Time to read : 5 Minutes
Managing our day to day money habits is one of those things that should be easy, but isn’t. Money is mathematical, but humans are deeply emotional.
As a result, our financial behaviour is often driven by the way we think and feel about money, rather than logic. Knowing this, what can we do to take control of our money habits – once and for all?
Ultimately, it comes down to mastering your own mind. In the digital world we live in today, it’s easier than ever for money to leak out of your life without a second thought. We can buy things 24/7 and have a world of spending opportunities in the palm of our hands through our smartphones.
One third of Gen Zs and millennials admit to having a shopping addiction, but emotional spending and impulse shopping isn’t exclusive to younger generations.
Impulse purchases have increased 72% since 2020.
Research has found a correlation between the pandemic and increased impulse spending. When feeling anxious during times of uncertainty, we turned to emotional spending as a way of coping and having a sense of control.
Be aware: it’s easier than ever to spend beyond your means, even with the best of intentions.
What makes up our money habits?
Habits are the behaviours we repeat again and again. Whether good or bad, anything we do repeatedly becomes a habit. The impact of one single behaviour might be relatively insignificant, but the compounding effect means that our habits can really add up.
Buying a $15-$20 lunch at work three times a week could cost you almost $2,500 per year.
Australians buy an average of 56 items of clothing per year. If each item costs you $40, that adds up to $2,240 per year.
Adding in 5 off-list items to your supermarket trolley at $5 each every week would set you back $1,300 per year.
If you budget for one coffee a day but end up getting a second a few days a week, that’s almost another $1,000 leaking out of your account.
Forgetting about unused subscriptions could set you back over $1,000 per year – and according to research from ING, Aussies could be wasting $8 billion on this financial sinkhole.
Why do we say we’ll do one thing, but end up doing another?
One of the biggest problems we face with our money habits is the gap between what we intend to do and what we actually do.
We set out to pack our lunch or stick to our shopping list or take our coffee from home or wear the dress we wore last time – and still find ourselves wondering where all our money went.
This disconnect between our intended behaviour and our actual behaviour often comes down to our emotions complicating our behaviour, and our preference for instant gratification and convenience.
What are the common spending traps?
Responding to emotions with spending
We might plan to save $200 from our paycheck, but when we have a bad day and end up making an online purchase or ordering food when we have plenty in the fridge, our emotions are stepping in. They’re changing our behaviour to achieve immediate relief, overriding our rational plans in the process.
Money leaks
These occur when we think we’re doing everything right with our money, but we still have nothing left at the end of the month. These happen when we overlook small expenses like subscriptions, supermarket extras and small conveniences, and spend on autopilot.
Momentum-driven spending “runways”
Sometimes in life, we find ourselves in a bit of a spending spiral. One purchase leads to another followed by another, because the situation we’re in puts us on a ‘runway’ of spending.
How to take control of your money habits
Taking control of your money habits comes down to two things:
mastering your emotions
being more present with your money decisions.
When we spend more than we intend to, it’s usually down to either emotional spending, or mindless spending. We need to get to know our own behavioural patterns in order to intercept them.
Go through your bank statements and look out for behaviours, rather than just numbers. It’s not what you spent, it’s the backstory. Is there a habitual lunch-at-work spend that’s causing a significant leak in your household budget?
Watch my video hack on how to track your spending.
Do you often find yourself ordering things online when you’re scrolling social media? Maybe trips to certain places always result in an impulse purchase for the kids, or perhaps you’ve noticed certain expenses create a knock-on effect for more spending behaviour.
Once you start to recognise what's actually creating your habits and behaviours, you're far better equipped to stop and ask yourself some powerful questions:
Do I really need another pair of sneakers or sports shoes? Could I wear the ones I have for a week and see how I feel?
Has buying a new outfit ever actually changed my life the way I think it will?
Could I wear something I've worn before, or make do with something imperfect for the benefit of my wallet and the planet?
Of course sometimes, we do genuinely need (or really want) to make a purchase, and that's okay. Before you buy, ask yourself these questions to make sure it's worth it:
Can I borrow from a friend or neighbour, or rent something similar?
Is it possible to buy a second hand version for a lot less?
The more you practice stopping and asking yourself questions that challenge old habits, the better you will get. It's all about repetition – that's what creates change over the long term. It might feel hard at first, but eventually, your mindful spending patterns become the norm.
Bottom line
Managing money is about far more than logic. We might know what to do, but that doesn’t mean we’ll automatically do it.
Looking behind the numbers at what’s creating our financial behaviour can help us improve old habits, build a greater sense of awareness around our money, and take better control of our financial outcomes.
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Financial disclaimer
The information contained on this web page is of general nature only and has been prepared without taking into consideration your objectives, needs and financial situation. You should check with a financial professional before making any decisions. Any opinions expressed within an article are those of the author and do not specifically reflect the views of Compare Club Australia Pty Ltd.
