We’ve seen a lot of interesting money habits and across the spectrum of behavioural finance during our time here at Locumsgroup. The one spending habit we routinely see and perhaps the biggest culprit for savings erosion are small, discreet habitual payments. Acts that may seem innocent enough, like ordering UberEats for a mid-week treat, in aggregate may be one of the biggest threats to your long term savings.
Ironically, it has become increasingly evident that one of the biggest obstacles to saving money is the emergence of new and improved financial platforms that often encourage the development of poor spending habits instead of creating healthy ones.
This blog discusses these spending habits:
Buy Now, Pay Later
Afterpay’s popularity has surged across Australia, particularly among younger generations. This ‘buy now, pay later’ platform is used by 15.2% of Australians, offering convenience but also encouraging poor spending habits.
The name says it all – buy now and pay for the consequences later. The ‘pay later’ aspect can lead to overspending, encouraging more frequency, impulse buys and accumulating debt with hidden fees.
Credit can be your friend in that it enables you to take possession and enjoy an asset before you own it (think home ownership) however if applied incorrectly it can be a toxic destroyer of wealth.
Ding-Dong….. Pizza’s Here!
At a micro level, think of this: We all love an easy takeaway meal and with food delivery services like UberEats becoming a global phenomenon, it’s easier than ever to buy out and eat in!
While everyone should enjoy a meal out, what’s important to be aware of is the dollars going out that you could instead be saving. In Australia, 3.5 million people use UberEats, with the projected revenue in the online food delivery market for Australia estimated to reach US$11.29bn in 2024. Add on eating out on top and that number may increase exponentially.
In A Sticky Situation?
We all know a friend, who no matter how hard they try, is unable to cancel their gym membership. Subscriptions like these, where the process to opt-out is timing consuming or complicated, are often referred to as “sticky subscriptions”.
Subscriptions can be another sneaky drain on finances, especially when Australians are signing up for multiple accounts without knowing the total cost. If you were to subscribe to 8 streaming services on the most basic plan, that equates to over $980 per year.
The Road To Smarter Savings
To improve your spending habits and reach your long term goals, there are a few good habits you can get into that are detailed below:
- Create a budget: determine what expenses must be paid and where you might be overspending.
- Monitor subscriptions: frequently monitor the number and cost of subscriptions you have. Evaluate whether you need it, want it or can remove it for a while.
- Eliminate wasteful spending: before buying from platforms like Afterpay and UberEats, consider a helpful balance. Maybe you set a limit of 2 meals out a week instead of 4.
- Track your spending: use a planner to see what you are spending and where. Some expenses are unavoidable, but you might like to reduce others.
While it’s important to enjoy the little things, part of our job is identifying your spending habits that may be keeping you from your long term goals. Whether it’s an overseas holiday, a house, or plan to start a business, achieving these might start with a small, consistent habit.
If you need support creating new, helpful habits, reach out to our team today.
