Lately I’ve been working more and more in a ‘one on one’ hand holding roll with people than I have for many years.
People are coming to me for direct help and one thing I see that causes people to feel like they have lost control of money is that many of the expenses that happen in life are seen as being unpredictable. They feel this is a major reason why they just can’t get on top of their finances.
I agree that there are many unpredictable expenses in life but nowhere near as many as people might think. More of them are predictable than unpredictable and it is easy to take control of predictable expenses.
Let me explain…
A car that has done 300,000km does not break down by accident or unexpectedly if it has not been maintained carefully and regularly serviced.
A 10 year old washing machine may call it a day when you least expected it (and when you needed it the most) but it was a predictable event in that you knew it was going to happen (just not when).
If you take control of what is controllable and put money aside for the less predictable and less frequent events you need to pay for, you will find money much easier to manage.
Why not go through your expenses for the last month or so and identify them as being either repeating and very predictable (e.g. insurance payment, loan payment, electricity bill, telephone bill, rates notice, car registration, groceries etc), or one-of expenses.
Even though the phone bill may vary each time, it is a predictable expense and you could allocate an amount for it in your planning to be available when it falls due each month and so too all the other obviously predictable expenses. These can easily be taken control of because they are predictable!
Then, look at the one-of expenses and put them into one of two categories.
1. Repairs and maintenance (e.g. Tyres for the car)
2. Things you did because you just wanted to (e.g. Movies, Coffee, Dining out).
Repairs and maintenance may not be so easy to predict but if you consider the age and condition of your car, white goods, electrical equipment and so on, and you put money aside each pay to cover eventual replacement of these items you will find they cause you less and less ‘surprises’ as time goes by.
You will get to do more of the fun things with less stress if you allocate money for the more predictable expenses with a systematic approach and you can make what seems like a constant barrage of unpredictable expenses look a whole lot more manageable.
That’s all for now.