Struggling to save money when you know that you should? Understanding your deep-rooted money habits and taking simple steps to shift your mindset could turn you from splurger to savvy saver.
Are you an emotional spender? Do you have a wardrobe full of clothes with their tags still on, a salary that seems to disappear the moment it hits your bank account and a budget you struggle to stick to? If this sounds like you, it’s likely that savings are way down your priority list.
How much should you have saved up?
Personal finance gurus recommend we keep enough money in an instant-access savings account to cover our costs of living for three months. Then, if redundancy strikes or a sudden illness leaves you lying low, the rent or mortgage will be covered and you won’t need to take out an expensive loan or rely too heavily on credit cards.
It’s sensible advice, but struggling to put it into practice is surprisingly common. According to recent reports, 15% of Brits have no savings at all (rising to 53% of 22-29-year-olds) and one in three of us have less than £1,500 saved.
Understand why you’re struggling to save
If this all sounds depressingly familiar it helps to understand the reasons behind it. And don’t be fooled into thinking it’s because you’re not paid enough – far from it, says The Money Whisperer, Emma Maslin. Instead, she says, it’s all about your own personal mindset. “Even with all the financial know-how in the world, a lot of people still have emotional money habits which prevent them from making logical steps to improve their financial situation,” she says. “Managing your money effectively involves mastering the emotional side of things before you get on to the practical elements.”
What’s your money personality?
Psychologists have isolated six different traits that combine to form your money personality. Understanding these will give you an insight into your ability to start saving.
• The carefree spender assumes everything will ‘just work itself out’
• The giver loves the feel-good factor of being generous
• The status-driven spender gets a buzz from what other people think and uses money to present a positive image
• The planner is intentional with purchases and a self-confessed lover of budgets and goals
• The spontaneous spender sees money as a means to enjoy the present (but can often end up in debt)
• And the security-led personality type tends to be disciplined and needs to feel safe and secure financially.
“Working out which spending type fits you best is a crucial first step,” says Maslin. “We all have elements of the six types but getting clarity on your dominant traits is useful in terms of achieving your goals. If your aim is to be financially secure in retirement, for example, and your dominant type is a spontaneous spender with underused security and planning traits, you’re going to find it hard to reach that goal.”
Simple steps to start saving
So how can we start to shift the balance from spender to saver? Experts agree that building awareness is key, and Maslin outlines three crucial steps.
1. Watch your internal chatter. Keep a journal for two weeks, and set an alarm for 2-3 times a day when you analyse how you felt during your most recent interaction with money. Note it down and review when the fortnight is up. Were you anxious your card would be declined? Did you feel angry that friends evenly split a bill when you’d deliberately had less to eat?
2. Keep another journal to log your spending so you notice patterns. When you’re about to buy something, ask yourself whether it’s a want or a need? Align the wants with your goals. If you’re spending £10 on coffee and cake for the office twice a week, you need to be aware of that.
3. Set goals and pin them up somewhere you can see them. If your aspiration is to own your own home and pay your mortgage off, having fixed goals with monetary targets and time frames allows you to have a benchmark.
“If you only do one thing, simply pay yourself first, by setting up a standing order into a savings account that comes out on pay day,” says Maslin. “Getting a handle on your money is so important. For a huge amount of people, financial troubles are a big source of anxiety, and taking small steps to build up an emergency fund that will last you three months will give you a sense of peace and security.”
In short? By thinking of money as the key to freedom, rather than a chore, you gain a new perspective on your finances.
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