The psychology of spending: how to get more balance.

Tired of getting to the end of your pay cycle and thinking ‘how can I save money?’ Maybe it’s high time you did a deep dive into the psychology of spending to find out where you sit on the spectrum.

Our financial decisions are driven by many different factors, including our upbringing, cultural background and who we are partnered with. The good news is that your money mindset is not set in stone. Whether it’s exercising more or cutting down on alcohol, neuroplasticity (our brain’s ability to change and adapt) enables us to form new habits, and this includes making better financial choices. 

If you’re prone to emotional spending, can’t resist a flash sale or tend to shout your mates one too many beers on the weekend, you can change your ways.

Regardless of what drives your money habits, simple changes can help to steer your finances in the right direction. Here’s how to take charge of your cash and kickstart your financial future:

Hatch a plan.

Brisbane-based wealth coach Jules McBean supports his clients to improve their relationship with money. He says one of the common hurdles stopping people from improving their financial situation is not having a goal.

‘One of the biggest roadblocks stopping people from getting to where they want to be is not having a plan or goal. If you've got a clear, realistic goal, that really helps set the framework for driving behaviours to reach that goal,’ says Jules.

Just like you wouldn’t aim to complete a marathon without training for it, you’ll need to prepare yourself by taking small steps every day or week to be able to reach the finish line. A good start is to work out where your money is currently going (money tracking apps will help with this).

Once you’ve set some tangible goals, you’ll be one step closer to making them a reality.

Set up a system.

Now that you’ve set a goal of saving X amount for a new car, dream holiday or house deposit, how do you get there? Having a clear strategy or system is key.  

Jules explains that out of all the money saving techniques, the ‘envelope’ or ‘bucket’ system of allocating your money to fund different areas (rent, education, health, groceries, and so on) is generally one of the easiest strategies to implement. In the old days, your grandparents probably stashed cash in different paper envelopes to fund different things like a new car, Christmas gifts and their annual holiday down the coast.

These days you can separate your savings goals with a SaveME account that allows you to open up to nine online savings accounts, which you can name after your goals to keep on track. 

There have been many studies conducted on how language can influence our thinking. Just changing the words you use can have an impact on your mindset. If you shudder at the thought of ‘saving’, then rename what you’re doing.

‘I often say to people, “I don't want you to save, I want you to allocate.” You’re allocating money to your mortgage, your retirement or your holiday,’ says Jules.

Seek out small wins.

It might be tempting to make sweeping changes to your budget to fast-track your savings, but often small steps taken repeatedly over time can generate big wins down the line.

‘Chipping away slowly and doing the one-percenters will put you in good stead in the long run,’ says Jules.

Here’s some easy ways to save money that don’t take much effort to implement:

1. Add the Round Ups feature to your bank account so that every time you tap, a small amount is automatically transferred to your savings account.

2. Open a high interest savings account to boost the growth of your funds.

3. Still paying monthly account keeping fees? Switch accounts and save.

4. If you have a chunk of funds that you won’t need to access anytime soon, move it into a term deposit to lock in a great interest rate that will see your nest egg grow faster.

5. Review your bank statements to find and slash unnecessary recurring payments.

According to Canstar Blue research, the average Australian household spends $40 per month on streaming services, equating to $480 a year (or more). Hint: Use a savings calculator to see how much you’ll save by cancelling subscriptions you can live without.

Filter out the noise.

If you’re searching for clever ways to save money, avoid information overload. One thing that trips people up is getting confused by the sheer number of money-saving tips out there, many of which come from people with their own biases and vested interests. Whether it's social media influencers, finance podcasters or well-meaning family members, there’s an explosion of information out there that can lead to jumbled thinking and ‘analysis paralysis’.

‘Taking in too much information can make it hard to land on a decision, which leads to inaction. Narrowing your information sources will help you take that important first step,’ says Jules.

Go the distance.

Ever started saving for something and fell short? You know the drill: you start with the best intentions, then lose momentum and self-sabotage by impulse buying a new PlayStation. Once the doom mindset takes hold it can be hard to get back on the savings bandwagon, but one way to overcome it is to allocate funds in your budget for fun.

‘Planning and following a budget helps people to understand that they can allocate funds for fun things like entertainment, eating out or a holiday. Then they don't feel so guilty for spending because they have allocated for it,’ Jules explains.

The point isn’t to deprive yourself of all the good things life has to offer. Some things (like a pair of comfy shoes) are worth spending money on, other things (such as overhyped trending toys) not so much. And remember, some of the best things in life (hiking with friends, sunset beach walks with your dog and going to an art exhibition) are still free, so make the most of them!

Watch your savings stack up with SaveME.

With no monthly fees or confusing criteria, you’ll be crushing your savings goals sooner.