Saving should be a no-brainer

Don’t think about tucking cash away… just do it

I am often asked why it is so difficult to become financially secure.

After 25 years as a financial planner and thousands of hours with clients, I believe it comes down to psychology.

Instant gratification is ingrained in our way of life – society has trained us to expect things now.

From same-day delivery to streaming the latest films to our living room, we don’t have to wait around for the things we want any more.

If we don’t have the funds to get what we want, it’s not a problem – we’ll just use a credit card or one of the many buy now pay later companies.

But the best financial advice often asks us to forego what we want now for a future promise.

A good example is saving money. We have so many demands on our time and our finances that setting money aside is hard. The cost of living crisis has certainly highlighted this.

It feels like we should be doing something more enjoyable with that money, or just using it to make ends meet.

When we have a choice between saving for tomorrow or spending it today, we tend to lean towards the latter.

So how do we win at the money game when there are so many demands?

The answer is to stack the odds in our favour and take emotion out of the equation. If we can make a decision once and put our finances on autopilot, we’re on the right track.

Most of us don’t like change – we like what we know. We take the same journey to work every day and we often eat the same meals when we go out or order the same drink.

Changing our financial habits is the same. It can be scary.

When we can’t immediately see and feel the outcome of a decision to save for tomorrow, we tend not to like or

If you set your finances up automatically, you’ll become wealthy by default

trust it, preferring the certainty of the near term.

That’s why we need to remove the emotion behind our day-to-day spending and think about the bigger picture instead.

Essentially, if you set your finances up automatically, you will become wealthy by default.

HMRC understands this principle when it automatically deducts taxes from your income.

Your mortgage lender also gets it when they encourage you to repay by direct debit – they don’t want you thinking about the payments. You need to take the same approach to saving.

The number of people saving for retirement has rocketed in the last few years.

Why? Because it became the law for every employer to automatically deduct a pension contribution from your pay packet. That’s a step in the right direction.

Take the next step by setting up dedicated savings accounts for your goals, like buying your first home, helping your children with university or tucking some money away for your retirement.

Name these accounts and attach emotion to them. That way, you’re less likely to touch the money in them for unnecessary expenses in the future.

Visit warrenshute.com for more money planning ideas.