If you’re like most people, you’ve probably been in a situation where you had some intentions around your money but failed to translate them into the results you wanted. It could be spending on an epic summer holiday, buying some new tech gear, or hitting some savings targets to start your new year on the financial front foot. I know I’ve definitely been there…
You end up in a position where there’s something you really want, and you know what you need to do to get there. But for some reason, it just doesn’t happen. In most cases, the reason for this is a flaw in our money behaviour I call unconscious prioritisation. And unconscious it’s the main reason most people fail at reaching their money targets.
But if you know what to look out for, you can hack your thinking and avoid falling into this trap.
What’s The Situation?
I’ve found that when someone thinks about what’s important around money (and the lifestyle it allows you to live), people make one set of choices. We tend to choose putting a heap of money aside for epic overseas holiday, a healthy budget for awesome one-in-a-lifetime type experiences and saving to create financial freedom and security. These are the sort of things that have been proven to show money can buy happiness. So, it makes sense that most people place a higher priority on these outcomes ahead of other things you could be directing your cash to.
So, What’s The Problem?
Well, I mentioned above that people list these types of priorities when they think about their money. But, when we act, often our actions don’t reflect these same priorities. This happens because as humans we’re hard wired to seek pleasure, and often put pleasure in the moment ahead of pleasure at some time in the future. In the moment, we de-prioritise our larger future money targets for the short-term pleasure hit that comes from buying yourself a sweet new outfit, a shiny tech toy, or that extra fancy bottle of wine on date night.
You Can Hack Your Thinking
But there is a hack I’ve found works pretty well to help you avoid this issue, to consciously prioritise, and then to help you make your real priorities turn into real results. The hack works because unconscious prioritisation is generally caused by a lack of clarity. See if you’re not clear on exactly how much you should be spending on your different expenses and how much should be dedicated to saving to achieve your priorities, it’s hard to make it actually happen. I’ve found this lack of clarity is normally created by the way people manage their money.
If you have all your money coming into one account, then you spend on your credit card, have bills getting paid from multiple accounts, and save money randomly, you’re not going to have the clarity you need to make your priorities happen. This causes many to end up with their money in a mess and makes it almost impossible to make their goals happen.
So, What Can You Do?
The hack to give yourself clarity is twofold. First, you need to take a step back and list out what your priorities really are. This can be on a piece of paper or a spreadsheet. I suggest going old school to keep things simple, and to allow you to tweak things until you reach a place where you feel like you’re happy with all the priorities you’ve chosen.
Note: if you’re like me, when you do this the first time you’ll likely need to circle back and re-prioritise. I found like many of the people I’ve worked with as an adviser, the first time you list out all the things you’d like to do with your money they aren’t all possible…
Once you’ve reached a balance you’re happy with, you then need to translate the ‘plan’ into how it will work on a day to day basis. What I’m talking about here is structuring your banking to make sure the right money is in the right places at the right times to cover the priorities you’ve chosen. Multiple bank accounts and a good bank account structure are your friend here. This will make sure you have the right money in the right places at the right time. A good banking framework will also give you crystal clarity on how you’re progressing to your plan. This won’t stop you from blowing your budget, but it will mean you have clarity and it will mean that you’ll have to really think about changing your priorities (blowing your budget) to muck up the plan you’ve set for yourself.
There’s so much psychology that drives how we manage our money, that often sets us up for failure. So, if you want to make it easier to actually get the money results you want this summer, you need a framework to hack your thinking. But it’s totally worth it, so put in the work now and you’ll be taking the first big step to set yourself up for money success.
Now you've got your savings sorted, it's time you learnt how you can achieve financial wellbeing.
Image Credit: Guille Faingold
Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstances before acting on it, and where appropriate, seek professional advice from a finance professional.