BCBusiness

28 BCBusiness january 2016 heppet is hardly alone in finding that her mental map of what she's spend- ing is lacking. In fact, most people are much worse than Sheppet at assess- ing their expenses, especially in cer- tain categories. Just check the beloved personal-finance stories of the week- end newspaper. People will list plausible amounts they're paying for their mortgage or rent. The cellphone and cable bills are within strik- ing distance of reality. But then you'll see single people claiming they're feeding themselves on less than $200 a month. Or a family of four will list the monthly cost of groceries as $600. And that same fam- ily apparently plans never to buy furniture or a household appliance or to repair their car in the next 20 years, because little or nothing is listed in their expenses for those kinds of items. Even "Eric and Ilsa," the laughably privileged Vancouver couple who became a Twitter hit with their financial-makeover story of struggling to make it on $25,000 a month, put down the unlikely figure of $260 a month for dining out. That would barely cover one meal at Hawksworth. What these personal-finance tales show—and what the popular new field of behavioural economics confirms— is that we are far from rational actors when it comes to money. "We like to think we are perfect machines, but we are not very perfect," says UBC economist Yoram Halevy. "We are kind of short-sighted animals. We have a hard time planning. People have a very strong 'present' bias and there is very strong evidence we distort probabilities." That means that when people think about their spending, they think about the now, not the future. That's what Sam Ramos concluded was his prob- lem after a new girlfriend made him look closely at his budget a few years ago. Ramos, a 33-year-old volunteer engagement co-ordinator who works at the YWCA and teaches the subject at colleges, hadn't paid much attention at all to how he was spending his $40,000 to $55,000 in annual income. He thought of himself as frugal: he doesn't have a car, rents an apartment for less than $1,000 a month and is the kind of guy who will buy a bed "This was just after the war, 1947. i was starting out in the war surplus business, because i'd been in the army overseas. i didn't have any money but i did have one deal–i don't remember whether it was marine pumps or camouflage paint–and i needed $5,000 to pay for it. i had a bank account at the royal bank, and i could never get to see the bank manager. i was nothing. They were opening a new branch of the bank of Montreal at the corner of Prior and Main. so i went to the new branch that they just opened and i walked in and i said to the banker, 'i'd like to borrow $5,000.' He said, 'Well, who are you?' and i said, 'i deal at the other bank down the street, but i can't get any money there, nobody's listening to me. i'm gonna move my bank account here.' He said, 'i can't guarantee i can get you anything,' and i said, 'Well, i'm moving here anyway.' and he said, 'We'll see.' He gave me the $5,000. and that started my career in the war surplus business. and one thing led to another, and as i started making a little money i bought four-by-four trucks, six- by-six trucks, fire barges, blasting caps, dynamite–everything. That little $5,000 led to the next deal. When you have a little, a little is a lot. When you have a lot, a little is nothing. now as you go down the road, you get a little more, but you always require more." Jo e S e g a l P R E S I d E N T A N d C E O, K I N g S w O O d C A P I TA L K now n for : Building a retail empire that included Zellers and the Bay, and further endeavours in manufacturing, real estate and venture capital funding Five ProMinenT b.c. business PeoPle discuss–in THeir oWn Words–THe MoMenT WHen everyTHing cHanged For THeM and THeir business by Ma r c i e Go o d M y F i n a n c i a l T u r n i n g P o i n T went to the new branch that they just opened said to the that started my career in my career in the war surplus business. the war surplus business. a d 1 the 2016 the 2016 P E R S O N A L F I N A N C E R E P O R T $ S

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