BCBusiness

30 BCBusiness january 2016 500 kilometres away. One study looked specifically at that mental-math prob- lem. "People are fairly adept at forecast- ing future costs and determining how much to spend on ordinary items, [but] they underestimate future spending on exceptional purchases and overspend on each individual purchase," concluded the 2012 study by Abigail Sussman and Adam Alter, published in the Journal of Consumer Research. Their research found that people generally don't account for those kinds of costs in their budgets, even if they are faithful expense trackers. Worse, they will spend more on each one of those items—20 per cent more on average—than they would if they had a category of "special non-daily expenses," because they see each one as unique. "They con- strue each potential purchase as a relatively rare occurrence and consequently they overspend across a series of discretely exceptional expenses," wrote Sussman and Alter. Financial planners see both kinds of failures— not tracking the little expenses and not account- ing for the irregular big ones—constantly. Jillian Bryan, a vice-president with TD Wealth Private Investment Advice in Vancou- ver, says her otherwise smart clients will forget to account for how much money they're shelling out on their children (Halloween costumes, skates, swim- ming lessons), for hair care and Botox, or even for vacations: "There are all these incidentals that creep in." Simon Tanner, at Dynamic Planning Partners in Langley, sees simi- lar irrational accounting from his clients. They do well at estimating their static expenses, he notices: mortgage or rent, taxes, even cellphone and cable bills, because they can scrutinize the bill when it comes in each month. But in other areas—food or car expenses that are paid for sporadically—they are wildly out of whack. "We have some sort of denial about what it costs to live," says Tanner. "When people tell me they spend $400 on grocer- ies and $200 on eating out, I can guarantee it's the reverse of that and higher in each category." Tan- ner estimates his own monthly grocery bill for his family of five at $1,600. Gwen Chapman, a UBC nutrition professor "In 1982, I left my core competency of real estate and invested in the stock market–and I lost heavily. Interest rates went to 21 per cent and we had a mort- gage on our home. Being a realtor that was selling pretty well a house a day, I had to swallow my pride. I came home and I said to my then-wife, Mieko: 'here's the problem. We can afford the mortgage payments but we're absolutely throwing our money away. so let's sell the house.' The worst thing was that we had just had our first child, Kristopher. Mieko was recover- ing from a Caesarean birth at her sister's, and I had to move us from our big new fancy home on Burnaby Mountain into a rental at $1,200 a month. We still owed money on the stocks. But I had this thing–it's not just ego, but in building a family business we could not go bankrupt. I could never ever go bankrupt. When my son was one year old, the bank actually called our loan, and I met with the bank in tears and said, 'Would you leave me alone for six months, let me do what I do, and I will get the payments back in line?' and they said oK. The market was a mess because of interest rates. I worked from 7 a.m. to midnight Monday to Thursday, and 7 to 7 on Friday, and I did two open houses each day on saturday and sunday. It was a tough time. But I really believe that you learn more through adversity than through success. It built a brand. and I was in hell with amazing people. To this day we go away once a year–my partner, Carey; my ex-wife, Mieko; and our three kids. My son Kristopher runs the company. I think when people go through a storm together, that support never goes away." bob re n n ie O w n e r a n d F O u n d e r , r e n n I e M a r k e t I n g S y S t e M S K now n for : Marketing many of Vancouver's best-known condo developments, including the Olympic Village, Shangri-La, Jameson House and Woodward's M y F i n a n c i a l T u r n i n g P o i n T fancy home on Burnaby Mountain into a rental at worked from 7 worked from 7 a.m. to midnight a.m. to midnight Monday to Thursday, Monday to Thursday, 3 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 $

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