I overheard a colleague today talking about the repair bill for his car “I’ve just paid off the holiday and this comes out of the blue! I cannae believe it”.
Ok, I might have left off a bit of profanity but it really surprised me to hear this from as he always struck me as being quite a sensible sort but apparently, despite probably earning a great deal more than me he spends it as soon as he gets it.
The bill in question is £800 – enough to make me wince but the car in question is a 16 plate BMW 330i and probably nice trim. If you wanted to buy it tomorrow it might cost you £20,000 (not that anyone buys their car anymore). Presumably the monthly rental cost or depreciation is £300-£450 a month which he doesn’t mind spending but the “out of the blue” bill is just far too much.
It got me thinking about a post I read a long time ago (which I can’t find but it was maybe MMM) saying that there is no such thing as a “one-off” expense or “out of the blue” expense; pretty much all of our spending is predictable and if you own a car you may expect car related bills, if you go on holiday you may expect that you need to pay for it.
On a budgeting level, I like to look at what we have spent and predict what we will spend. Some big bills we have this month and next are holidays to London, Ireland, Italy and France (skiing). By not travelling much since the Little Lady was born, we’ve saved a lot of money (or postponed spending) and it’s flattered our spending/savings rate/SWR to the point that our finances look FIable!
The problem is that just as if someone is on a diet and only eats rice crackers and drinks water but every other day has an “out of the blue” a 1000 calorie muffin. With spending, you could easily live like a miser for 10 months of the year and still blow your budget on Xmas and a ski trip and a family week to Centreparcs in high-season).
My approach is to expect we’ll spend a lot sometimes and have the cash (or credit) emergency funds available to pay. My colleague isn’t as prudent and from listening to him; he’s overdrawn, 2 weeks from payday, maxed out on credit cards and doesn’t seem to think that he’s the cause of his money woes and not the car/holiday/wife/house/kids.
Spending is always going to be lumpy. Big ticket items will test your budget and bank balance. There’s always insurance for the truly out of the blue and for what you can’t afford, but I suppose the first step along the road to Financial Independence is at least having enough money to pay your bills – especially if you drive a car that costs about 4 times mine. Fur coat and no knickers comes to mind.