There is likely an example for most of us when we have bought something we didn’t plan to, treated ourselves during a tough week, or overspent during the holidays. While spending is a part of life, if it is eating into your savings, it may be time to pause and ask: why?
Understanding the psychology behind your spending can be a powerful tool that could help you make positive changes to your savings.
Why do we spend more than we plan to?
Spending may not be rational, and in fact can sometimes be emotional. Here’s a few reasons why we may reach for our wallets:
- Emotional Spending – Possibly through stress, boredom, or even joy, emotions may drive us to purchase things we might not need. Shopping can sometimes provide a quick boost of happiness, but this may only be temporary.
- Habits and Patterns – Some people might get used to certain routines, such as a weekly takeaway or a coffee out, but these can add up more than we realise.
- Keeping up – Another factor could be social pressures having an influence on your spending, as we try and match what friends and family are doing.
- “I deserve it” thinking – After working hard, you might feel like you’ve earned the right to spend freely, but it’s worth bearing in mind your hard-earned cash could be the key to making that freedom last.
How spending could affect your savings
Dipping into your savings for everyday purchases is something that can start as a one off but may over time affect long-term plans. However, you may not have to overhaul your lifestyle overnight. Starting with small, thoughtful steps could help:
- Track your spending – for a few weeks, it may be helpful to write down everything you buy so you can see where your money is going.
- Identify triggers – you could take a mindful approach and notice when you’re most likely to spend, it might be after a tough day or when you’re bored for example.
- Create meaningful goals – it could help to focus on what you’re saving for rather than cutting back on what it is you’re spending.
Habits that could help your financial wellbeing
Some habits you could try are setting up ‘fun money’ which could allow you to have guilt-free spending, with a cap to suit your budget. You could also try automating your savings, as it may be useful to treat what you put into your savings account like a bill, and something that is non-negotiable. Finally, talking to someone like a financial adviser or your bank could be a great step to help you understand your financial picture and make a plan that could work for you.
Spending doesn’t need to be something that might ‘just happen’, and with some insight and intention, it’s possible to enjoy your money today and protect your financial future.
