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  • Writer's pictureMr H

New Financial Year, New Living Expenses Budget!

We're 4 days into the new financial year, it's time to grasp the nettle and review the living expenses budget for FY22.

If you read my monthly budget reports, you would know that Mrs H and I have been blowing our budget more than not for the last year and I committed to stop lying to myself and review it for the new financial year. That might not seem like a momentous event for an innocent bystander but a FIRE stalwart knows that any increase in living costs echoes into the future. The whole FIRE philosophy is to have a number (an amount of money or net worth) that allows you to retire and never run out of cash. Your living expenses are the biggest and most important component of that so if you increase your costs outside your plan, you might run out of money.

Let me cut to the chase.

Our living expenses for our first year of Financial Independence was R62,000 / $4,133 / £2,995 per month.

It wasn't enough.

I'm pretty frustrated by that because we are a married couple in our mid-forties with no mortgage no dependant costs (oh, the kids never stop costing you, you just get more control!) other than Winston the wonder puppy and a fairly mainstream middle class lifestyle. It should be enough, in fact it should be more than enough in South Africa but it wasn't. I could spend the entire post analysing that but it would be desperately boring so rather let me break down our 2021/2022 budget and open it up for abject criticism and analysis by my beloved readership.

Deep breath, here goes:

The new budget is R68,000 / $4,500 / £3,400 per month . Here is how it's allocated and a bit of rationale to why:

1. Fun Money Allowances - R20,000 / $1,333 / £1,000

Pay yourself first! Mrs H & I used to argue about each others spending (well I wouldn't say arue, more wind each other up) so when we moved to South Africa we decided to have a joint account for all household spending and then an allowance that was paid into our own accounts that was for whatever our heart's desire. Want a spa day? pay for it yourself, want a new power drill? pay for it yourself.

It works great and whilst before we found FIRE our allowances were much bigger, one of the biggest changes we've seen is we're less materialistic now we understand money better. Mrs H likes to look good so spends a bit on personal care,. we both pay for our own mobile phones and we pay ourselves if we're out with friends but not together. We haven't increased our allowances for three years but we seem to do OK, this may need to be reviewed in a post-covid world but we'll see.

2. Eating Out & Takeout - R1,500 / $100 / £75

We don't eat tons of takeout but we really like going out for breakfast and if we have friends over for a informal chillout with a movie, a pizza is usually on the cards and Mrs H goes through phases of having a sweet tooth and I don't keep much sweet stuff in so she extravagantly orders herself dessert on Uber Eats (And gets a lecture off me about the cost!), We both also love a chinese banquet as the occasional splurge.

The logic behind the amount is that the bill for a breakfast out or a takeout in is around R300 / $20 / £15 for the two of us so I've assumed we do that 4 times a month and then I've added a buffer in case one is a dinner out which is usually double at R600 / $40 / £30 for two.

3. Gifts - R1,500 / $100 / £75

This caught me out last year, I had no idea we bought so many bunches of flowers and gifts for people but Mrs H is a gentle soul who is very thoughtful and I like that so lets budget for it. It's nice to be nice.

The rationale is that we probably have 12 birthdays / christmas presents for immediate family at approximately R1,000 / $66 / £50 each and then the remaining R500 / $33 / £25 goes on 12 smaller gifts like flowers, chocolates, wine etc. for friends birthdays.

4. Groceries - R17,000 / $1,133 / £850

I rang my bell trying to get this bill down last year and it was harder work than it should have been. food inflation in South Africa is hectic and it feels like every time you buy something it's more expensive. There is also Mrs H's cigarettes in here which get hiked every year. Finally there's the alcohol, we like a drink, I'm not going to lie. Then there's all the household cleaning products and food treats and toys for Winston. Dog treats are the biggest rip-off in South Africa but Winston is a bona fide addict and as he's in his twilight years, I've stopped rationing them too much.

5. Household Maintenance - R5,000 / $333 / £250

This spend is my nemesis! Stuff just keeps breaking all the frickin time! It would probably be cheaper for me to employ a full time handyman compared to what I spend at the hardware store. This is one of my major motivations to move into rental property. It's 7.3% of our total spending that in my opinion, should be less than a third.

The logic for the amount is I started with half that last year and the budget was gone in a few months. I have decided to stop employing tradesmen for non emergencies and take the time to learn to do it myself so there will be some spend on tools but overall, I would like to bring this down to half by the year end.

6. Transport - R3,100 / $200 / £155

This was a tough one. Since COVID the cars barely moved until Mrs H changed her job slightly and went back in the office. We also use Uber more than we used to if we go an a night out rather than have to have a designated driver so that adds up also.

Petrol prices keep going up and we still need to service 2 cars whether they drive or not so I've increased the budget on transport by 50% for this round.

7. Bank Charges - R350 / $23 / £18

I've considered moving banks to save money but South Africa is way behind the curve on digital banking and charges. People can't believe when I tell them I never had bank charges my entire life in the UK, it's just normal here to pay for banking. The good news on this one is the points we get from the bank for spending money usually is worth about R500 per month in investments so we get the money back in other ways.

8. Cleaning & Gardening - R4,100 / $275 / £205

We cut down on our domestic help when I retired but we do enjoy the luxury of having the bed made and the lawn cut for us so it's a guilty pleasure. It's pretty normal in South Africa to have a domestic helper and a gardener to give you more time with family when you're not working and I guess while the job doesn't pay so great, it is a job created all the same.

We have a cleaner who comes 3 times a week and a gardener who comes twice a month so the amount is simply their wages. We also give them a 13th cheque at Christmas as a bonus.

9. Health & Medical - R2,500 / $166 / £125

This budget item is on top of our medical aid plan that comes out of Mrs H's salary before she gets paid so is outside of the budget technically. This mainly covers GP and dentists visits which for some strange reason are not covered by your medical aid. Medical aid is a massive scam in South Africa in my opinion but there's not many ways to hack it so it is definitely our biggest grudge purchase after living with the NHS in the UK. However, we both have a medical condition and we're not getting younger so this one is a "suck it up" spend.

This spend is on top of around R6,000 / $400 / £300 per month for our Medical Aid and covers everything that it doesn't (which seems to increase every year).

10. Home Security - R100 / $7 / £5

This is a small but important one. Simply it pays for an app on Mrs H & I's phone and links to the house alarm for an armed response. If we're in danger, we push a button and some big men with big guns show up 30 seconds later. We also make a small contribution to the camera system that tracks unknown cars and faces moving around the streets in our area.

11. Water Electricity & Rates - R5,000 / $333 / £250

In South Africa your property taxes are based on the value of your house and I have to say are pretty fair. You also get charges for water (metred), sewerage and refuse disposal plus a random fixed standing charge for electricity. As we're solar powered the electricity bill is only around R1,000 / $66 / £50 per month so the rest is pretty much water and property tax.

12. Car, Buildings & Contents Insurance - R2,700 / $180 / £135

Regular readers will know this is a pet peeve of mine but I promise not to start ranting. One of my best moves last year was to appoint an insurance broker to get me a better deal. Rochelle is awesome and has managed to get my insurance down to this level for 2 cars, all our contents and the full rebuild cost of our home. This is probably the first time in my life that I've been properly covered and when I was managing it (or not managing it actually) I let my previous company pump the price slowly up to R7,200 / $480 / £360 per month for lesser cover so Rochelle has earned her salary and no mistake.

13. Internet - R1,200 / $80 / £60

This is one area I don't believe in skimping on, the entire house is automated we stream to and from every device in the house and we both spend a large part of our day multitasking on laptops. We NEED good internet.

I did downgrade us from a 300mb fibre line last year to a 100mb line and didn't notice any difference whatsoever so that saved around R300 / $20 / £15 per month but that's far enough! I'll always shop around for other deals and am on a month to month contract but there isn't much movement in fibre prices in South Africa.

14. Music & TV - R350 / $23 / £18

Being expats we like to watch TV from home and not speaking the main SA languages (Afrikaans & Xhosa) means that local TV is fairly limited. We have a YouTube Premium subscription which gives us ad-free Youtube plus YouTube Music for streaming and a Netflix Subscription. We use a VPN to watch British TV so we're pretty well covered.

The local satellite package is around R900 / $60 / £45 per month so I think we're pretty optimised here but I may add the amazon prime package soon as it's only R99 / $7 / £5 per month here.

16. Entertainment - R2,000 / $133 / £100

This is a slightly random category at the moment due to COVID but it's supposed to be for excursions, days out or tickets for events and that kind of thing. We do like to do that stuff and despite not being able to do it much in 2020, it will be useful when the world heals. This would pay for a few wine tastings, tickets to a show or concert or a couple of cinema trips.

17. Unplanned Spend - R1,000 / $66 / £50

The final one. This is the catchall for anything that slips out of the other categories. We don't put much in here but it also works as a buffer for overspending like a car breakdown or helping someone out etc. It should probably be more but the budget seems to capture most things.

And that's it, that's how we spend our money every month. We could live on much less but it would feel like compromise and we could live on much more but it would feel like waste.

The obvious question that I'll preempt right off the bat is what about holidays, new cars and major purchases like a new TV etc? I'm very "Rich dad, poor dad" about my approach to those,. If we want something, I go and get a consulting gig or we sell some of our old stuff or I wait until our investments over perform. We spend the excess income on those things rather than plan for us. The only thing I can ever see us buying in an emergency is a new car if both died at the same time but then I would treat it like a loan to myself and pay it off.

I'm intrigued to get your opinions on our spending, do you feel its excessive? Do you think we're missing something? Do you have a hack that could save us a bunch of cash? I would love to hear your views in the comments below.

Until next time, keep living

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Mr H
Mr H
Mar 05, 2021

Once again Charlie you exhibit how two fairly similar human beings can have two entirely different thought processes.

I actually feel quite dumb that I never considered our discretionary spend could be divorced from our essential spend and then in fact, I'm at 4% Fi for my essential spend and my discretionary spend is what's creating the perceived shortfall.

I like that because Mrs H is worried that if she retired she couldn't generate the same income I have from a side hustle (I keep trying to explain to her that it's not about the amount it's about doing something you love but she keeps coming back to it so it's clearly a concern for her) .

Thinking about it…


Mar 05, 2021

If you look at your core expenses, say the money excluding the R20k splurge, you're sitting at R48k. Can your FIRE net worth cover that at 4%? Yes it can. So it's really just the extra you're concerned about and whether that R20k can be covered by additional net worth.. so you work that out and it's now possible to cover that with an extra R6m.

Here's the trick though, and what I noticed in my own household. That splurge R20k? It's an illusion. It's R20k because the net worth is XYZ. It would actually be far higher if the net worth or income allowed it. At least, I know that's how my own household works. So instead of trying…

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