Most households in South Africa make ends meet on dual or multiple incomes, be it wife and husband; a mother and her children; or siblings or friends living together. These setups help people to navigate living costs.
However, people’s circumstances change. Couples get divorced or they separate. Adult children move out. Friends drift apart or someone decides to get his or her own place.
The best way to ensure you are okay when circumstances change is to know who pays for what and to plan for change before it happens.
Money conversations can be difficult, but they are necessary. You have to set the financial ground rules of your household for three main reasons:
- When everybody knows who is responsible for what, you’ll be far less likely to have fights about money.
- When you know what the other person/people contribute, you will always know how much you would need should your living arrangements or the household income change.
- When the financial matters have been sorted, it is easier to deal with the emotional impact of a big change.
Here are examples of plans you can put in place to prepare for a change in circumstances:
- Draw up a notice period agreement that would give the person staying behind time to find a new roommate to share the rent. If the other person cannot honour the agreement, he or she has to find someone new or continue to contribute until the agreement runs out. Such an agreement protects all parties and could even motivate you to resolve small irritations before they blow up into a fight that destroys the friendship.
- Save specifically for this prospect. For instance, if your housemate contributes half of the rent, build up enough savings to cover at least three months of his or her share. This way, you’ll have three months to figure out the new situation without getting into debt.
- Make sure that you can pay your debts, instead of depending on the other people in your household to balance your own books.
- Invest in a safety net, such as a policy that will cover your children’s school fees in case of a loss of income. Alternatively, start a savings account dedicated to school fees. If you end up not needing the money for the kids’ education, you will have a solid nest egg to cover other expenses.
- Maintain good financial habits, such as always saving a portion of your bonus, salary
increase or stokvel pay out. - As soon as your roommate or family member gives you notice, take a hard look at your
expenses and decrease as many of them as you can. Subscriptions to services that are not essential are a good place to start, as are eating and drinking habits. - If you are living with your parent(s), agree how much you contribute and what that contribution covers. This will allow you, for instance, to stop paying for rent and food, but to continue paying for your parents’ medical aid when you move out.
Household incomes are not only disrupted when people move out. It could also happen that one of the contributing parties loses his or her job, or has to take a pay cut. In such instances, there are non-financial ways to help cushion the blow. For example, the unemployed person can take over the household chores to help compensate for not bringing in an income.
The golden rules for multiple-income households are the same as for all money matters: know exactly what you are dealing with, have the crucial conversations, and plan for a rainy day.
