How do our habits lose us money?

I am a very habitual person. I try not to be as much as possible, but it’s so difficult to break many of my habits. Sometimes I just can’t help but bite my nails or lie in bed when I know I should be getting up and working. Habitual behaviour underpins many people’s lives, and however hard we try to break them, we often don’t. However, maybe if we discovered all the money-losing habits that plague many of us every day, we would focus everything on breaking them. It would just make financial chef.

Habit 1: Savings Accounts

Whether you count it as a habit or not, your 0.5% interest rate on your Flexi Saver Student Whatever Account is not helping you financially. Yet, so many students and even working adults continue to use them. If you had £1 million sat in one of these accounts for a year, and you had the option to earn either £5,000 from it or between £30,000 and £70,000, which would you choose?

If you say £5,000, you’re either joking or you need to really rethink what you’re doing with your money. Ditch the savings account, and start building your stocks, shares and funds portfolio. Educate yourself on the topic now, and make 5% growth your new habit. Today ends the days of your 0.5% growth.

Habit 2: “Dipping into” your savings

We’re all guilty of it, if we have savings available. It’s tough when the student loan runs out, and instead of deciding to go into the overdraft, or simply not doing fun things, we decide that £50 out of savings is worth it every single time. In first year alone, my savings built up over 18 years depleted by about 70%. In one year!

“I can afford it if I take £30 out of my savings. Worth it!”

Fresher Me pretending it’s worth it

The reason this is so bad for you financially is not just because you’re £50 worse off than before, but because that £50 turns to £250 very quickly. Without stopping the habit, it morphs into an ever growing beast that can’t be stopped. So here’s my tips for stopping it:

  1. Become less liquid
  2. Tight Restrictions
  3. Locked Pots

Becoming less liquid means putting your money somewhere where it takes a while to be withdrawn. My Hargreaves Lansdown stocks and shares ISA takes 3-5 working days to withdraw my money, and hence it’s not really worth taking the money out!

Tight restrictions refers to setting dates of withdrawal for yourself, so you do not dip into the savings you have. This could be active or passive restrictions, either putting a lock on your account, or simply saving towards something important, meaning taking money out is not worthwhile.

Locked pots are something many online banks such as Monzo use. Putting your money away in a “savings pot” which cannot be opened until either a certain date or amount of money is reached is a great way to stop you touching it. It also means that you are more likely to increase your savings as you will have to continue growing them to be able to withdraw. It is what I do as well as having a separate account and it works a charm.

The original Locked Pot

Habit 3: Being a procrastinator

“You may delay, but time will not.”

Benjamin Franklin

This one is the toughest and most broad habit. I’m not just talking about sitting around watching Netflix instead of working or reading or financially educating yourself. Even though that comes into it, it’s acceptable to not always be trying to learn something new. My biggest irritation is the “I’ve been wanting to do that for a while” procrastinator. They have the funds, they have the time, but by God do they have the excuses.

I’ve heard many people say to me that they’ve wanted to start matched betting for a while. It is unlikely they will ever start, as they are so caught up in this habitual excuse making that it seems to fizzle from their mind every time they actually have the spare time to start. I’ve heard the same with ISAs, the same with reading and learning in general, and it really gets on my nerves.

Train yourself to stop procrastinating. Put your full effort into it. Then get started. It’s worth it.

These habits damage our financial objectives and destinies every single day we keep them up. Habitual behaviour is one thing that really strikes people down without them even realising it, and it is up to you to notice and stop your bad habits, and start making the money that you deserve to be making. The idea of “opportunity cost” is important (meaning the benefits forgone of making one decision over another). How much are you missing out on by choosing to watch 3 hours of Netflix instead of spending 1 hour learning how to earn more with your money and 2 hours matched betting? Just think about that, then make a change.

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