How many people here have a budget? I take it not too many. Now for those that do have a budget, how many of you stick to it? Most people that do have budgets fail to stick to them because there are always expenses that they failed to account for. Me? I don’t have a budget, which seem so unlike me considering that financial planning is one of things I’m very passionate about.
A few years ago, I decided to keep track of my spending for a month, just to see exactly how much I spend on stuff. I was told the best way to track your spending was just to carry around a notepad and write down the stuff you buy. Being a computer guy I use Quicken instead. After the month was up, I checked the numbers and received the shock of my life. You have no idea how all those little purchase here and there can add up to hundreds and thousands of dollars until you start keeping track of them. The experience was a little sobering and very in your face. So I did what most people would do in that kind of situation – I deleted Quicken from the computer so I didn’t have to look at how much I spent eating out. Out of sight out of mind, right?
The only problem with the out of sight, out of mind approach is it only works if you make more than you spend. The instant you spend more than you make, you’re in big trouble. And without a budget, there is really no way to be sure you’re not spending more than you make.
This month, I received two unexpected bills. One was for the insurance on my car – it’s time to renewal it. That will set me back $2,000. The other bill came from MSP – it’s time to renewal that as well. This year the price raised to $1,000 because Sarah in on my plan. So that’s $3,000 of expenses that I didn’t account for, nor was I expecting.
Fortunately an extra $3,000 here or there doesn’t affect the lifestyle of a Dot Com Mogul. However, I imagine unforeseen expenses like these can have quite an impact on the average person. And it seems that ICBC and MSP understand this as well. How else can you explain the Autoplan 12 payment plan? MSP will also let you pay your bill over the course of the year as well. Both companies don’t do this for free of course – interest is charged on the outstanding balance as well as enrolment fees. While I don’t have the numbers from MSP, I was told by my insurance agent that more and more people are using Autoplan 12 payments instead of paying the entire bill off. I guess I shouldn’t be surprised by all this. After all we are in a “buy now, pay later” world.
I suppose I really should start budgeting again but I’m really in no big hurry to do it. This is because my views on budgeting are very simplistic – as long as your bank balance keeps increasing, you’re doing OK. If your bank account decreases each month, or worst you have to use credit to pay bills, then you’re not doing OK and it’s time to fire up Quicken and start budgeting.
The one thing I discovered about budgeting from watching Till Debt Do Us Part is nearly everyone underestimate their expenses. I also find that expenses are what everyone tries to cut. There are two ways to improve your financial position – reduce expenses or increase your means. Till Do Us Part deals a lot with cutting expenses but very little with increasing means, and that’s really too bad because most people really don’t have a spending problem, they have an income problem.