Do you suffer from money tunnel vision?

Recent research suggests that a third of middle-class earners couldn’t pay an unexpected £500 bill. If you’re in this situation despite an apparently healthy income, you may have ‘money tunnel vision’. Here’s how to correct it – with a little help from Charles Dickens (and Sherlock Holmes).


‘Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result: happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result: misery.’ That’s Wilkins Micawber from Charles Dickens’s novel David Copperfield, with possibly the wisest piece of financial advice ever given. Unfortunately Micawber, a resident of a debtor’s prison, didn’t take it himself. In general, Micawber lives by the dubious philosophy that ‘something will turn up’.

It seems he’s as relevant as ever. A recent YouGov poll for The Times revealed that 31 per cent of the middle classes (categorised as ABC1 workers) would have to borrow money to repay an unexpected bill of as little as £500. Despite this group including some relatively high earners such as junior managers and professionals, it appears that nearly are third are living simply hand-to-mouth, from month to month. They have little or nothing in the way of savings, and are apparently unable to build up any. For some it was even worse: 14 per cent had not even £100 to spare.

Looking rich, feeling poor

The irony is that these are individuals who are supposedly well-paid – most would be earning above the national average wage. A large part of the problem is due to the high cost of owning or renting property: people feel obliged to live at the very limit of their incomes in order to secure the best home they can afford (or indeed any home at all). But it isn’t helpful just to blame house prices – there must be another reason why you can be well-off on paper and yet so often find yourself skint.

The answer may be in the way you look at money. Specifically, you may have ‘money tunnel vision’.

What is money tunnel vision?

The thoughts of a person with money tunnel vision work like this. He sees £1,000 in his current account. He thinks: ‘I have £1,000 to spend.’

We can all suffer from this, to a greater or lesser extent. In its mildest form, you may simply forget that unexpected expenses can arise from time to time – such as a flat tyre or friend’s hen night. But many have a more severe tunnel vision, where even regular, predictable expenses such as council tax or insurance renewals are forgotten about until the reminders come in. Then, when the bills do arrive, it can be a struggle to meet them.

Even worse cases occur when our individual thinks, ‘I have £1,000 to spend… plus my overdraft.’ That’s before we enter the dark world of payday loans.

Money tunnel vision happens when you keep ‘What I earn’ and ‘What I spend’ in separate mental compartments, with little or no communication between the two. Which is exactly what Micawber’s maxim warns against.

So what’s the cure?

‘It is a capital mistake to theorize before one has data.’ – Sherlock Holmes

Yes, Sherlock too has a financial tip to offer. Before you can take any positive action, you need data. First, gather as much information about your money as you can. This means:

  1. How much money you (or your household) have coming in each month. This is the easiest figure.
  2. All your regular, unavoidable monthly costs, e.g. mortgage repayments, loan repayments, work travel costs, council tax, direct debits for bills and so forth.
  3. Your average spending on everything else – from essential groceries to luxury items. This may vary considerably, so a good shortcut (if you use a credit card for most purchases) is to look at your credit card bills for the past year and find the average total monthly bill. Add to this any additional discretionary spending on cash or debit cards.

Now, add together the spending figures from 2 and 3 and deduct them from the total household income figure.

The power of data: a 360-degree view of your finances

If the answer to your calculation is positive, that’s good news. It means your average spending is lower than your monthly income (even if some months are tighter than others), so over the course of a year you should be able to save. Work out the average amount you have left over and pay some or all of it into a regular savings account.

However, if you did the sum and got a minus number, this may indicate a problem. On those figures, your average spending exceeds your income, so over time you will be heading the way of Micawber.

You may object that this isn’t exactly rocket science – it’s merely checking to see if you’re spending more than you earn. But as simple as that sounds, it’s amazing how few people actually take the time to do it. They base all their actions on a single piece of data: their current account balance. This results in money tunnel vision. But what you need is a full 360 degree view of your finances, in order to tell whether you are really in the black, or in the red.

Balancing the books

You just can’t have too much data when it comes to managing your money. If you have built up a clear picture of what you have spent (e.g. over the past year), what you will spend, and what you might spend, you’ll know to within a few pounds exactly how much freedom you really have.

For example, if you know your average monthly credit card bill is £2,000, then there’s no need to panic if one month it’s nearer to £3,000 – because you know that’s unusual. Conversely, if one month your bill is only £1,200 you know it’s not an excuse to go on a spending spree, since the money you’ve saved this month needs to go towards balancing out the ‘overspend’ months.

People with money tunnel vision tend to notice only the months where they underspend – conveniently forgetting all those other months where they have more bills to pay. So they spend a lot of time feeling flush, and then can’t understand where all the money’s gone.

And it boils down to these simple tips…

If you want to stop being one of those people who can’t afford even a small unexpected bill, the remedy starts here.

  1. Keep a spending diary (to include even small things like cups of coffee)
  2. Retain all credit card bills and keep a running yearly average of what you spend on them each month
  3. Pay off credit cards in full each month – paying interest is just throwing money away
  4. Keep all current account statements and track the overall trend of your balance – is it rising or sinking?
  5. Include regular savings as part of your monthly ‘essential costs’ – you will definitely need this money at some point.
  6. If you’re not clearly any monthly savings on average, check out this article for tips on how to do so.
  7. Remember Micawber’s maxim about income versus spending – and not his other catchphrase ‘Something will turn up.’ Because what usually turns up, is another bill.

For more tips on saving for the future, talk to a financial adviser. You can find one near you using our smart postcode search.