Living expenses: What are they and how do I budget for them?
A guide to paying for your essentials without hurting your wallet.
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Living expenses are a type of spending that probably takes up the bulk of your monthly expenditure. From grocery bills and rent charges to utility costs and loan repayments, these expenses are absolutely essential. Beyond this, there are living expenses that are completely unpredictable: think hospital bills or urgent home repair fees.
That's why it's so important to make sure you've got a solid budget for your living expenses - but you probably didn't need us to tell you that! In this guide, we've included tips on how to create a solid living expenses budget, as well as including our free budget planner so you can put all our tips into action.
What exactly is a living expense?
Living expenses are costs that you can't simply remove from your budget. In other words, this form of spending is reserved for providing you with a basic standard of living, including food, water, clothing, electricity and healthcare. By understanding which aspects of your spending are living expenses, you could easily cut non-essential expenditure and save more. Here are some common types of living expenses for you to consider.
- Home expenses. These costs include mortgages, property taxes, rent and home insurance.
- Costs that make your home "liveable". Consider utility bills and waste removal service fees.
- Home maintenance fees. Think of the costs associated with repairing a roof, maintaining a lawn or fixing your heating system.
Cost of basic necessities
- Food expenses. Factor in the amount you spend on groceries rather than eating out.
- Living necessities. Think vitamins, toiletries, cleaning tools and first aid supplies.
- Basic clothing expenses. Consider what you spend on work attire, pyjamas, daily wear and gym clothes. This doesn't include branded goods, jewellery or statement pieces.
- Transport and maintenance costs. This includes car rental bills, car loan repayments, petrol money, public transport fares, Uber costs and bike maintenance fees.
- Long-term medication. Factor in the cost of long-term medication including blood pressure medication, cholesterol medication and birth control pills.
- One-time illness fees. Think of the cost of over-the-counter medication and the cost of visiting the doctor.
- Emergency costs. This includes setting aside money to cover accident-related injuries, broken bones or conditions specific to your medical situation.
In contrast to this, expenses related to branded goods, unnecessary phone upgrades, a Netflix subscription or even high-end brands of cheese are not considered living expenses. As a result, you should reduce the portion of your budget allocated to such items.
Free Budget planner
How much of my salary should cover these expenses?
That ultimately depends on your personal budgeting preference. A good place to start is with the 50/30/20 budgeting rule, where you allocate 50% of your income to living expenses, 30% to non-essential spending and 20% to savings.
Alternatively, if you feel too restricted by this allocation, you could always tweak the allocation to one that you're more comfortable with. For example, the 80% spending and 20% savings model is another popular model where your living expenses and non-essential spending should take up no more than 80% of your monthly income. The sub-division can be done to your fancy, as long as you allocate enough to your living expenses.
5 tips to save on living expenses
1. Use a budgeting app
Keeping track of your living expenses can be impossible. With so many bills, expenses and products to monitor, it's easy to lose track of your spending. A budgeting app, like the Finder app, is a great tool to manage your money. It allows you to connect all of your bank accounts like your credit cards, transaction accounts, home loans, savings accounts and investments, into a single dashboard. This means you can get an overview of your finances at any time, anywhere. You can also track the amount you've spent on living expenses, regularly check your credit score for free and shop around for better deals, all in the one place.
2. Share expenses with your friends
Try carpooling, sharing an apartment with roommates or bulk buying groceries with your neighbours.
3. Switch to cheaper alternatives
Move to a place with lower rent, eat at home instead of going out or shop at discount stores. Similarly, you may want to try out peer-to-peer retail marketplaces, use a second-hand car, turn to public transport or purchase generic brands.
4. Directly reduce your spending
Be mindful of your utility bill and limit unnecessary water and electricity usage. Alternatively, you could also try limiting unnecessary shopping sprees and downgrading your phone plan. Besides this, you should always keep an eye out for a good discount. Take advantage of discounts on petrol, coupons and store-specific membership discounts.
5. Always plan for an emergency
Living expenses could get out of hand when an emergency occurs. If you're not prepared to cover unexpected costs, you may end up making expensive choices on a whim or even sacrifice certain basic comforts. For peace of mind, allocate a set portion of your salary to an emergency fund, which should only be touched during urgent times.
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