"This month was unusual"

Ask anyone on the leftover plan why they didn't save this month and they'll have a good answer. There were the tyres. Last month it was the MOT, and the month before that a wedding, with a hotel and a present. None of these is an excuse. Each was a real expense that couldn't sensibly have been avoided. And each time the conclusion is the same. This month was an exception, and next month will be normal.

Abigail Sussman and Adam Alter studied this pattern across seven experiments. They distinguish ordinary expenses, which recur, from exceptional ones, which are unusual or infrequent, such as a celebration, a repair or a piece of electronics. People, they found, are fairly good at predicting what they'll spend on ordinary things. They consistently underestimate what they'll spend on exceptional ones. The researchers' explanation is that people file each exceptional expense in a category of its own. A wedding is a one-off, and so are new tyres, and so is a vet's bill. Because each is unique, none of them gets counted as part of normal life, and so none gets budgeted for. The paper's title states its conclusion, which is that the exception is the rule. The particular exceptional expense is unpredictable, but it's entirely predictable that there will be one.

You can check this against your own year, and I'd encourage you to. Go through your last twelve months of statements and pick out everything you'd have called a one-off when it happened. The list will include car repairs, the dentist, Christmas, birthdays, a broken phone, school trips, a friend's hen weekend, the boiler service and insurance paid annually. Add them up and divide by twelve. Most people who do this find a monthly figure somewhere between surprising and shocking. I won't suggest what yours will be, because I don't know. I do expect it won't be small, and it'll look much the same next year, though it'll be made up of different items.

This matters for the leftover plan in two ways.

The first is that a normal month doesn't exist. The plan is always waiting for one, a month with no surprises in which the arithmetic from the first can finally come true. But a month with an unexpected expense in it is a normal month. If you can only save in months without one, you'll save in perhaps two months of the year.

The second is that these expenses are exactly what savings are for. There's an irony here. Under the leftover plan, the tyres are the reason you couldn't save. If the order were reversed, the tyres would be what the savings were there to pay for. At the moment the unusual expense comes out of the month's spending money and wipes out the month's saving. With a cushion in place, it would come out of the cushion, and the month's spending would go on as usual. Next month's transfer would begin to refill the cushion. Your money would stop lurching from one surprise to the next.

So the honest reply to "this month was unusual" is that it wasn't. It was a month much like the others, and it contained a surprise, as nearly all of them do. If a plan only works in months that have no surprise in them, it will hardly ever work.