Knowing and understanding your personality traits
To understand our attitude towards saving identifying your financial personality is a good first step, as Dr Frank Ryan, author of Willpower for Dummies, says: “Impulsive or excessive spending is a product of the interaction of several personality traits. A cluster of characteristics linked to impulsivity, seeking out exciting new experiences and being social or a ‘party animal’ are linked to excessive spending. In contrast, personalities that prefer familiarity, planning ahead and predictability are more likely to be savers than spenders.”
Accepting your financial personality traits is important – you’re more likely to be able to manage them or develop coping strategies than completely change your personality. If you are an impulse buyer or compulsive spender this behaviour can be hard to stop. Simply changing the brand you buy or where you shop, for example, might not be enough to curb your habit. Experts suggest that tracking your spending can remove some of the emotion from it. Forcing yourself to write it down every time you spend, for example, turns the action from something compulsive to something rational. Our Spending Insights can help with this: they’ll show you how your spending is changing from one month to the next across 10 spending categories, such as travel and lifestyle. You can also break down what you’ve spent by merchant to show you which shops, brands or services are part of your habits.
The role of emotion
It’s not just our enduring personality traits that can make saving so hard – how our emotions influence our spending plays a big role too. Paying on credit is less painful, for example, while paying with cash makes us confront uncomfortable feelings about our finances. Credit can help us delay the pain of spending and the rise of cashless payments has given us another new way to push those negative feelings away. However, paying on credit and increasing your debt can create financial stress that may ultimately outweigh the fleeting happiness you felt at the moment of spending. Real-time notifications through your app are a great way to address this issue in a contactless world as it reminds you of what you’ve spent as you’re spending it.
How can age and generation affect your approach
Experts suggest that your age and generation’s experiences will affect how you feel about and approach saving. Millennials prefer to spend their money on an experience rather than something they can own and typically prioritise short-term over long-term saving. Other factors, such as student debt, expensive housing and higher living costs, eat into their income and make it harder to save than previous generations.
Psychologist and author Karen Pine, has previously written about how our upbringing can influence our attitudes to saving and spending money. What you were told about money as you grew up and whether you had a strong financial role model can affect how you handle money and your saving behaviour. Many of us, especially those aged under 24, have grown up in a world of instant gratification – from next-day delivery to contactless payments. Without realising it, this environment can make spending increasingly attractive and strengthen its hold over us.