Our finances have a big role to play in our overall happiness and wellbeing. When you manage your finances effectively, you can achieve your goals and live your ideal lifestyle. Yet, if you experience financial problems it’s likely to be highly stressful.
As a result, you might assume that increasing your income is the key to reducing stress about money and living a happier life. However, Harvard professor Arthur Brooks argues that income isn’t the important factor. Instead, as reported in Business Insider, he says that fixing bad spending habits is the best way to achieve financial happiness.
By changing your behaviours, you can prevent wasteful spending, meaning that you’re less likely to face financial difficulties. Additionally, you may have more disposable income to contribute to savings and investments, potentially making it easier to achieve your long-term financial goals.
Unfortunately, many of us fall into bad habits that lead to wasteful spending, and breaking those habits can be difficult.
Read on to learn about three habits that could lead to wasteful spending and how to avoid them.
1. Impulse buying
Most of us have been guilty of “impulse buying” – purchasing items that we didn’t previously want or need. You might experience this when you visit the supermarket with a shopping list and leave with a handful of items that weren’t on your original list.
This is incredibly common. In fact, according to Talking Retail, 1 in 10 Brits make an impulse purchase every single time they shop. Unfortunately, those small purchases add up over time and can affect your budget.
You might believe that your tendency to make impulse purchases is a personal failing, but that isn’t necessarily the case.
When you enter a shop or visit a website, you’re met with a carefully crafted display, designed to evoke positive emotions that you associate with the product. The persuasive power of marketing can be incredibly strong, and this is often what encourages you to put extra items in your trolley.
That said, there is an emotional component at play too. Research reported by Forbes suggests that certain traits such as low self-esteem, poor self-control, increased stress levels or anxiety can all make you more prone to impulse buying.
Fortunately, you may be able to avoid excess spending by applying one simple rule. Before making a purchase that you haven’t planned, ask yourself these three questions:
- Is this something I want or need?
- Can I afford it without exceeding my budget or sacrificing something else?
- Will this purchase improve my life and bring long-term satisfaction?
Asking these questions gives you a moment to pause and think logically about the purchase. Often, you’ll find that you don’t need the item after all and put it back.
2. Retail therapy
We all have rituals that make us feel better when we’re having a hard day. You might go to the gym or take a walk. Alternatively, you may prefer to relax in the bath. For many people, shopping is a good outlet that boosts their mood.
This practice, known as “retail therapy ”, may affect your psychology in several ways. According to WebMD, when people are stressed or sad, this is often accompanied by a feeling that they don’t have control over their lives. Making decisions about what to buy may provide that sense of control.
Moreover, the anticipation of a reward causes your brain to release dopamine – a hormone that gives you feelings of pleasure and satisfaction. This means you experience a temporary boost to your mood while you’re shopping.
Finally, getting out of the house and browsing shops offers a good distraction. If you’re stressed about work or family responsibilities, shopping might help you forget those concerns for a short while.
Yet, relying on retail therapy to manage your mood could put an additional strain on your budget, and it may not offer long-term solutions to your problems.
If you regularly engage in retail therapy, you might want to explore other ways to relax and unwind such as:
- Walking
- Yoga
- Meditation
- Running
- Reading
- Socialising with friends.
These are all simple ways to reduce stress without disrupting your financial plan. You may find that they offer more lasting benefits to your mood, too.
3. Subscription creep
You can find subscription services for all kinds of products these days from TV and music to food, drink, toilet paper or plants. Many of these services offer an initial free trial before the payments start, and this could cause you to fall into the “subscription creep” trap.
This is when you have many subscriptions, some of which you don’t use or may have even forgotten about, taking payments from your account each month.
You might take out a free trial and forget to cancel it before you start having to pay. Sometimes, you may also purchase a subscription with good intentions but fail to use it, as is often the case with gym memberships.
It’s easy to overlook subscriptions because the individual payments are often small. Yet, when you add up the cost of several unused services, you might find that you’re wasting a significant amount of money each month.
To avoid subscription creep, you may want to review your bank statements regularly so you know what payments leave your account each month. You can then cancel any services you don’t use regularly.
Additionally, you could rotate certain services instead of paying for several at once. This is especially useful for TV subscription services as you can cancel any time you like. So, you could pay for one service for a few months and watch everything you enjoy before cancelling it and switching to a different service.
Being more vigilant about the subscriptions you use could, over the long term, help you save a significant amount of money.
By changing these simple habits, you may be able to reduce waste in your budget. Ultimately, this gives you more disposable income to contribute to savings and investments for the future, meaning you could be more likely to achieve your long-term goals.
Get in touch
If you need help reviewing your budget so it’s suitable for your long-term goals, we can help.
Email hello@fcadvice.co.uk or call 0333 241 9900.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.