Prepare for unexpected
AVOID DEBT SPIRAL: PUT ASIDE MONEY TO USE FOR EMERGENCIES
In many cases you don’t have to take quotes at face value; shop around and negotiate for the best deal.
The expense mob has come knocking. First, the City of Johannesburg (CoJ), in its wisdom, decided to reclassify my high-density residential property as a sectional title business. I checked the new market value during the revaluation process but was naive enough to think it impossible that the “category” of a run-of-the-mill residential property could be changed during the process. So in July I got slapped with a bill more than triple the usual amount, even though the valuation was only 18% more. My research suggests it can cost more than R5 000 to get the classification fixed by an outside party.
Then there’s my Toyota, Goldie. She recently turned 13, still has relatively few kilometres on the clock and is as reliable as ever. But when I picked her up after her recent service, I almost had a heart attack. The service agent handed me a quote for “urgent work”. Apparently, the only things that didn’t need to be replaced were the indicators. The service centre was kind enough to keep the quote a whopping R550 lower than the car’s insured value. Business must be booming!
There was absolutely no indication that there was anything wrong.
For someone who carefully budgets and plans ahead for months where irregular expenses will have to be paid, this has been a tough pill to swallow.
Unfortunately, no matter how carefully you manage your finances, there are bound to be unexpected mishaps. The idea is to structure your financial plan to give you the best chance of overcoming roadblocks so the setback is only temporary and you don’t fall into a debt spiral.
Unfortunately, as humans we’re wired to focus on our immediate needs. In SA, this may be exacerbated by unemployment and inequality, which leave many people with little choice but to try and make ends meet.
The Momentum/Unisa Household Financial Wellness Index 2017 states only 17% of South Africans who are considered financially well have a comprehensive plan that includes providing for emergencies/unplanned expenses. Only about 60% of them will be able to cope with a R20 000 emergency.
My experience underscores the importance of an emergency fund. But before you dip into your rainy-day account, be critical. Just because you’re handed a quote or invoice, it doesn’t necessarily mean the expense must be incurred. I’m convinced at least some of the repairs aren’t immediately necessary.
Moreover, there’s often a case to be made for shopping around. Although likefor-like comparison is difficult, the first comparative quote I obtained (40% lower) suggests there’s significant scope to negotiate a better deal. Unfortunately, the CoJ situation doesn’t leave me with options.
With the economy expected to remain under strain for the foreseeable future it’s imperative to scrutinise your finances; update, revise and stick to your budget to ensure you have some cash for emergencies.