Free Debt-Free Forever by Gail Vaz-Oxlade Page A

first new bill will be “pro-rated”… it will have the additional amount on it. This may, in fact, not happen until the second or third bill, depending on when the pro-rated bill gets calculated so keep an eye on your bills when you make a billing-date change, particularly if you have an auto payment set up for that bill. You don’t want to be caught short in your bank account because a pro-rated bill took more than you expected from your account.
WHAT’S PUSHING YOU OUT OF YOUR BUDGET ZONE?
    One of the biggest problems people have living on a budget stems from their failure to plan for inevitable and sometimes infrequent expenses. Sometimes people refer to these as “unexpected” expenses—I’m not sure why, since some of the things they include as “unexpected” aren’t unexpected at all, just irregular. “Unexpected” is really just another way of saying, “I don’t want to have to think about it.”
    Be honest. Did you really think you were going to get through the year without your seven-year-old car breaking down at least once? Did needing new tires actually come as a surprise? Did you think the window that got broken last summer was going to mysteriously repair itself?
    Home maintenance is one of the areas where people act all surprised when the bill comes due. The rule of thumb is that you should be budgeting between 3% and 5% of the value of a home for annual maintenance. Older homes require morefinancial investment. Brand-new homes require almost nothing initially, often lulling home-owners into a false sense of what things really cost. People just about choke when they work it out for themselves. One couple with a $400,000 home informed me there was no way they could afford $1,000 for home maintenance. Really? Your most important asset? You can’t afford its upkeep? So you have people paying through the noses on their mortgages, watching their homes crumbling around them because they don’t want to have to deal with the realities of home maintenance. That’s how the new roof becomes an “unexpected expense.”
    It’s time to pop a Home Maintenance amount into your budget. While hitting the 3% to 5% goal may not be doable with the debt you are carrying, popping that number in as a starting place will give you a good idea of what you have to work toward. Let’s say the value of your home is $276,000. Of that amount, 3% would be $8,280 a year ($276,000 ÷ 100 × 3 = $8,280), which when divided by 12 is $690 a month.
GAIL’S TIPS
    If the 3% to 5% maintenance amount freaks you out because your land value is the biggest part of your home cost, then use the “insured value” from your home insurance as the amount on which you calculate your maintenance amount. And if you’re paying condo or strata fees, this falls under your HomeMaintenance category and comes off how much you must set aside personally for maintenance costs.
    The same holds true for household appliances. Do you have an appliance replacement fund? Are you saving up for the next electronic item that will fizz out, or will it be an “unexpected expense?” How about the new hockey equipment the kids will need next winter?
    It’s not like these things aren’t inevitable, it’s just that no one wants to think about them because that would mean we would have to budget for them, and that would mean less cash is available to spend on the random stuff we want to buy ourselves. So we go ahead and go shopping for Stuff. We act surprised when we’re faced with the expenses we knew were inevitable, and then we whine about not having any money.
    It’s easy to forget about the annual car, home, or life insurance coming due this month if you don’t have it built into your budget as a monthly amount. Ditto your vehicle registration and plates, your health club membership, and the kids’ soccer fees. Then there are your property taxes, if you pay them directly. You can’t ignore your home maintenance forever, so you might as well put it in