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Budgeting for a single-income household

Posted on November 2 2020

This article first appeared in Private Property on 19/10/2020 – Budgeting for a single-income household . View the original article.

Living on a single income is a challenge that some couples decide to undertake to raise a young family. Others, either as a result of sudden unemployment or disease, have no other option but to make ends meet on a single income. No matter whether deliberate or not, there are ways single income households can budget to make things easier to manage. 

According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, those who have planned to live on a single income will have the opportunity to set themselves up correctly from the start, while those who have ended up in this position involuntarily will need to reorganize their lives to adapt to the reduced income.

“My advice to those who are planning to live on a single income is to be realistic about what they can afford and to leave themselves plenty breathing room so that they never find themselves in a position where they can no longer afford the repayments on their home loan. Bond repayments change every time the interest rates change, so taking on debt to the hilt of what a household can currently afford is seldom a good idea,” advises Goslett. 

He also recommends buying rather than renting, as this eliminates the possibility of annual rent escalations and provides the couple with an appreciating asset that can be liquidated in times of crisis. “If the homeowners have taken out an access bond, they can treat their home loan as a sort of savings account that can be accessed in case of an emergency. If need be, the property can also be sold and the money can be used to see the owners through the crisis.”

On the other hand, those who have suddenly found themselves in this situation will need to reconsider their current living situation to identify where to cut down on costs or possibly leverage the property to access some much-needed financial relief.

“Homeowners might be able to rent out a room in their home, either on a short-term basis via platforms such as Airbnb or on a long-term basis with the help of a rental agent. If this is not possible, then homeowners may need to downscale,” he recommends. 

When considering this option, Goslett cautions homeowners to factor in all the costs involved in selling a property to make sure the result will bring about the desired financial relief. “Many sellers forget that it can cost a substantial amount to sell a home, from the bond cancellation fees, home inspection and compliance certifications, to settling the municipal accounts as well as paying the agent’s commission. 

Homeowners need to factor in all these costs to find out what they can afford based on the profit that will result from the sale of their current home,” he concludes.