If you’re stressed about money and how to save for the future, you aren’t the only person. The past few years have seen a sharp increase in food and energy prices due to inflation, along with the continued economic impact of the Covid-19 pandemic, which has led to a lot of economic insecurity around the world.
With an increase in financial uncertainty comes a tendency for emotional spending to deal with these deeply unsettling feelings, which directly makes the problem worse.
It’s a natural response to a stressful situation. Shopping releases dopamine and endorphins (aka happy hormones) to improve your mood and make you feel excited. The problem is, the feeling doesn’t last long, and ultimately, it makes your stress (and financial situation) worse. And so, what follows is an endless cycle of emotional shopping to avoid your money anxieties. In psychology, this is known as negative reinforcement.
But when money is causing you stress and emotional pain, the last thing you should do is waste it on impulse purchases.
That’s why learning how to save or invest your hard-earned money will improve your emotional relationship with spending and your financial situation as a whole.
If you’re struggling to break the cycle and get better at saving or investing your money, here are five bulletproof strategies to get you started.
1. Create a long-term saving wish list
Psychologically, humans don’t interpret numbers in a bank account as being wealthy. Instead, it’s the things we can buy with the money that makes us feel rich. So, setting a generic goal to save money won’t be powerful enough to override the emotional connection you have with spending.
To help you save money, make a list of all the big-ticket items you would really want to buy if you had the funds. Luxury holidays, your dream home, a fast sports car…anything that fills you with excitement.
Then, when you’re tempted to spend emotionally on things that you don’t really need, pull out the list and remind yourself what you could have if you just say no to the impulse buy. This will give you the motivation to stick to your long term, substantial goals.
2. Find free online resources to learn about investing
Not everyone was brought up around good money habits, and that can lead to generational wealth consequences such as money anxiety and poor spending habits. This also whether or not you had money to spend; having more money in your account doesn’t necessarily mean you know how best to use it, and vice versa.
By breaking the chain and learning about investing, you’ll have the knowledge you need to rewire your brain to remove the emotional impulse of spending in favour of pursuing healthier money habits. There are a number of free resources, including this very blog, that can help you learn these financial best practices, along with the basics of investing to start you off.
3. Pay with cash as much as possible
Spending with a credit card creates an emotional detachment from money. Spending $500 in cash doesn’t register mentally in the same way as spending it on your credit or debit card. But when you can physically see $500 in paper notes, you’ll have a better realisation of your spending actions that will likely induce second thoughts about making your purchase.
4. Redirect your money into your investments or savings instead of the purchase
You can experience the same dopamine rush pressing the confirmation button on a transfer to your savings or investments as you would by purchasing an item impulsively. The key, again, is remembering the potential of that money in the future. So next time you go to buy something, build the habit of opening your bank/investment app instead.
Not only does it satisfy your emotional needs, but it also helps improve your financial situation. Investing your money is essential to letting it grow in the long term, instead of leaving it idle, and keeping your finances healthy. But there are many ways to grow your money with time, depending on what you’ll need the money for in the short term or long term.
For the money may immediately need access to, put it in a savings account and receive regular interest on your money. This won’t let it grow very much, but can be used as an emergency fund for unexpected expenses.
To grow your wealth over time, a portion of your money should also be invested. This can be the money you won’t immediately need, and are willing to risk a little in the short term for potentially higher returns in the future. You can look into finding an investment plan that suits your needs, such as the ones available via Smartwealth, and adding to it regularly over time to see those returns.
5. Don’t save your card details on shopping websites
Saving and investing are all about intention over impulse. You need to be strategic with your spending to afford it.
So, to stop impulse spending, you need to make it as hard as possible to finalise your buy. The more time and effort you spend getting to that final purchase moment, the more time you have to consider what you are doing and stop yourself.
Don’t make it easy to press ‘buy’—delete your card details from shopping sites and don’t save any new ones.
Emotional spending feels great at the time of purchase, but that feeling doesn’t last long. In fact, in many cases, it can leave you with little money and a lot of anxiety.
Using the tips above, you can create solid investing and saving habits that help you take control of your emotional spending.
Not only will you feel more confident about your financial situation, but you’ll also feel more in control of your mental well-being.
It takes practice, but step by step, you can transform your relationship with money and regain your money confidence.
If you’re looking to start investing and want help getting started, NBK Capital Smartwealth is the platform for you. We provide you with an investment plan that matches your needs and preferences. This can help you keep your emotions in check, guide you with a clear investment strategy, and keep you on track towards achieving your goals.