Those people who pretend they know how much they are earning, spending, investing or what is their net-worth either maintain detailed accounts or are lying!

The mind is a poor accountant, and it creates facts in such a way that is palatable and is socially right sounding! For example if you have spent on some gifts which you feel guilty about your ego will search all the past data to justify the gift. On the other hand if you have not gifted anything, it will find all the past data to justify the ‘non-gifting’. Either way its job is to make you feel good TO YOURSELF – there is no outside judge.

Look at this conversation I had with a friend:

Me: People over spend on many unnecessary things and that is why there is not enough for investing for a retirement. This delays / postpones retirement.

Friend: Can you give an example?
Me: Let us take the expense on clothes…how much do you think you spend on shirts?

Friend: Not really too much, say about Rs. 3-4000 a year.

Me: Really? Tough to believe it is just that much.

Friend’s wife: It could be a little more say 6k…on his shirts.

Me: What brand do you buy – I see it here – Arrow or Van Heusen, correct?

F: Yes, need to wear it…

Me: Hey I am just calculating, not commenting!!

Me: When do you buy?

Friend’s wife: His birthday, Our wedding anniversary, Diwali, …and sometimes just like that!

Me: Say 5-6 shirts a year for HIM?

Friend’s wife: Yes

Me: at Rs. 2500 a shirt that means Rs. 15,000 per annum

Friend’s wife: we also buy for his brother’s birthday, our parent’s wedding anniversary, my brother’s birthday, and my sister’s husband’s birthday. That makes it another 6-7 shirts.

Me: that is almost another 20k.

Friend: Man…vow!

Now why did this friend tell me 3-4k when he was actually spending Rs. 35000 on shirts? Simple – his brain did not want him to sound extravagant when he was sitting in front of a person like me! Was he worried about me judging him? Subconsciously perhaps, but frankly he could not care.

It is just packaging by the EGO..it hides all facts – and makes it  palatable.

However an accounting software – could be a simple diary or an excel sheet (enough calculators on Google) or a more sophisticated accounting software like www.myirisplus.com will show you a mirror on your spending.

Do not like what you see?

Do not break the mirror, change your spending pattern!