What do our spending and saving habits say about our personalities?
In association with Compare the Market
As human beings, we are taught to nurture our relationships, but there’s one that many often ignore: the relationship they have with their finances.
Although you might not imagine this to be an emotional bond, you’d be wrong. Our habits and behaviours heavily influence what we do with our hard-earned cash, and having a negative money mindset can affect other areas of your life.
One of the biggest problems that people have with money is being afraid to face the state of their finances because it brings feelings of shame or because they think it’s impossible to change.
We put ourselves in boxes – saver, spender, splurger, etc – but here’s the good news: you are not forever doomed to repeat the same pattern, because our personalities are not the problem.
Professor Thomas Webb, a behavioural psychologist from the University of Sheffield, explains that the issue is actually about which ‘zone’ – or rather, mindset – you’re in. There are four in total; comfort, fear, learning and growth.
The key thing to remember is that each has its benefits and drawbacks. First, let’s start by finding out what the zones actually mean and how to use them to get the best results.
The Comfort Zone
Comfort can be both negative (becoming complacent) and positive (resting).
To give a real life example, if you’re constantly avoiding looking at bank statements or always thinking about putting aside money for a rainy day but never actually doing it, it’s time to swap zones.
“Lurking within the comfort zone is a psychological response called the Ostrich Problem,” says Professor Webb.
“It happens when we bury our heads in the sand and adopt a blinkered approach to managing our daily tasks. Used in the right way, this mindset is a powerful tool that enables us to recoup and rest, to build ourselves up for the next goal on our list.
“But sometimes we get stuck here for longer than intended. Long term goals can slip off the radar, life admin may grind to a halt. And that is where the danger lies.”
Don’t panic, there’s still time to do things differently. Lean into the fear.
The Fear Zone
It might sound strange but you shouldn’t be afraid of the fear zone. It’s actually a very helpful stage, because it’s where you accept that it’s time to take charge.
“Our finances are personal and not something we’re always comfortable handling,” he says.
“We have to recognise our current financial position and we have to acknowledge and accept the challenges that lie ahead, the need to find time to identify the best deal.”
Start by writing down your income and outgoings, and be honest about your spending habits.
Once you’ve spotted the problem, make a plan to fix it but keep your goals realistic.
Facing your finances can bring up uncomfortable feelings of anxiety and doubt, even pushing many people back to comfort just so they don’t have to deal with the emotions.
Try to resist doing this and just take it one step at a time.
The Learning Zone
“Knowledge is empowering and so here we use it to battle our fears,” says Webb.
“We work out the pros and cons of different courses of action. What we need, what we want to keep and what we want to throw away.
“But knowing where we want to be and being motivated to get there isn’t necessarily enough.”
To implement your plan, you need the right tools for the job. Set small objectives towards the big goal, but specific – how, what, when, where are you going to do this.
Want to save £10,000 in a year? Decide how much to set aside each month and be clever with your cash. Find out what your current bank includes and then see what interest others will offer.
There are a lot of free services that can help with money management, such as Compare The Market’s Good Things Happen hub. For instance, if your goal is to save, check if you are getting the best possible deals from providers.
Don’t be afraid to ask friends and family for advice, or consult an expert (if your finances allow).
The Growth Zone
And finally, it’s time or the last step: the growth zone.
This is essentially where you use all that knowledge you’ve acquired and action it. Or, as Professor Webb says: “We’re searching out the best deals, we’re setting budgets and we’re trying to cut down on unnecessary spending.”
Word to the wise; try not to get distracted by day-to-day life and its challenges. A to-do-list that you can tick off and smaller goals will help you do this, as it will feel less overwhelming than trying to make it to the final destination quicker.
Stay motivated but allow yourself to make mistakes. It’s okay if you slip up, so long as you learn from it and get back on track.
“We mustn’t be too hard on ourselves,” adds Webb, “we mustn’t go back to that fear zone and tell ourselves ‘well I can’t do this, I can’t manage my household finances’.”
No case is without hope, even if you’re deep in debt or finding it hard to manage your money.
Commit yourself and with the right tools and mindset, the results will follow.