New job, old debts? Personal finance management not your strength? The looming presence of the debts you’re desperate to be paid off can be a constant source of de-motivation, both at work and outside of it. You may, as a result, have put better financial management on your list of New Year’s Resolutions, alongside commitments to stay off wine and stop eating huge bowls of your favourite ice cream. Falling off the ice-cream wagon is one thing, but not managing your finances can have widespread repercussions, affecting every decision you make. Yet often, all it takes to improve your finances is the odd tweak here and there. Here are a few suggestions.
#1 Don’t let a winning streak cloud your judgment
You’ve longed for that beautiful Burberry bag for months but, at £3,000, you know it would seriously hurt your finances. Then you receive a letter from the recruitment company informing you that you’ve landed the job you applied for – and a higher salary to boot. A licence to splurge? You may think so, until you suddenly remember that you still have numerous debts to pay. Getting carried away with a spot of financial luck can cloud your financial management.
Tip: Give yourself a good seven days to think through a significant spending decision and work out the impact on your finances if you were to go through with the purchase.
#2 Make financial management a hobby
OK, personal finance is hardly scintillating stuff. But you can at least develop a healthy interest in your finances. Read finance blogs and use the various apps that exist to help you manage your money. Although not a ‘money management’ app, check out smartphone app Onavo, which will track the amount of data you’re using on your phone and compress it, enabling you to do more with less –and help you avoid high data use charges.
Tip: Several apps will help you set financial goals and plan your way to achieving them – goals such as buying that Burberry bag you’re coveting.
#3 Stop equating external displays of wealth with success
Do you view equate external displays of wealth with success? Image motivation and the desire to be seen as successful, can encourage people to spend beyond their means. Instead, focus on more noble goals, such as saving up for your Ph.D. Do you look at others and the trappings of their apparent success with more than a trace of envy? If so, remind yourself that though they may appear to be successful, you have no idea what their liabilities are.
#4 Think in longer-term time frames
The lure of instant gratification is so intoxicating at times, that it trumps our better judgment. This is why so many of us make impulse decisions, only to regret them soon afterwards. One survey revealed that Britons spend in excess of £100 million on impulse buying. To guard against this, here are some things you can do:
- Identify when and where you are most vulnerable to buy on impulse, and make a concerted decision to avoid these times and places. Events such as ‘Black Friday’ are notorious for encouraging people to impulse buy.
- Make it a rule that impulse purchases more than a certain amount of money should be subject to a joint decision – for example with your partner.
- Time your shopping – for example, only go shopping during the sales
- Avoid the trap of spending more money to benefit from getting a free element, for example free postage.
- “Slow down” the shopping experience; for example do not enable a website to store your details, which will mean you will have to fill in your details each time you shop.
- Make a “What the heck was I thinking” list of impulse purchases and stick this somewhere visible to remind yourself of the dangers of impulse buying.
#5 Eliminate anything you really don’t need
Do you really need the golf course membership that you took out last year, even though you’re too busy to play golf? Or the Vogue subscription that you took out on impulse? Ruthlessly eliminate anything that doesn’t make financial sense. If you find this difficult to do, tell yourself that there’s a psychological name for clinging to the status quo: ‘Status quo bias’, the tendency to want to (irrationally) keep things as they are. Then, one by one, eliminate the worst offenders.
These five habits won’t make you rich, but they’ll save you a pretty penny. Good luck.