Baruch Labinsky- Financial Planner, Israel Resource Network
This is the first in a 3-part series on Financial Planning in Israel.
Many people think that there is no point in making an effort to budget because money will go anyway. "I’ve tried to budget in the past, and it just doesn’t work."
The little things can make a tremendous difference in the long run. If you can save 50 NIS/wk from total expenses, you can save a lot over the years.
You have to align your spending with what you want to be spending – ie, knowing what you want to spend your money on.
Break it down – if you can afford 3,000 NIS/month on food, that means (since there are really 4.2 weeks/month, not 4) you can spend 650-700 per week. Most of that is groceries, but have to budget for fill in shoppings, Shabbat, lunch money for kids, etc.
Can put specific amount of cash you’ve budgeted into envelope, and take that with you when you shop – if you don’t have more, you won’t spend more.
Important Klalim:
1) In Israel, you can negotiate everything.
2) Research is important – where are the best prices, go online, ask people – especially for big ticket items.
3) Buy used – can save a lot. Online auctions, email lists. Auctionisrael.com.
4) Review your bills – there are often errors. Call up and remove those extra charges. Supermarket items get rung up incorrectly all the time – check receipts, and know the cost of what you are putting in your cart.
5) Plan ahead. If you wait until the last second you may end up buying the most expensive thing just because you need it. Stock up on end of season sales by planning ahead what you will need.
How does the Tax system work in Israel?
Bituach Leumi, Bituach Menahalim, Keren Hishtalmut, Keren Pensiya. You can contribute to these packages and it will reduce your overall tax rate.
Individuals are taxed, not family. Each person gets a certain amount of nikudot zikui. Women get an extra point for each child under 18 they have.
If you give tzedaka to a recognized charity, that has “seif arbaim vshesh” you can get back 35% of your donation from Mas Hachnasah. You can go into Mas Hachnasah anytime during the year with your receipts and they will print out a page for your employer to take out a certain amount less each month. If you want to get back for a previous year, you have to file a tax return. (You must have taxable income to take advantage of this, if you already aren’t paying taxes you don’t get anything back).
You must be aware of what is happening financially in the country to take advantage of it – Ma’am just went down ½%, which means prices go down.
You may be eligible for certain benefits from bituach leumi, go to their website for a list of situations. You can then go in to an office and ask them about it.
How to save $$:
Shop at discount stores, shuk, shopping online can be cheaper. Don’t shop with your kids, that increases bills. Plan weekly menus so you know what you need when you go in. Limiting the amount of times you go to the store can lower the amount of money you spend. Prepare food from scratch, rather than buying prepared. Don’t go shopping when you’re hungry. Freeze leftovers for later use, stretch leftovers by adding something new.
Keep a notebook of which items are cheaper where – if you shop in several places you’ll know what to buy where.
The average person spends between 2,000-3,000 NIS/month on their car. Gas, insurance, repairs and maintenance.
Mortgages are very complicated in this country. There are many different types of mortgages involved and it’s hard to understand the complexities involved. You can either work through it with a mortgage broker, or invest the time to understand it so you know what you’re getting into.
Financial system:
Banks are the biggest shuk in this country – everything you do at the bank is negotiable. Get to know someone at the bank, your banker who is there to help you, that can help cut expenses.
Insurance:
People don’t understand their insurance – what they have, what types of policies they have, amounts they are paying, etc. It can be a good idea to take insurance out of your bituach menahalim so you actually get a bill each year and have to evaluate if it’s what you need. What you took out as a 23-yr old may not be what you need as a 40-yr old. Reducing your deductible can lower your payments.
Debt Reduction:
Can rollover debts and combine things to lower overall payments. Know what your obligations are as far as tzedaka, you may be able to pay less (make sure to ask a Rav).
Utilities:
Electricity:
Heating and cooling is the single largest component to electricity. Can check bills in March/April when we tend not to use it to get your baseline, and then see how high it goes in summer and winter. If you can make changes there, you can save a lot. Change to energy efficient systems. Can change to a different electrical system, called Taoz, where instead of paying flat rate no matter when you use it you can get lower rates on off-peak hours. Have to do the calculations to see if those times work out, but can look into it.
Water:
Have to register the number of people in your house so you get the right allotment.
Arnona:
Certain people qualify for discounts – Olim, low earners, etc.
Gas:
Gas companies have a habit of charging as high as they can. So buildings have different rates depending on when they were hooked up, and whether they ever complained to the company and renegotiated rates.
Phone:
Cell phones can take a huge chunk of your monthly expenses. Make sure you’re using them as efficiently as possible.
Gmachim are a great way to cut expenses. Get hand me downs from friends, or switch clothes if you have things your child didn’t wear. You can talk to school about getting discounts if you have multiple children in the school, or a child with disabilities.
Be creative – If you want your kid in a chug, then offer to host a chug and organize it for someone and they may let your kid go for free. Can you barter babysitting or other services?
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