Monday, May 11, 2009


Is there such a thing as underspending? When it comes to personal finance, definitely when it comes to essentials such as health, children's education etc, but otherwise probably not. That said, it is nice to "live a bit" and part of my budget is allocated to luxuries - non-essential things which I allow myself to splurge on without worrying about blowing my savings rate. Examples of spending over the years have included paintings, en-primeur wine, hand woven carpets and an "L" lens for my camera.

Each month I accrue a fixed sum to the luxuries account. (I have a separate accrual for holidays.) Whenever I spend something on luxury items, the cost is deducted from the account. I have been operating this system since 2005. However, with the exception of 2007 when I overspent on wine and carpets, I have consistently failed to spend all of the money which I have put aside. As a result, the balance accrued in the account is now more than double the annual budget for luxuries (even after what I have just spent on this year's en-primeur campaign and replacing my increasingly unreliable iPod classic).

The temptation to make a single handed attempt to stimulate the economy with a spending spree is something I can resist easily enough. If I do spend the money, it will be on something which either has lasting value or which will generate a memorable degree of satisfaction. However, I am struggling to think of anything else other than, possibly, another painting. The reality is that I have most (if not all) of the things I need/want which would fall within the budget. (The Ferrari is, sadly, outside the budget and likely to remain so.)

Of course, I am in no hurry - I can just keep the accrual running and wait until I find something that I want to splurge on. Of course, I could just ask mrs traineeinvestor.....

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