nothing initially, often lulling home-owners into a false sense of what things really cost. People just about choke when they work it out for themselves. One couple with a $400,000 home informed me there was no way they could afford $1,000 for home maintenance. Really? Your most important asset? You can’t afford its upkeep? So you have people paying through the noses on their mortgages, watching their homes crumbling around them because they don’t want to have to deal with the realities of home maintenance. That’s how the new roof becomes an “unexpected expense.”

It’s time to pop a Home Maintenance amount into your budget. While hitting the 3% to 5% goal may not be doable with the debt you are carrying, popping that number in as a starting place will give you a good idea of what you have to work toward. Let’s say the value of your home is $276,000. Of that amount, 3% would be $8,280 a year ($276,000 ÷ 100 × 3 = $8,280), which when divided by 12 is $690 a month.

GAIL’S TIPS

If the 3% to 5% maintenance amount freaks you out because your land value is the biggest part of your home cost, then use the “insured value” from your home insurance as the amount on which you calculate your maintenance amount. And if you’re paying condo or strata fees, this falls under your Home Maintenance category and comes off how much you must set aside personally for maintenance costs.

The same holds true for household appliances. Do you have an appliance replacement fund? Are you saving up for the next electronic item that will fizz out, or will it be an “unexpected expense?” How about the new hockey equipment the kids will need next winter?

It’s not like these things aren’t inevitable, it’s just that no one wants to think about them because that would mean we would have to budget for them, and that would mean less cash is available to spend on the random stuff we want to buy ourselves. So we go ahead and go shopping for Stuff. We act surprised when we’re faced with the expenses we knew were inevitable, and then we whine about not having any money.

It’s easy to forget about the annual car, home, or life insurance coming due this month if you don’t have it built into your budget as a monthly amount. Ditto your vehicle registration and plates, your health club membership, and the kids’ soccer fees. Then there are your property taxes, if you pay them directly. You can’t ignore your home maintenance forever, so you might as well put it in your budget monthly and set aside some money for when the roof starts to leak. And if you’re self-employed or working on a contract basis, you should also be setting aside the taxes you’re going to have to come up with come tax time. There are Internet tax calculators that will automatically calculate the tax you’ll likely owe when you enter your income and province of residence. Whatever amount the calculator comes up with, divide by 12 and set that amount aside every month so you can stay on the right side of the Tax Man.

You may be able to wear your jeans until the bum is bare, but the kids will outgrow their clothes before they wear them out, so you should have some money budgeted for them on a monthly basis. Look at how much you spent last year, divide by 12, and use that as your monthly amount for your budget. Pet care costs are predictable until Poochie gets sick. If you don’t have pet insurance, then you should have a little set aside monthly in your budget for your inevitable trip to the vet. The amount you set aside will be dependent on the type of critter you own. (Pure breeds cost more, and some four-legged friends are more susceptible to certain illnesses than others.) Ask your vet what he or she thinks is a reasonable amount you’ll likely have to spend on Fido this year.

Don’t forget medical costs. Yes, I know we have universal medical coverage, but not everything is paid for, no matter how “universal” it is. So if you aren’t budgeting for things like glasses, the dentist, cold medicine and painkillers, and all the other stuff you’ll end up buying, you’re bound to run into some “unexpected expenses.”

GAIL’S TIPS

In January, start setting aside the money you’ll need for the next holiday season. It’s much easier to save $100 a month than to come up with the $1,200 all at once. A little bit at a time means the money is there at the ready when it’s time to shop for seasonal gifts.

Working Together on the Budget

One of the big benefits of a budget is the fact that it becomes the reason why you do or don’t do things. Yes, you can make the budget the bad guy. The budget becomes the control point. If you’re trying to cut your expenses, it’s easy to get upset with a partner who seems to be spending too much. But