Saturday, June 24, 2006

All men have vices

As I told Mrs Traineeinvestor before we got married, all men have vices. The question is not whether a man has vices, but which vices he has. In my case, it's a reasonably long list with being a little bit too fond of good wine close to the top. This week my passion for wine wrecked havoc with my simplistic (and rather pathetic) approach to budgeting.

About five years ago, I decided that the easiest approach to budgeting for "completely unnecessary luxuries" was to allow myself a vice budget of a fixed amount each year - and no more. For the last four years I have been sufficiently disciplined to spend less than the budgeted amount. This year I let things get out of control. With the 2005 en primeur season now underway, I purchased a couple of cases of ridiculously over priced claret. This is consistent with my practice for the last few years. So far so good. I then noticed that the prices of the 2004 wines were starting to edge up, but that not all merchants had increased their prices. So, you guessed it, I went and ordered a couple of cases of 2004 which broke this year's budget. Add in the art purchased on our holiday last month and I have spent about twice the allocated vice budget for 2006 already.

I could claim that the wine is an investment (it does have some prospects of appreciating in value) but this is a bit hard to reconcile with the intention of drinking at least some of it when it matures.

Back to budgeting school and an austerity regime for me.


makingourway said...

now, my friend, the big challenge is figuring out how to restore balance to your budget - what will give?

as to wine as an investment, i've contemplated that thought myself, however, it seems a bit illiquid (pardon the expression). how would you dispose of the claret -- also, what do you recommend?


traineeinvestor said...

Thanks for the comments.

As to the budget, something has to give and I have decided to trim expenses in a few areas to try and close the gap. For example, I can save lunch money once a week by going to a seminar course where lunch is provided. I may even learn something useful in the process. Otherwise, it's the budget that is giving at the moment. For this year, the budget is blown and I will have to resign myself to being more disciplined next year.

On wine as an investment, I am not an expert (I just drink the stuff). There is a market for wine in the UK (probably a few other places as well) and most of the better UK brokers will deal in recognised names. However the transaction costs are quite steep. I find it hard to view wine as being in the same class as shares or real estate as an investment.

My wine selection is driven by two factors. First, I need to buy recognised names so that there is a reasonably expectation of there being a market for the wines should I decide to sell. Second, the wine should not be so expensive that I would feel unable to drink at least some of it. In practice, this means that I am buying the mid tier Bordeaux wines. Individual selection varies from year to year.