We have prepared a series of educational articles in cooperation with the leading financial portal Peníze. Read the full article with comments here.
The times are forcing us to save. But some expenses cannot be cut at first sight. They are mandatory. But we will show that this is not always quite true. And that even where this is true, it pays to have a good overview.
If you’re serious about saving, you can’t do without planning. The basis is not complicated. Just a pencil and paper to get you started – although you shouldn’t condemn the computer, it can make your work and calculations a lot easier.
If you have to, you have to
First of all, list the expenses and among them choose those that could be described as mandatory.
The ones where non-payment means a penalty, fine, debt collection, bailiff. The obligation to pay arises either because we have agreed to pay or because the law requires us to pay.
Once we have such expenses written down, we can start to think if we could save on some of them.
Mandatory family budget expenses include:
- Taxes. Most of us are concerned with paying income tax, and we count compulsory social security and health insurance among our taxes. As employees, we don’t actually have to worry about them, the company accountant takes care of everything – but it’s good to know about tax credits and deductions. If you own real estate, you pay tax on that too.
- Alimony. Failure to pay alimony for more than four months is a criminal offence in many countries.
- Fines – from the police, transport companies and so on.
- Loan repayments on debts such as credit card, lease or hire purchase sales
- Payments arising from contracts we have signed – rent, deposits and top-ups for energy supply, water and sewerage, household waste removal, telephone and internet bills
- Payment of boarding fees, school fees, payments for the use of pre-school facilities,
- Other payments that we have committed to, but where there is usually no risk of financial penalty, such as the payment of membership fees in sports clubs, associations and political parties.
As can be seen, mandatory expenditure has a certain hierarchy. Some face swift and painful penalties for non-payment and, at worst, court and criminal sanctions. For others, “just” getting kicked out of a club, association or party.
However, it also shows that savings can be made on mandatory spending. Not by not paying my taxes, but by not joining a second sports club and making do with one. I can also consider whether I necessarily need life insurance, or whether I am really at risk from all the risks I have insured against – will I lose my income if I break my arm? Unfortunately, however, we also encounter the fact that some families do not pay for the school canteen because they simply do not have the money.
Preparation is essential
Obligation is often an unpleasant thing, but there is one positive to be found in mandatory spending. They tend to be regular and largely predictable – although the recent rise in energy prices has shown us that sometimes the predictability is not quite so predictable… Anyway, it pays to think ahead.
It is worth making a yearly plan, writing down the mandatory expenses and knowing at least approximately how much money you will need each month. Then we can manage the family budget and not just let it drag us down. When a family knows that in January they will need to pay off two insurance policies, pay for the school cafeteria, pay the quarterly electric bill, and that there may still be a gas arrearage, they also know that they can’t spend all their spare money on gifts in December.
Knowing at least the approximate amount of the mandatory payments will help us know how much we have left for other things, and will also help us to see if we can save some money among the mandatory payments. It is better to think about whether to cancel your fitness centre membership and go jogging instead.
Even loans can be managed
Mandatory expenses include loan repayments. It is a good idea to try to write them down in your list of mandatory expenses. Before you take out a loan. You’ll see it in the context of other mandatory expenses, and you’ll get a better idea of how much more expensive the debt purchase will make the item and how long it will put a strain on your budget. You might even change your mind about whether you really need a loan.
However, an inventory of mandatory expenses can help you with one more thing when it comes to loans. If you’ve managed to chop up more than one, you might want to work with them a bit and see if you can merge them into one. In other words, take out one loan to pay off all the others. If it’s worth it. Given today’s interest rates, you probably won’t find a better rate now, but you may be able to spread out your repayments better. It’s also easier to keep track of payments on a single loan than several.