“I plan my spending each month to make sure I live within my means”
Agree 47%
Disagree 53%
It’s perfectly reasonable to look at the poll result both ways, first that it’s a legitimate cause for alarm that around half of those who responded DON’T plan how they spend their money but, second, from experience, that it’s perhaps surprising to find that half of the respondents at least believe that they do!
As Marlene Shalton CFP, Managing Director of Cardiff based Chambers Morgan James commented “ Like Bob, I was surprised to see that as many as 47% do plan their spending each month. It’s heartening to see this response, but that still means there are plenty of people who do not p
lan to make sure they live within their means.”
Alan Dick CFP of Glasgow based Forty Two Financial Planning was very surprised by the findings as the result doesn’t reflect his real life experience with clients.
He recalled a recent client meeting with a couple who thought they were focused on their monthly finances and how this fitted into their long term goals. Having reviewed their long term cashflow forecast they were surprised to find that, based on their own figures, there was a surplus of around £20,000 between their annual income and expenditure! “Where has it come from?” they wondered. “We certainly don’t seem to have it to invest!”
As Alan put it, “Most people have very little idea of what they spend each month beyond the basics such as mortgage, council tax, electricity etc. Therefore I’m surprised that as many as 47% believe they budget effectively. Completing a simple budget which includes an allowance for regular saving and investment (and more importantly having the discipline to stick to it) can make the difference between meeting your objectives or failing to achieve your dreams.”
Ian Smith CFP of Central Financial Planning in Birmingham saw an opportunity for the 53% who do not plan their spending each month to do a basic financial planning exercise by taking a good look at their bank and credit card statements. “Often people are surprised to find out what they are actually spending their money on!”. Ian commented.
Rebecca Taylor CFP of Dunham Financial Services in Peterborough identified two major impacts from the statistics.
“The first, of course, is that without any kind of control on their expenditure, many of those within the 53% may end up overdrawn each month resulting in bank charges and debt. Whilst it may be true that some people fail to budget simply because they do not need to as they’re lucky enough to have surplus funds each month, I believe that everyone needs to know at least how much they need to live on each month. This simple fact can make a huge impact on their decisions, for example about whether or not they accept a new job, whether they can upgrade the car, or even whether they can afford the new dress that has been spotted in John Lewis!
Second, people need to grasp that not understanding their monthly budget now, may well impact on how they plan for retirement. How will someone in this situation ever be able to get an idea of how much they need to save in order to be able to retire comfortably? Many people who I advise have ideas on the type of lifestyle that they would like to lead in retirement, but have not thought about how they are going to fund them”.
In conclusion, we believe that the poll results and the comments by Financial Planners above illustrate an important point, i.e. that far too many of us, for whatever reasons, are either failing to budget or not doing so effectively.
As a result, more of us run the risk of falling into unmanageable debt and are failing to plan effectively for our long-term financial future. If people are encouraged or motivated to take action by something they've learnt during the Financial Planning Week, then that's a really positive result.
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