Intentional saving and spending is a combination of psychology and finance, or “behavioural finance”. It’s quite complex and hard, and if you do not save or budget you are not alone.  

Intentional saving – Shlomo Benartzi, American behavioural economist states that “when it comes to saving – self-control is not a problem in the future, but a problem now. We know we should be saving, we will do it next year, but today, let’s spend.” This immediate gratification causes us to think about saving but end up spending.  

Intentional spending – Behavioural Economist Dan Ariely has spent most of his career understanding why and how we make decisions, and he has recently focused on those everyday financial decisions we make. He says that money is all about opportunity and opportunity costs. 

So if the smartest scientists out there have told us that it’s really hard to be intentional with our money, both for saving & spending, what are some really easy steps we can take to help us alleviate the fear of having enough money and some easy tools to help us?

EASY STEPS TO START INTENTIONALLY SAVING AND INTENTIONALLY SPENDING

1.  DETERMINE “WHAT IS YOUR GOAL?”

Whether your goal is to save for a holiday, a new car, a house deposit or have enough in retirement – all goals big and small are a really critical first step.

So step one is to determine your goal(s) and how much you will need – over what time frame. Through a few calculations, you can work out how much you need to save each week or month to achieve this goal. 

2.  UNDERSTAND WHERE YOU SPEND YOUR MONEY TODAY & REFLECT

This is a really hard one to do…but worthwhile. In taking Dan Ariely’s view on spending equalling opportunity cost, it’s really important to understand where you spend your money today.

3.  WORK OUT IF YOU CAN REALISTICALLY ACHIEVE YOUR GOAL 

Based on what you need to save – and what you are spending, can you realistically achieve your goal?

Reflect on the opportunity costs of your choices for where you spend your money, are there any areas you could spend less? What can you live without?

You could actually spend less just by looking at your big-ticket expenses and making a phone call to their provider. For example, call up your gas/electricity provider and ask if they can give you a better deal, the same for your health insurance and so on.

4.  UNINTENTIONALLY SAVE INTENTIONALLY

There are many ways you can do this, but the best ways are those systems that are set and forget – until you need to access the funds!

What my husband and I have done for all our savings goals is to create “saving folders”.  We currently have one for each of our children and have had ones for “holiday”, “school” and other goals. These folders are savings accounts we have set up with the bank, that earn interest and we divert a certain amount of our income towards these savings accounts on a weekly basis. It’s amazing how quickly the weekly contributions add up. 

5.  CHECK IN AND REPEAT

It’s important to check in on your intentional savings and spending on a fairly regular basis. Dan Ariely recommends once a month to create a habit of it. Ultimately, this is about creating positive money habits and being more conscious of the opportunity costs when it comes to spending and ensuring you are intentionally saving to help you achieve your goals.

SO REMEMBER:

  • Intentional saving & spending is hard.
  • It is important to know what your goals are and how much you need to set aside per week/month to achieve your goals.
  • Spending is about opportunity costs, so make sure you are making the most from your spending decisions.
  • Set up systems to help you save to achieve your goals.
  • Don’t just do this as a once off, repeat until it becomes a habit.

Irit – HTM Guest Contributor (from F-Empowered)

The article was written by Irit Harris. She started F-Empowered to provide knowledge, tools & access to experts so women can be in control to make decisions with their finances.  Check her out on Instagram @fempowered.project and join the Facebook community.

Irit has worked in financial services for over a decade, holds an MBA, a Diploma of Finance and an Accreditation to give General Advice. Aside from her love of learning, she loves spending time with her supportive husband & two beautiful children.

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