question archive Managing costs - Cost of running a home The cost of owning and running a home in Kenya has gone up significantly over the past years
Managing costs - Cost of running a home The cost of owning and running a home in Kenya has gone up significantly over the past years
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Managing costs - Cost of running a home
The cost of owning and running a home in Kenya has gone up significantly over the past years. The increase in owning and running costs was driven by an increase in inflation, loan and mortgage interest payments besides other related factors. Gas, fuel and electricity charges have been rising and a lot of volatility has been observed in such and other related commodities.
Loan and mortgage interest payments are still the single biggest cost of owning a home, accounting for 27 to 66 per cent of the total expenses. Electricity and gas bills are the second biggest cost at 19 per cent, up from 14 per cent, followed by taxes and domestic rates at 17 per cent. Overall, the cost of owning and running a house takes up roughly about 23 to 66 per cent of earnings for someone on an average salary. Suren Thiru an economist said: "With loan and mortgage interest payments increasing over the past year, the annual cost associated with owning and running a home may increase significantly. Such a sizeable increase in the costs of running a home will pile pressure on household disposable income, providing some financial stress to homeowners."
Required
1. Explain the direct and indirect costs of running a home and their impact on the family finances.
(10 marks)
Analyze how the above cost information can be used as a basis for planning to save for a family holiday.
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- The direct and indirect costs of running a home have impacts on family finances. Direct prices include loans, electricity bills, and taxes. These costs are directly deducted from the salary as statutory deductions or are paid by the homeowner, where they do not have another option. For example, running a home will require fuel and electricity, which are controlled by government policies. These deductions reduce the net earnings of the homeowner, and the family remains with less finances. The indirect costs are loan interests and mortgages interests, which further reduce the family finances. Other incidental damages are an annual increase in these costs. The electricity and gas costs are also increasing and will further lower the family finances. It may not be possible to save due to these high costs, and the family is subjected to financial stress.
- The cost information may, however, be used as a basis for planning the family holiday. Despite the high costs of mortgage and loan interests, fuel, electricity and taxes, and domestic rates, the family can reduce the use of electricity and fuel so that they can save for the family holiday. It may not be possible to influence the mortgage and loan interests, but the homeowner can first research the best financial service provider that can offer loans at relatively lower rates so that the family finances are not significantly impacted. this way, the family can save for a holiday
