The savings ladder, is it missing rungs or should there be bigger steps taken?
By Sarah Patterson
For many people, the strategy of saving and building a substantial fund is a merry-go-round of hopeful excitement, followed by failure, and in some cases, regret. The cycle of intention, an idea that is partially carried out for the short term, but then left by the wayside shortly after. It is a puzzling and often frustrating journey, but luckily there is basic psychological interference driving the outcomes. When we shine a light on what this is, you may be surprised.
Blessed are the young, for they shall inherit the national debt.
Herbert Hoover
With a sharp uplift in the average cost of energy across the globe, many people at all ends of the spectrum are finding it harder to save, with some trapped in rented accommodation, a problem effecting millennials; perhaps the first generation to find their selves in this position.
First, an Oxymoron
We are lead to believe that large amounts are more important than small fragments; whilst this idea compliments and agrees with our goal, during the journey the opposite is actually true.
Lets imagine our goal was to save £10,000.
We often believe we can reach this goal by accelerating the amounts we put into it, submitting large amounts into this new savings pot, say £200 here or £300 there, whereas small amounts will take longer, impacting our motivation.
Hesitation, and then Withdrawal
In our brains we have a number of guidance systems, operating subconsciously to protect us from pain and suchlike. When these systems (aka Cortex) detect anything that is a threat to us, or gives us discomfort either through our senses or feelings, it then triggers a reaction.
Many people have been taught or trained that money is a tool which is used in order to create pleasure. The modern sales industry has been developed around this concept and as a result, we believe the obtaining of the item is associated with the release of pleasure, whereas money itself has none.
Thus, in our perception the larger the amount of money spent, the better outcome. And the more frequently we do it, the more it becomes habit, followed by addiction.
If this were not true, why do many people perpetually have no savings, no matter how much money they receive? As this is practiced, be surprised at how reluctant the individual becomes to spend the amount saved. It is as though we have redirected the addiction in a totally different direction.
Finding alternative means. Hustle up.
Haggle for a bargain? Whilst it may seem counter productive there is a necessity to haggle on, well, the necessities. If it has to be spent, then spend it well. Any money saved from the negotiation can be put in savings pot to accelerate the process and attract interest faster.
Sell, sell, sell. Car boot sales, bric-a-brac markets, or for those at the top end of the spectrum, attending auctions. If you have assets which are no longer valuable, sell them on. For a profit of course.
Little and often is key. By saving small amounts regularly, we bypass the pain function in our psyche and instead transfer our focus to the result of the process. In short, the spotlight starts to shine on our goal, we see our savings rising and instead begin the process of addiction to the growing amount in our pot. Simply because our pleasure focus is now at the opposite end of the process.
Find hidden opportunities in everyday processes. A poll by YouGov in the UK polling stated that of the 40 per cent of people who asked for a pay-rise at work succeeded.
Houghton & Mackay covers financial subjects here on our main website. Do you have an article you want to be published, have a story to tell or wish to take part? Let us know.
