Dei'ah veDibur - Information & Insight

A Window into the Chareidi World

22 Adar 5762 - March 6, 2002 | Mordecai Plaut, director Published Weekly









Produced and housed by
Shema Yisrael Torah Network
Shema Yisrael Torah Network











Home and Family
Going Overboard
by Rosally Saltsman

Making a budget has long been a tool for managing one's finances. It is a well known fact that many, if not most, people can't stick to a budget. The main reason for this is that people don't usually make an accurate budget to begin with. In general, we tend to underbudget our expenses and overbudget our income, whereas it should be the other way around. Therefore, the first step in planning a realistic budget should be to state the worst case scenario.

Many chareidi people work independently and rely on freelance work. Even if they have steady clientele, they have to take into account that sometimes the clientele go on vacation, there are the festivals to consider and often people have to cancel appointments or put off having something done for personal reasons. So even if you have steady customers, you have to take unexpected things into account.

Things will come up for you as well; you're not feeling well, you have to go out of town for a simcha, you have your own simcha, your child will need extra attention and so on. So when estimating income, take contingency into account. Even if you have a steady income, there are sometimes cutbacks, unexpected deductions or other unpleasant surprises like National Insurance suddenly informing you that you owe them 1,000 shekels from three years ago. But National Insurance often makes adjustments in your favor as well, so you tend to break even with them, though these lucky breaks are unpredictable.

Similarly, when budgeting for spending, you can always expect the unexpected. The source of the unplanned-for expense will change from month to month, therefore making it seem less like a regular ocurrence and you won't notice it or take it into account. An unexpected expense is not an anomaly; it's a given. One month you may have to buy more than expected for guests, another for gifts, a third, something major breaks down. Also, when budgeting for a major repair or event, add on another couple of hundred to a couple of thousand shekels to the estimate. The more the thing costs, the more you should overbudget. Ask friends who had a similar cost how much extra they paid over the estimate they were given.

When planning their budget, many people consider only their daily or weekly expenses. They don't take yearly expenses into consideration like trips to the dentist, getting a test on their car or even help in the house before Pesach etc. Even an expense that you incur every few years, like painting your house, taking a major vacation and buying a new appliance should be budgeted in as part of your monthly expenses and the money you'll eventually be spending on it should be put away on a monthly basis if possible.

Unfortunately, the way things often work in Israel, you buy something, find out how much it costs and then pay it off sometimes over years. It should work in the opposite way: you find out how much something costs, budget for it and then buy it. While this is hard to do in Israel, the very least we can try to do is anticipate our costs as realistically as possible. Forewarned is forearmed.

This knowledge protects us from being in the vulnerable position of having unpleasant surprises sprung on us. When being given an estimate, we should ask, "Does that include everything? Labor, parts, overtime, repairs?" Often when we buy, rent, or build something, we miss something in the fine print of what this does and does not include. BE VERY CAREFUL with the small print.

Budgets need to be constantly reviewed and revised. Cost of living increase should also be taken into account. If you budgeted 2500 shekel a month for food and you find that you're really paying 3,000 -- adjust your budget, otherwise within a year you'll be 5,000 shekel over the budget. If you think you earn 5,000 shekels a month and you find after deductions (always calculate tax and social security, retirement funds, insurance etc.) that you really earn 4,000 or that you anticipated earning 1,000 more than you did, write it down and recalculate.

Budgets are not static, they're dynamic; as people age and kids grow, their needs and, subsequently, their spending habits, change. Budgets should be reviewed every year to take the new familial reality into account. The worst case scenario from overbudgeting is that you'll be left with some money and that's really the best case scenario in the final accounting.


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