We're not that great at predicting the future

It turns out that as humans we find it relatively easy to think about the big bills that we pay each week, imagining the cost of something less regular, like the dentist, is hard for lots of people.

People base their spending predictions on typical expenses like groceries, fuel and rent. They usually fail to account for irregular – though still common – expenses like car repairs, last-minute concert tickets or one-off health care bills. This is what leads to underprediction.

When we found this research it made a lot of sense and it is what we see in the loan applications for our financial reset.  It's also a reason why many Kiwi return to Pay Day (high-cost) lenders or use Buy Now Pay Later for expenses. You can find out more about that from Consumer NZ here

What's the learning

It turns out that simply getting into the practice of thinking about irregular expenses can mean that your predictions become more accurate! Which means you're more likely to be able to pay for unexpected expenses. Sweet!

Prompting people to think of irregular expenses in addition to typical expenses helps them to make more accurate spending predictions.

Where to start with predicting my future

We can't predict our future costs without taking stock of our past, and keeping track of where we're REALLY spending our money. We're all different, and this two-minute video from Sorted gives some ideas on how to start....

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Questions to make it work for you

Our friends at Good Shepherd recently released their blog "Keeping tabs: adding mindfulness to your money" which on the above and has some great practical tips. In addition, consider these questions to think about how tracking could work for you

1. I like spreadsheets and data: There are lots of spending trackers online, like this one: Free from Microsoft or from Sorted Spending Tracker
2. I am visual- I can understand things more clearly through colour, pictures, and post-it notes: There are heaps of templates on Pinterest or Instagram
3. I like apps and games so would like something that keeps me engaged: There are lots of budgeting apps out there- find one that suits YOU. There are heaps in the APP store, and some examples are here:

And finally

Re-connecting with WHY we want to do anything of these things is important.

Without a goal or a question in mind tracking your expenses may feel like a chore- but if it's attached to a goal then that can be a huge motivator! If you had more money what would you do with it?

It's a bit like the financial reset- why did you do this? What is your goal? And imagine how you'll feel when you're debt-free!

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