Planning for a Financial Disaster
Planning for a Financial Disaster
Planning for a Financial Disaster
Planning for a Financial Disaster
Do you know how to schedule a financial disaster? It is simple. Fail to plan for predictable expenses.A co,mon example of this is failing to plan for predictaiiTh automobile maintenance. I don't know about your cars, but mine have a regular cycle of problems. About every twenty-five to thirty thousand miles they need tires, brakes, belts, spark plugs, and so on. Once I recognize that, the smart thing to do is to anticipate those expenses and budget for them.
Failure to plan this way is a major reason many people end up in debt. When the expenses occur, they must be paid, so the only alternative available is often a credit card.
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Why do reasonably intelligent people fail to anticipate known expenses? Because when they try to work them into their spending plan (a budget), they don't fit. So they simply ignore those expenses until a crisis arrives. To do otherwise would require adjustments in the other areas of spending, such as housing, cars, and vacations. This is the head in the sand syndrome.
It is common to see this problem when one counsels engaged couples about their first year's budget. When I ask if they have developed a budget, usually they respond, "Yes, we have, and everything worked out fine."
But when I review their budget with them, it reveals that they have made no provision for clothes, visits to the doctor, car repairs, or vacations. I might be convinced that they have a car that doesn't break down, and bodies that don't get sick, or even teeth that don't get cavities, but I absolutely refuse to believe they won't go to Disney World the first year they're married. And since they aren't nudists, I assume they will need to replace their clothes eventually.
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