Get emotional to reach your goals

Make saving simple by focusing on what it’s for

I am often asked, ‘Why is it so difficult to get ahead financially?’ 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 film to our living room, we don’t have to wait around for the things we want.

Don’t have the funds right now? No problem, use a credit card and pay later.

But the best financial advice often asks us to forego what we want right 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.

It feels like we could be doing something more enjoyable with that money so 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, which means taking 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.

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 trust it.

That’s why we need to remove the emotion behind our day-to-day spending and put it to use thinking about the bigger picture instead. Take routine thought out of your everyday decisions, set your finances up automatically and become wealthy by default.

HMRC understands this principle when they automatically deduct taxes from your income, and your mortgage lender gets it when they make you repay by Direct Debit: they don’t want you thinking about the payments.

You need to take the same approach to saving. I believe in that ethos so strongly that I wrote a book all about it: The Money Plan.

Set your finances up automatically and become wealthy by default

DEDICATED

The number of people saving for retirement has rocketed in the past few years. Why? Because it became the law for employers to automatically deduct a pension contribution from your pay.

That’s a step in the right direction. Take the next step by setting up a dedicated savings accounts for your goals, like buying your first home, helping your children with university or saving for your retirement.

Name these accounts and attach emotion to them. That way, you’re less likely to use them unnecessarily.