If you’re like most people, no matter your age, you often decide to save more and spend less. But life gets in the way, and you end up going back to your usual money habits. In the 1993 movie Groundhog Day, Bill Murray’s character experienced the unusual scenario of waking up to the same day repeatedly. Watching it was quite frustrating.
As a viewer, you hoped for the day to change, but unfortunately, it didn’t. So, the question arises: why do we find ourselves making poor financial decisions day after day? In this article, we will explore how to cast off commonly held poor financial habits and create a brighter, more secure future.
1. Facing the Shadow: Identifying Poor Financial Habits
Just as the groundhog emerges from its burrow to see its shadow, it’s essential to face our financial habits head-on. Start by identifying the patterns that contribute to your financial challenges. This could include overspending, neglecting savings, or avoiding financial planning altogether. Awareness is the first step towards positive change.
2. Setting Realistic Financial Goals
In the spirit of Groundhog Day, use this opportunity to set realistic and achievable financial goals. Starting with your goals means you can understand which choices are right for you. For instance, knowing what you’re saving for can help you choose the right type of account – does it need to be easily accessible, or could it be locked away for longer to access a higher interest rate?
As well as setting out your financial goals, think about the lifestyle you want. Would putting a bit of money away each month mean you can plan a holiday to a dream destination? Or will adding to your pension mean you can retire early and enjoy the next chapter of your life? Focusing on how the financial steps you’re taking will improve your life can help you stay on track.
3. Building a Solid Budget Foundation
One of the most common financial mistakes is neglecting a budget. Groundhog Day teaches us the importance of repetition, and the habit of budgeting should be no exception. It can help you understand your expenses, disposable income, and where you could make better decisions that would help you achieve your goals.
Writing down your regular expenses could highlight where you could make savings. From cutting out services that you no longer use to reducing your spending in some areas, it can help your money to go further. Getting into the habit of tracking your spending can be useful too. It should mean you’re less likely to overspend or forget to move money to your savings account.
4. Breaking the Cycle: Control Impulse Spending
Just as the groundhog may repeat its behaviour year after year, we often fall into the trap of impulse spending. With online shopping just a few taps away, it’s easier than ever to impulsively buy something and overspend.
Break free from this cycle by implementing strategies to control impulsive behaviours. Think about when and how you may overspend. If you’re tempted by online shopping, removing saved card details from your computer or phone and unsubscribing from tempting newsletters can help. If you find you often dip into money allocated for other expenses when you’re out, creating a separate account that holds your disposable money can be useful.
5. Establishing a separate savings account
Identify what your savings budget is and save it each month. Put this into a separate savings account free from bank cards so you can’t access it too easily. This avoids you spending it on impulse purchases. If you set up a standing order into this account as soon as you get paid this will ensure that you actually save it.
6. Embracing Financial Literacy
Education is key to breaking free from financial shadows. Take the time to educate yourself on personal finance topics such as investing, debt management, and retirement planning. Attend workshops, read books, or consult with financial advisers to enhance your understanding and make informed decisions.
Explore our website and take the time to read our guides and case studies. We believe when it comes to financial planning, knowledge is power.
7. Securing Your Financial Future: Emergency Fund and Investments
Just as the groundhog retreats to its burrow for safety, establishing financial security requires preparation. Building an emergency fund can provide you with a valuable safety net when you need it. From allowing you to repair a leaky roof to covering an unexpected energy bill, it can provide you with financial security. Research from HSBC found that having an emergency fund is a priority for many people. 6 in 10 adults said that saving for a rainy day is important to them.
Additionally, consider investing wisely to grow your wealth over time. If you want to build up your investment portfolio, setting up a regular contribution can help you take steady steps to reach your goal. It’ll also mean you buy stocks and shares at different points of the market cycle, which could help to balance risk and volatility. You should keep in mind that all investments carry some risk, and it’s important you choose investments that are appropriate for you.
8. Seeking Professional Guidance
Breaking free from poor financial habits might require professional assistance. If you find it challenging to navigate your financial journey alone, consult with a financial adviser. Effective financial planning can help you put a long-term plan in place that will consider a range of things, like what your goals are, how to make the most of tax breaks, and how to create security in case you face an income shock.
Financial planning doesn’t just help you make the most of your assets. It can provide an emotional boost by giving you confidence about your future.
If you’d like to talk about the steps you can take to improve your financial security and reach your goals, please give us a call.
