What will your future self think of your spending habits today?
Will you be impressed at your discipline and bank balance, or horrified at how frivolous you are now with your money?
We take a glimpse into the crystal ball to find out what 50-year-old you wants you to know and you’d be well advised to listen to your older self.
Open a savings account
Opening a savings account might seem like a very obvious suggestion, but it might not be so obvious to the 35% of Australians who currently don’t have one.
Having only one bank account is fraught with danger, as every cent you earn ends up in there with your disposable income, making it very hard to save.
So open a second account with a higher interest rate for your savings, and put a percentage of your weekly earnings in it. It doesn’t have to be a huge amount – anything is better than nothing.
Saving money on your energy bills means more in your saving account:
Don’t dip into your savings
The key is to leave your savings alone and avoid dipping into it because you’ve emptied your day-to-day account and desperately want to buy something.
Around 57% of Aussies dig into their savings account each week to make impulse purchases and pay bills, amounting to a staggering $2.6 billion each month, according to UBank‘s research from the Science of Spending and Saving Experiment.
Rather than ploughing through your hard-won savings, be disciplined and cut back your spending for a couple of weeks until you’ve built up enough in your everyday account to make that purchase.
Make a plan
Mention the word “budget” and most young people’s eyes glaze over. Budgeting isn’t sexy, and the fact that almost half of Australians don’t have a weekly budget proves it.
But making a simple plan for your finances and sticking to it could be the quickest way for you to put yourself on the path to wealth later in life.
And with hundreds of smartphone apps that make budgeting ridiculously easy, there’s no excuse not to have a handle on where you’re spending your money.
It will make it easier for you to set aside a certain amount each week for savings, as well as identify areas where you may not realise you’re hemorrhaging money, allowing you to cut back and save even more.
Learn to accept delayed gratification
With smartphones, iPads, credit cards and other technology, people today are accustomed to being able to access what they want, when they want it.
But what that means is that many can no longer accept having to scrimp and save in order to buy something – they’ll simply go out and empty their bank account, load up their credit card or take out a loan in order to get it.
Please forgive 50-year-old you for sounding like your parents, but it’s hard to appreciate what you’ve got if you haven’t had to endure the hard yards to get it. You’ll value the things you have far more – and be in a much better financial position to enjoy them – if you hold off on making those major purchases until you can truly afford it.
UBank‘s recent research from the Science of Spending and Saving Experiment project measured the reactions of people as young as 22 as they made financial decisions.
It found that something as simple as presenting them with a computer-generated image of their “future self” brought a significant change in attitude towards money.
In fact, after seeing the older version of themselves, there was a 150% increase in attention paid to the moment of choice between spending money or saving it, while 72% of participants actively shifted their mindset towards wanting to save their money, versus spending it.
Try visualising yourself in 10, 20 or 30 years time, and start to shape your financial decisions around where you want your “future self” to be.
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