SMUG MONEY: How to mind your intentions gap

Written by Rebecca O'Connor on 6th February 2017

Oh, we’ve all got good intentions. I intend to remain within my £60 budget this week. I intend to limit myself to two glasses of wine on Saturday night. I intend to go to bed early on Sunday…

I might manage one out of three – and that’s kind of good enough for me: set lots of goals, be happy if you achieve any of them. It’s not a bad way to get through life and it’s certainly not a bad approach to money. Because all the noise at the moment is that despite having the best intentions towards saving, people aren’t managing it. Even when affordability does improve, thanks to something like a salary increase, we STILL fail to fulfil our intentions.

Why? Why? WHY can I not save??

WHY? Well, life. It’s just getting more expensive (see our inflation piece) and the temptations to spend are becoming more, not less numerous, more insidious and less noticeable (easy, digital payments make buying stuff so slick you can even forget you bought something – who else has had an Amazon parcel delivered they don’t even remember ordering?)

Another reason is unexpected expenses, such as car trouble or household problems. We often fail to budget for these, but research from Provident Personal Credit suggests that these can tip many of us over the edge – it says just under half the population – 47% – consider themselves JAMs, or Just About Managing. That’s quite a chunk of people.

When we decide to save, we might be setting a target that is too high, failing to meet it and so just giving up. Or it might be that low interest rates have simply turned us all right off saving anything – but we’re too risk-shy to invest it instead. Or we might be so jaded by the world that we’re choosing to live for the moment.

Would you save more if you earned more? Really?

According to Zurich, two fifths (42%) of UK adults say earning more would encourage them to save more into a pension. However, a behavioural study by Mindlab discovered that there is a short period of up to a month where people actually consider saving more following a pay rise. This means there is just a small window of opportunity for people to change their savings habits when affordability improves, and put a little more aside each month. If you don’t, you just spend the extra – your balance gravitating back to the norm.

The situation is kind of urgent.

StepChange, the debt charity, put out figures last week that show nearly a third of UK adults have not managed to set aside any rainy day saving fund in the last 12 months.

Jon Hall, managing director of Masthaven Bank, said: “It’s really worrying to hear so many people are struggling to put money aside for unexpected costs and bills. We know from our own research that people have great intentions and want to save when they can – for example, eight out of ten people told us they do want to save more money this year. But, as StepChange’s research shows, some people can struggle to find the cash after they have paid for essentials. When it comes to saving for rainy days, our research found that almost a quarter (23%) intend to save for this purpose in 2017.”

If you are totally on the breadline, then any article that tells you you need to save more is just going to be annoying. However, if you are doing ok, it might not be unrealistic to manage £100 to £200 a month, depending on how well you are already budgeting on essentials such as food and energy (and how many unexpected expenses you have had to deal with).

You can read more suggestions for better saving here.

Here are four more nuggets of inspiration for your week:

Set your money watch five minutes faster

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At the risk of getting a bit Pseud’s Corner about it, our bank balances tend to rest at a common point that we become used to, which may be £0, -£1,600 or £450, each month. Because money is an abstract rather than a tangible thing and because of this tendency towards the norm, when you have more money, you can easily not notice that you have more of it and therefore you will spend it, bringing your balance back to the point that you are used to.

So one trick of the mind that might help us save more is a bit like setting your watch five minutes faster, that is, to change our expectations of the level our current account and savings balances should be at. Set your target for the point you think your bank balance should be at before you next get paid. When you start to get close to that level in the month – maybe with £200 or so to go, fix your daily budget for the rest of that month and do not stray. If you are an easy spender, that might even mean leaving the house as little as possible (leaving the house and going to a place that has shops and cafes tends to cost me at least £50 these days.)

A vision board for your money

How about re-imagining your money? Life coaches use vision boards, based on the idea that what you visualise becomes easier to achieve.

Here’s one we made earlier:

FRENCH

Direct debits, direct debits, direct debits

A quick way to fill your intentions gap is simply to set up a direct debit into a savings vehicle of your choice. With rates so low, personally speaking, we’re right off cash ISAs or instant access accounts. My money is going into stocks and shares ISAs, junior ISAs and (shortly) the Innovative Finance ISA. Higher returns and more interesting than my bank savings account. Which brings us on to….

Seek inspiration from your savings

One way that more and more of us are getting into saving and investing is to save and invest in things that excite us, that reflect our interests, not just our savings goals. What are we on about? Innovative finance, ethical and sustainable funds, bonds in companies we love.. that kind of thing. Here are some more ways your money can better reflect you.