Putting money away for a rainy day is seen as a good thing, but cautious spenders can end up with as many regrets as those who blow the budget on a whim, says psychologist and spending expert Prof Ewan Gillon, clinical director of First Psychology Scotland.
“Our attitude to our money is influenced by psychology,” he says. “Some people don’t spend because of fear – they are anxious people and deny themselves things that could be helpful to them. Others take it to the other extreme, spend more than they earn and get themselves into debt – encouraged by our current culture and the easy availability of credit.”
Wherever you fall on the save or spend spectrum, you can learn from those who see money differently from you.
Anybody ending up with no money at the end of the month, despite a reasonable salary and manageable outgoings, can learn from those who keep a regular budget – more than half of British families, according to the Money Advice Service. It gives them peace of mind, and helps them cope with the unexpected.
Although it’s easy enough to make a budget on an Excel spreadsheet, more interactive tools – free apps such as OnTrees or MoneyDashboard, for example – could help you to see where the money is going.
By linking with your bank account and credit cards – and automatically categorising your spending – these tools provide insight into how much of your salary goes on nights out, clothes and shoes, and food.
“If you monitor your spending over a period of a few months and continue to revise your budget based on the results, you will have a much better idea of how you use your money,” says Moneydashboard CEO, Steve Tigar.
“You might want to cut down on the amount of takeaways you buy, but not really know what a realistic goal would be. Start tracking this and you might be amazed at just how much extra money you have left over to add to your savings at the end of the month.”
Those who struggle to spend the money they have, even when it would improve their lives, may be suffering from anxiety about the future. A survey carried out for the BBC by behavioural finance experts found that men were more likely than women to see money as security, and therefore develop a tendency to hoard. Over a third of people said they felt guilty about spending money on themselves.
If that’s you, monitoring your budget and making sure you set aside some money for luxuries may help you to spend guilt-free.
If you are hoarding cash because you are worried about how you would deal with unexpected life events such as illness, perhaps considering some form of life insurance would take away the anxiety.
If you do just one thing, do this
Spenders: wait 24 hours
Is your money burning a hole in your pocket? Give yourself permission to spend it, but with one condition: wait one full day to see if you still feel the same.
“After 24 hours your emotions will have changed. If you still want to make the purchase it will be a logical one, not an emotional one,” says Prof Gillon.
Savers: find a financial role model
Is anxious saving stopping you from enjoying life? Find someone whose financial strategy you admire and see what you can copy. “You’re unlikely to relate to someone at the other end of the ‘saver or spender’ spectrum,” says Prof Gillon, “so just pick someone whose balance seems better than yours.”
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