What the leftover plan costs

The costs have come up one at a time. Here they are together. Most of this chapter is my own reckoning, and the sums in it are illustrations.

Every shock becomes a debt. Without a cushion, the washing machine goes on the credit card. If it's cleared at the end of the month, no harm is done, but the end of the month is when there's nothing left. So it's cleared over four months, or six, with interest. Before it's gone, something else arrives. Many people on a decent wage carry a permanent balance of a thousand or two on a card. No extravagance put it there. It's made up of a string of ordinary breakdowns with nothing to absorb them. They pay interest on it all year round. It's the price of having no savings, and a cushion of a similar size would have cost nothing to hold.

You pay more for things. Without money in hand you pay monthly for insurance when paying annually would have been cheaper. You buy the cheaper appliance that fails sooner. You can't take the offer that needs payment up front. None of these is large. They recur, and they all push your costs the same way.

The background unease. If you've nothing behind you, every odd noise from the car causes a little anxiety. The same happens when the boiler is slow to fire, or when there's a rumour about restructuring at work. Once you've a cushion these become nuisances where before they'd have been threats. The study of bank customers in chapter 7 suggests that this shows up in how people feel about their lives.

Fewer choices. Money in hand buys options. You can leave a job that's making you ill, because you have two months' rent. You can take the course or move for the better post. You can help a relative, or turn down overtime during a bad week. Someone on the leftover plan faces each of those decisions with no slack at all, and as a result they often don't really get to decide. They stay in the job because they have to.

Strain at home. If you share finances, the twenty-seventh is a shared experience, and so is the washing machine. Couples with nothing in reserve argue about money more sharply, because every unexpected cost has to come from somewhere that hurts. There's often a quieter unfairness too, which is that one partner does the worrying for both.

A verdict on yourself. Year after year of intending to save and failing turns into a belief about who you are. You decide you're bad with money, and that you're not the saving kind. It's drawn from real evidence, but the evidence came from a plan that fails for nearly everyone who tries it. The belief then does harm of its own. You stop looking at your accounts, and you avoid the subject. It feels pointless to try anything new.

Time. This is the cost that's hardest to see and largest in the end. Savings begun at twenty-eight and savings begun at thirty-eight differ by ten years of contributions, and by whatever those contributions would have earned. This book isn't about investing and I won't put figures on it. But the leftover plan rarely lasts for a month or two. People stay on it for a decade, always meaning to start properly soon.

Against all this, what does the leftover plan offer? It spares you the small sting of a lower balance on payday. It keeps every pound available all month, and chapter 3 showed that this is the reason every pound gets spent. It also takes no setting up.

If a bank offered you these terms as a product, you'd turn it down. You've ended up on the leftover plan only because it's what happens when you don't arrange anything else.