I've discussed saving (and investment) previously, but haven't yet covered spending behaviour. Specifically, what are people spending their money on that prevents them from having spare cash to play with at the end of the month? Interestingly (to me anyway), there are certain items that appear again and again on the bank statements of this group. Cutting, or at least reducing, the amount of money spent on these items would help them reach their financial goals much faster.
1. Credit Cards
Credit cards are the last thing that most people should be getting involved with. Certainly not if you are already struggling to pay the bills. They are designed to hook you into a debt cycle that keeps growing. Once you miss a payment, interest gets added on and the amount you owe grows. Can't afford to pay back the new amount on time? The bank adds more interest. Now you have an even bigger sum to pay back. Can't pay back the new amount? More interest... and so the cycle continues. Most people struggle to pay just the minimum payments and carry the debt over for years. According to The Money Charity, the average UK credit card debt per household in 2018 was £2638 with an average interest rate of 18.67% (ouch). And it takes up to 26 years to pay back this debt with minimum payments! If you put that £2638 in a 5% interest P2P or another investment asset for 26 years, you'd have around £9,600 with spare change!
2. Appearance
I'm not talking about basic hygiene and looking after your appearance, but the thousands that people waste on keeping up with the latest fashion trends (I refuse to wear anyone's name on my clothes unless they pay me advertising fees), hairstyles (I cut, colour and style my own or get a friend to do it), manicures/pedicures/whatevercures, skin tanning/lightening, high end makeup (most of which does exactly the same thing as cheaper brands), tattoos (then removal of said tattoos), piercings, and a bunch of other stuff that I don't even notice!
Stop trying to impress idiots with 'bling'! The type of people that will notice and care what brand of t-shirt you wear are not the type of people whose opinions you should give a damn about. Trends will go out of fashion (very quickly these days), haircuts/dyes will grow out and fade, you can take care of your own nails (mainly through good diet, exercise, filing them and maybe painting them on a night out), leave your skin alone and learn to embrace your natural look (the world would be incredibly boring if we all looked the same), and learn to use any makeup properly (relying on expensive products is lazy)! I personally don't like most tattoos or piercings, so I'll leave it there. But just don't spend crazy amounts on them.
Buy assets, not 'stuff'. When you are richer and have all the basics covered, you'll then be able to afford to waste a bit on unnecessary things. Or, more likely, you'll no longer care whether you look as if you've just rolled out of bed!
3. 'Short Cuts'
Following on from the above, so many people waste money attempting to sidestep time and effort for a quick solution to whatever problem they have. Gym memberships are a classic example of this. Most people are able to walk/jog/run in their local neighbourhood or park. Most people could fairly easily create a basic workout that would tone their body, cut fat and get their heart pumping. But sticking to that routine is reeeeeeeeeeally hard! So they panic sometime around late December, splash out on a gym membership, new gym clothes, books/apps to track every calorie they consume, and then sometimes around March the novelty wears off and they stop using it. The gym sales team loves people like that. 3 months for the price of 12! Fantastic! Even better if you forget to cancel at the end of the year and they get another stash of your cash!
The same goes for 'miracle fat burning pills', 'miracle detox teas', 'miracle muscle building powder'. People are incredibly quick to buy into the dream of getting the perfect whatever without having to put in the hard work. They don't need to buy a product. They need to change their mindset and get into a healthy and continuous routine.
4. Impulse Purchases
(after a few drinks, these magically turn into
the world's coolest pair of shoes!)
An ex-flatmate of mine used to hand me her credit card if she hadn't slept enough, if she was feeling emotional, or before she went for a night out. She was impulsive at the best of times, but after several glasses of wine she would stumble home in the early hours of the morning and head straight for eBay while waiting for her fried breakfast to finish cooking! Everything seemed like a great bargain through the lens of alcohol and she would wake up the next morning with a splitting headache and her bank account drained of funds. A week later several boxes would arrive full of glitzy shoes, novelty cushions, and random items that we could never quite identify the use of!
The moment you learn to differentiate between needs and wants is the moment where you regain control of your life. If you really can't be trusted to stay away from impulse buys, then at least stay away from easy access to your money. Lock the credit card away or chop it up completely. The few extra minutes/hours of distance between you and your money might give you a chance to reconsider whether you actually need those novelty reindeer gloves!
5. Smoking and Drinking
Addictive behaviour will cost a fortune in the long run. The average cost of a pack of cigarettes in the UK is now over £10 and climbing. So that pack a day habit is costing you around £70 a week, £280 a month, or £3360 a year! Imagine what you could do with that £3360 instead of setting it on fire! Not to mention the damage you are causing to your body, which (if health isn't a good enough reason) will likely cause additional damage to your finances later on in life. Stop burning and drinking through your money and get a few extra years of life as a nice bonus!
6. Gambling
A 2012 study from Yale University found that those in the lowest 20% socioeconomic status had the highest rate of lottery gambling at 61%, and over 70% of the UK population play the lottery on a regular basis. That's a lot of poor people wasting money they really can't afford to waste! On top of that is the large number of people who gamble at casinos, on internet betting sites, on poker phone apps, and all the other myriad forms of gambling available today. Everyone dreams of winning a fortune and retiring to a castle with servants and a fleet of high end cars. However, you have more chance of becoming an A List film star or President of the United States than winning the jackpot, and the companies that run those schemes know it!
7. Wasted Food
Most people have no idea how much food they throw away each week. Without a bit of planning, the average trip to the supermarket results in around 40% of vegetables being thrown away, 17% of dairy products and nearly 15% of the meat and fish. What a waste! And just think how much money could be saved if you spent a few minutes meal planning before your weekly shop. Learn to love your freezer. Pull out those old victorian cookbooks your nan left you and develop boss-level soup making skills with leftover meat.
Pro Tip: Never go shopping on an empty stomach! It will lower your self control and result in poor decisions!
8. Student Loans
If you're not entirely sure which field you are best suited to then take a year or two out of education and get some work experience in different sectors. Even an entry level job will give you the opportunity to network, and most people are willing to let you shadow for a few hours if you show interest in what they do. Not only will it give you the opportunity to test the water, but you'll be able to save up a bit of cash in case you still decide university is the best route.
Research whether you need a degree at all to work in your chosen industry. Many fields only require portfolios or short certifications to get your foot in the door. Once you're in a company, many will even fund further training and education in return for an agreed length of service.
If you still decide you want a degree, then consider distance or part time study rather than attending university full time. Not only will it stretch the payments out further and give you more of a chance to budget, but you'll have free time during the week to go out to work. I went to both brick and online universities (although I don't count the first degree) and found working at my own pace in coffee bars or pubs much easier than having to sit still in a lecture hall waiting for 40 other students to catch up. If you don't HAVE to physically attended classes, then distance study might be the better choice.
