Saving

What habits do I need to change to save better?

18 November 2020 | Posted by Ellie Austin-Williams
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You’re not alone if you have high hopes of saving, only to find yourself tripping up thanks to old financial habits that you just can’t seem to shift. We’ve all had them – whether it’s your daily takeaway coffee or a refusal to check your bank account for weeks on end. So if you’re ready to speed up your saving, now’s the time to break those habits. We’ve put together a list of the most common financial bad habits and how you can save better.

Overspending

Setting a budget is a great way to manage your money, but a common mistake is creating a budget that’s so restrictive that it’s unrealistic and impossible to stick to. If you’ve made a spending plan only to see it fail, it’s likely that you’ve found yourself overspending which can leave you feeling demotivated to stay on track financially. It isn’t always overspending on big expensive items either; adding £5 or £10 to your regular expenses can add up quickly and eat into your bank account. 

To help you tackle your overspending, we’ve created a free Chrome extension that helps you make smarter spending decisions.

When you’re shopping online, our chrome extension will tell you how many hours you’d have to work to pay for the items in your basket – making you more aware of your spending.

Ignoring your bank account

Checking your bank account fills a lot of people with fear, however, it’s one of the most important habits that you can develop when it comes to improving your money management. Knowledge really is power with money, so understanding what goes in and more importantly, what goes out of your account on a regular basis is essential. 

In addition, the more familiar you are with your bank account, the more quickly you’ll notice fraudulent transactions or payments that you no longer need to make. Set yourself a challenge to log in to your bank account daily for a month and in no time, the fear will disappear and you’ll know your account inside out.

Overpaying on your bills

In many areas of life, loyalty is a great quality to have and yet in stark contrast, the world of finance doesn’t value your loyalty much. Many utility companies and service providers operate on minimum term contracts that tie you in at a set rate for a year or two. However, they often fail to let you know when the contract ends and automatically move you onto a new tariff.

Unfortunately, these tariffs are usually far higher than the prices offered to new customers and you can spend huge amounts of money without lifting a finger, for no additional benefit. When you take out fixed term contracts, set a reminder in your calendar for a month before the term ends. That way, you can negotiate rates or switch providers in good time.

Forgetting to pay yourself first

When you finally receive a long-awaited pay rise, there can be a huge temptation to start spending the extra cash in your bank account. It’s very easy to let your lifestyle creep up as your income increases, which means that you don’t see the benefit of the extra money you take home – you simply spend the difference. 

If saving is a priority, one popular method of avoiding lifestyle creep is known as ‘paying yourself first’. Each payday, immediately transfer your savings over to a separate account so they’re out of sight (and out of mind). That way, you’ll avoid the temptation to spend until you hit zero and have nothing left to save.

Not making your money work hard

You work hard every day for your money, so why not make your money work for you? Saving money is a great habit to get into, however, make time to learn about other ways you can use your money to build your financial future. 

When you leave money in low-interest savings accounts for years on end, inflation can decrease the buying power of your hard-earned cash. Learn about investing your money and you can open up the opportunity for your money to grow.

At Claro, we’re building an app that makes it easy for you to learn, plan and invest your money – even if you’re a beginner. Sign up to our waitlist now.

As with all investing, your capital is at risk.

Key takeaways

  • We all have financial habits which get in the way of our goals, so keep an eye out for these common bad money habit.
  • If you’re creating a budget, make sure that it’s realistic and that you can stick to it. Otherwise, you’ll set yourself up for mission impossible sticking to it.
  • Burying your head in the sand about money might seem appealing, but checking your bank account is one of the most important financial habits you can build.
  • Beware of letting your expenses creep up when your salary increases. Try to keep your expenses in check as your income goes up over time and you’ll start to see your savings build.
  • Make your money work for you. Learning to invest your money can help you build towards your financial future.
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