The person drawing up the plan should aim to have a balance between pessimism and optimism. This is where many people go wrong when drawing up their financial plans. It is very easy to make predictions about the future based on best case scenarios. Most people will assume that their job is safe and that they will countinue to work the same hours. They assume that the rates of tax will remain and that they will take-home the same income for the foreseable future. They may underestimate how much they spend on clothes, food and going out.
It is clear that very big purchases can lead to very significant problems. Buying a house or a car, or even booking a holiday without working out exactly how much it will cost and how you re going to pay for it are major causes of financial problems and may lead to going into unplanned debt. Even small items of expenditure need to be taken into account if they are regular and frequent. It might be a good idea to keep a diary where you make note of every expenditure no matter how small it is. This will reveal that people spend much more than they realise on fast-food and sweets. Me-irl
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