People are busy and sometimes obvious things are overlooked. Like the answer to the question, “Which matters more to you, quantity of spending or quality of spending?”
Most people eventually notice that quantity matters. It becomes obvious. Third parties help you discover your profligacy. Banks, credit card companies, car leasing companies. There are many. Quality on the other hand tends to be unnoticed.
The difference follows a familiar rule. The urgent is seldom important and the important is seldom urgent.
The move to quality spending is part of the 3Rs of financial planning. Record, Review, Revise.
Not everyone records the spending. It is much easier now than it once was because debit cards and credit cards are much more helpful than cash. Nonetheless, you do have to look. How much is spent each month on food, on clothing, on gas, on car insurance and repairs and lease payments, on children’s expenses, on recreation and entertainment, on household expenses, rent taxes, insurance and so on.
You can manage what you know better than what you don’t know. Spend the time and break it down into broad categories. Detail is not your friend yet.
Suppose you expected food to cost $800 and you discover that food and eating out cost $1,500 on average over the past six months. What should you do? Maybe reclassify eating out as entertainment, but more likely, become more selective about eating out and probably recalculate your expectation. Once you are over budget, all expenses are in play.
Watch credit cards for recurring debits. Magazines you never read are common. Stop automatic renewals. They will let you know you are running out of time.
The question you ask yourself is, “If I was not already spending this amount of money on this item, would I start?” You will be amazed at how many “No!” answers appear.
Having some records allows you to manage other decisions that are improtant and hard to do otherwise.
When should I change cars? The repair versus replace decision that businesses face all the time. Sometimes repairs are enough to pay for a newer, more efficient, easier to maintain vehicle.
Does owning versus renting pay off? Often important for near retiree situations. The incidental costs to run a house are often a big share of what rent would be. The capital the decision frees can be invested.
There is no reason to know every dollar, but your records should be good enough that an alarm goes off when spending drifts. A review can help then. Discover what options are available. Then act on it.
People are generally happy with their spending if they believe it is quality spending. Getting money’s worth. Understand the meaning of your cost of living, it allows you to plan better.
Pity the government seems unable to improve the quality of their spending. That is why you dislike the number you send them each year.
Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.
Please be in touch if I can help you. firstname.lastname@example.org 866-285-7772