By Elizabeth Kerr
This Thursday is ‘Budget day’ and I’ll be sporting my most tantalising pony-tail (that joke will never get old) down at Parliament with other “media” for the early sneaky-peek at what cheques Key and his team intend to write this year.
Journalists, economists and financial analysts are locked away together from 10.30, under embargo conditions, which basically means we perform a secret handshake, read the document and promise not to tell anyone anything until the veil of secrecy is lifted at 2pm, which coincides with English delivering the details in his speech.
Ok, you got me, there is no secret handshake but writing that made it sound way cooler!!! There is also no Wifi, no cellphones are allowed and we are even escorted to the bathroom. Perish the thought I happen to smuggle a wadding great A4 copy between my legs on my way to the toilet. And who would I give it to? – all the journalists worth talking too are supposedly stuck in a room together competing to see who can identify an angle to write about that no one has spotted. As a mum of two busy boys; being in a lock-down without Peppa Pig and Elmo sounds’ bloody awesome!!! Bring it on!!!
The purpose of embargo is actually quite ingenuous. The theory is if we are all reading it at the same time, and no one can send out a press release until 2pm, then no one is going to cut any corners interpreting the information because of pressure to get the scoop over the competition. It’s like being in a race where we all cross the start and finish lines at the same time.
If ever there is an exam for journalists…. this is it. But seeing as I'm not one I'll leave the big words to them and just tell you how I see it, what this could mean for your Money Machine (and what everyone secretly talks about in the “lock-up”).
Inspired by this weeks’ event, today’s column is a story about the values of budgeting.
Once upon a time…..
… when I was young and financially ignorant a colleague and I were shopping at lunch time. She was a highly paid consultant and I was very much …not! Both admiring the (first generation) iPhone my response was “It’s too expensive for me”…. And she said “I can’t afford it”.
At $1200 it was the equivalent of half my month's wages; but for her, well I was all like “WHAYAT!!?? What do you mean you can’t afford it, you earn like a gazillion dollars?”
Of course I didn’t say that out loud, back then I was like everyone else – talking about money was akin to social suicide. “Don’t worry, it won’t take off – the Nokia has everything you could need” might have escaped my mouth.
But she wasn’t saying “I can’t buy it” she was saying “I can’t afford it” and that is totally different.
Buying vs. Owning
These days it is rare that one can’t physically make an over the counter purchase because there are a variety of credit cards, finance options, and overdrafts to use in lieu of your own money. Patience has totally gone out the window – no one even lay-bys anymore. (For those too young to remember lay-bys, it’s when you decide you want something and pays it off over time. But the store keeps the goods until you have paid them off).
People tend to purchase the other way around nowadays. Firstly they decide they want something, they buy it using a finance facility (credit cards, loans, store credit etc..) and then commit to paying it off after they have the goods at home. The thing is that hedonic adaptation usually means we are bored of the item before we have paid it off and tend to go hunting for the next happiness purchase right away.
So, back to my colleague. She could have bought the phone if she wanted to, she probably had credit cards or overdrafts which would have facilitated the purchase if her enormous salary couldn’t cover it. But still she said “I can’t afford it”. What does that mean?
Spending choices = Personal Values
A budget is an attempt to align our spending choices with our personal values. What she was really saying is “I am choosing not to spend my money on this phone”. She could have physically bought the phone but she wanted to honour her financial goals more. At that time in her life spending $1200 on a phone was not going to help her Money Machine.
Was it hard to say “No” to buying it? Maybe…. Sometimes it is hard to say no to something we really like, but I truly believe that what you focus on becomes bigger. What that means is that if you walk around focused on what you can’t have you will quickly become dissatisfied with what you do have. But if you focus on the progress, no matter how slowly it goes, and of the benefits of your money machine, then you will find that becomes much more important to you.
Depravation is NOT failure!
People rarely say out loud “I can’t afford it”. You might feel like a failure to admit that you might not have enough money to buy yourself everything that you really like. But that is simply just not true. Going without is not failure… it merely opens up a void for the things that you really want.
Life is about choices and you just can’t have it all because you will always be tempted by beautiful, useful things. It is a neverending wish-list out there in the big wide world.
Not spending money on that phone kept my friend's money available for financial successes that she did want. It might have only been a small decision in the scheme of things but that is where people become unstuck… because it’s the small decisions that add up over time.
Pot calling the Kettle black
So this week as we watch earnestly to see how the Government is going to budget this year – let us remember that a budget is our best attempt to align our spending with our values. Before you throw stones at Key and his team firstly ask yourself if your personal budget and recent spending decisions are 100% aligned to your values. See, it’s hard isn’t it?!
As always I like to hear your thoughts and so if there is something particular you’d like to know about from the pomp and ceremony of Budget Day please email me at Elizabeth.Kerr@interest.co.nz.