One day or another we all face this reality: we overspend. We splurge. This month was my time.
I have a plan, I have a budget, I even control my credit cards within my budget and heck I am good doing this. But sometimes life happens. Relatives come to visit from overseas, friends come to visit from Brazil, great amazing concerts are announced (I hate you Canada for selling tickets with so many time in advance and for hosting so many good concerts), the Canadian Personal Finance Conference happens in another town and all of this during one single month.
I am not blaming any of these things, let me tell you. I am 100% sure that it’s my fault, and there is some valuable lessons to learn here.
One: like I said, life happens, and you better be prepared. No matter how well you manage your financial life, your budget and your investments, one day you will have unexpected expenses and, well, you will have to deal with them.
This is what an Emergency Fund is for. It hurts to have to withdraw some money from my Emergency Funds to pay credit card bills, but this is how my plan is set up to work. Of course I didn’t have plans to splurge, but that’s the beauty of a financial plan: if sh*t happens to your financial life, you have the peace of mind to put it on its tracks again.
Two: We splurged, for sure, but even then it was conscious. Even if we were overspending, we knew what and how we were doing it. We did not went into a shopping/restaurant/tourist spending spree like if there was no tomorrow, frugality is in our veins, after all. No questions, no doubts, no fraking possibility of paying less than the full amount on the credit card bills, this is a big NO-NO in my family life.
Three: Sometimes I can lose track of my spendings. Even if I have a nice set-up and a pretty decent system for tracking my expenses and control my budget, I didn’t get to remove the weakest link from this system: me myself. Sometimes I forget to register a transaction, sometimes I postpone reconciling and then I think everything is fine. And worse, wife believes I am doing everything according to the plan and believes the system is telling her the truth. Result: we both rely on the reports on the screen and we end up spending more than planned.
Four: Course corrections are OK. Like my friend Holy Potato says in his book The Power of Simple (a review is coming, stay tuned), you will have to make small adjustments to your main course. The important thing to keep in mind is the broad direction. If at any given moment you see your ship is facing a complete different direction then yes, it’s time to stop and come up with a new plan. If the main direction is fine but you just diverted some degrees, keep up and just make the necessary corrections, no need to panic and no need to stop the journey to recalculate everything.
Five: Nobody and no system is perfect. Like I said, my system is nice and I am good using and following it. But there are flaws to both of us. Me, I don’t like to sound like Uncle Scrooge and then sometimes I ignore the Goodbudget’s warning red bar with thoughts like “I did not spend within my Gifts category, so I can afford this”. And for my budgeting and track system, maybe I should think about one thing or two I could do to get it better. Any suggestion is wildly welcome and expected, of course.
But don’t worry. Sh*t happens to everyone all the time. What sets you apart from everybody else is your capacity of dealing with it your way. The main lesson here is: have a plan. Think about what will be your actions if your financial life get out of track before it gets out of track. This way you will have a much clearer vision without letting emotions take over. After all, we all know how bad we are dealing with money when emotions are involved, don’t we?
Photo by Emmanuel Milou