So you’ve been good and you have set a budget for your 5YP. Even better you have more or less stuck to it. You’ve made the most of every trick in the book to make your pound/dollar/euro go further. Fantastic. Well done.
You’ve recognised that setting a budget is not primarily about setting limits. Rather a budget provides you with an opportunity to put together the finances to afford the 5YP in the first place. It ensures that you have a realistic idea of how much resource you have available to put towards your 5YP each year.
However, you are also realistic about the fact that sticking to your budget is nonetheless about setting some limits; it ensures that your 5YP stays within appropriate bounds. Realistically, a 5YP is unlikely to be among your financial priorities. There are more important things in life. So I take for granted that your 5YP budget is simply part of a wider set of budgets for your household.
However, though setting and sticking to a 5YP budget is an achievement in itself, there is more to do. I don’t want to undervalue that achievement. I have already confessed that I have found it difficult to stick to my own budgets. In each of the 5 years of my 5YP, and indeed the 2 years since, I have exceeded my annual budget. So If you have kept to your budgets you have done well.
Nonetheless, an equally important task is to keep track of your 5YP spend over the years. Why is this important you ask? Glad you did. Here are 5 reasons.
1. We have a short memory. Keeping track allows you to see just how much you have spent in the long term on the 5YP. It helps keep things in perspective.
2. If you keep track of your spend in various categories you can see where you have overspent and where you have underspent. So if over the last 3 years you have overspent your budget on shoes or shirts you can then make a decision to spend less on footwear in the following year. Similarly, if you’ve barely spent anything on suits you might want to make some adjustments.
3. It enables year on year comparisons. One of the surprises for me is that my annual spend keeps increasing. Given that my wardrobe has both increased and improved each year for 7 years now, and is currently at its best, I anticipated that my spend would decrease sharply. I need less stuff! It hasn’t so far. Keeping track of my 5YP spend revealed that unexpected trajectory. I can now do something about it.
4. It enables a longer term perspective on financing your 5YP. If in a particular year it becomes evident that you are likely to overspend your budget, you could choose to defer some of that expenditure into a subsequent year. The converse is also true. You might choose to spend less in one year because you know already that the subsequent year will have high expenditure.
5. It’s an additional reason to play with your spreadsheets. Nuff said.
For those who prefer apps, try punching budget planner into the App Store or Google Play for a list of free budget planning apps.
I track my expenditure across 10 categories. However, you might prefer a different approach.
Suits & Outer Wear
Ties & Handkerchiefs
Casual Trousers & Shorts
Cuff Links, Watches & Accessories
Tailoring & Adjustments