In my work as a financial planner, I need to know how much life costs. There is the mundane stuff like electricity and bin collections, to your holidays each year and how much you spend on clothes each year. Most people underestimate how much they spend and sometimes by a lot. It is quite common to talk to families who at an expensive time of life who don’t have much savings but when I key in all the data they gave me, they have a huge surplus (that surplus gets placed in miscellaneous spending).
Kids are expensive. And they don’t get any cheaper as they get older. The big ticket items such as creche, education (secondary and third level) are the obvious costs. But what about the €4,000 you may have to spend on braces for them? Or the increased cost in clothes once they are in adult sizes and you have to pay VAT. Then there is the cost of sport and other activities. All those subs and gear add up and with kids growing so quickly, they need new boots and gear almost every season. Musical instruments and lessons tend to be one on one so you have to pay those rates.
Houses are expensive. You spend most of your working life paying off the purchase cost of it. But what about the upkeep? A house that is modern when it was bought 20 years ago, may be looking a bit tired now. A bathroom that is used constantly for all that time may be worn and need to be redone.
Or as your children get older and bigger, the space that you thought was fine is now feeling a bit cramped, so you look to extend what you have. House renovations are expensive and it doesn’t take much until you are looking at costs in the tens of thousands.
Funnily enough, almost all of my clients have little interests in cars and are happy to drive the one they own until they start to cost money. And as the past owner of a 2008 BMW (a bad year apparently), I know how much cars can cost when they break down constantly.
While a lot of these costs are unknowns, with the cost and timing of the expense being impossible to predict, they will occur at some stage. That is why having an Emergency fund is so important. You always need to have a contingency fund for those big expenditures that WILL happen but you haven’t planned for.
05 July 2021