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How to improve your saving and spending habits

Tags Money Management
Category Save
An image of a woman resisting temptation

If you’re a regular follower of our blog you may have read about various temptations causing Aussies to compromise their savings plans. This is all well and good, but we want to take things one step further; to provide some practical tips to change Aussies spending habits. Guest writer and psychologist, Nick Petrovic provides some insights on how to make lasting changes in behaviour:

In a recent survey, RaboDirect found that 81 per cent of Australians had made an impulse purchase within the last six months and that 31 per cent had spent more than $500 on impulse items within that period

With many of us wanting to improve our spending behaviours and minimise such purchases, it can be helpful to understand some of the forces that govern out behaviours. There are many factors that influence our spending behaviour, and a very influential one is habit.

What may have started as a conscious reaction to a situation can become an automatic response whose origins we may not even remember. When it comes to our money, the habits we create can mean the difference between a secure future and one riddled with uncertainty. Changing habits does not have to be a stressful process, however, and with a few key points in mind you can be on your way to a lifelong habit of saving.

Set clear and meaningful goals

We’ve all declared the desire to turn over a new leaf at some point in our lives. “I want to save” and “I want to spend less” are common examples, however broad goals such as these are problematic because they do not take into consideration the complexities and different contexts in which our spending habits occur.

Instead, outline clear and meaningful goals that give you a vision of what you want to achieve or change, and don’t be afraid to modify them when needed. Pinpoint the areas where you want to improve and write them down. If the idea of saving is daunting, try to start with small and specific goals such as “limit spending on clothes to $200 a month” and work your way up from there.

Identify your triggers and maintaining factors

When we try to change a certain behaviour, it is important to know what triggers and maintains it. This means considering your motives, your environment and the feelings that spending elicits in you. Do you spend more when you have cash in your wallet? Are you too quick to pull out your credit card? Do you spend out of boredom?

The funny thing about human behaviours is that even negative behaviours are maintained by some form of payoff. So if your spending or lack of saving is becoming a problem, take an honest appraisal of what you are getting out of it, because if a behaviour is maintained it is serving some kind of purpose.

Modify your environment to avoid temptation

As is often the case when changing an ingrained behaviour, willpower alone tends not to be enough. Instead set yourself up for success by changing your surroundings. If you know you often spend more in certain situations, try to avoid them as much as possible. It can also be helpful to take a more systematic approach to saving.

RaboDirect recently launched a new account, Notice Saver, which keeps your money at arm’s length so you can’t spend it as impulsively. By requiring advanced notice for withdrawals, and higher interest rates for money reserved, it is both a behaviour moderator and rewards system in one.