Are you a saver or a spender? According to new research, one in five (20 per cent) of us think of ourselves as a spender, while two in five (39 per cent) favour saving over splashing out – leaving the other 41 per cent somewhere in the middle.
While splurging may bring a burst of excitement, spenders could be leaving themselves vulnerable to financial shocks if they face an unexpected bill, as well as storing up other problems for the future.
Hargreaves Lansdown’s survey of more than 2000 people found that just 29 per cent of spenders say they feel confident they’ll be able to afford to retire, compared with 39 per cent of savers.
Savers, of course, tend to have more in the bank too, with just one in 20 savers saying they have less than $1000 in their account, compared with one in five spenders. Furthermore, only a fifth of spenders feel confident about meeting their savings goals, compared with two-fifths of savers.
They also risk running out of money if their circumstances change: some 40 per cent admit their savings would last less than a month.
Read: Seven ways to safeguard your savings against recession
“Big spenders might be having all the fun, fun, fun right now, but there’s a risk they’ll come to regret it,” says Sarah Coles, a personal finance analyst at Hargreaves Lansdown. “We can all be tempted to spend too much every now and again: there’s a multibillion-dollar advertising industry designed to persuade us to do exactly that.”
“The risk is that we get into dangerous habits,” she adds. “Overspending becomes part of our mindset, and we come to think of ourselves fundamentally as ‘spenders’.”
So can you change your ways? Ms Coles says, yes, there are steps spenders can take to break the cycle. While it may not be easy to change your habits overnight, here are Hargreaves Lansdown’s tips to help you start thinking like a saver.
1. Let go of the idea that it’s okay to be a spender
Identify your spending weak spots and use techniques to keep them under control. If you enjoy the thrill of buying on impulse, try giving yourself a 48-hour ‘cool-off’ period to see if you still want the item.
Those with a weakness for splurging could also consider trying to avoid temptation by banning themselves from specific shops, avoiding online shopping when they are feeling particularly vulnerable, or trying not to buy anything in the week after payday – to make their income stretch for longer.
2. With the cash you free up, start regular monthly savings
Set up an automatic payment to put a monthly sum into a savings account before the cash has a chance to hit your bank account and be spent.
3. Engage with where your money is going
Don’t just dump your emergency savings into an account with the same bank as your current account, look for a competitive rate on an easy access account. If you know you won’t have time for regular searching and switching, consider an online savings marketplace, which lets you compare and switch between banks in a handful of clicks.
Read: Curb your enthusiasm – a guide to winding back online shopping
4. Set specific goals
Prioritise short-term spending you know is coming up – such as holidays or Christmas – alongside building up a cash safety net of three to six months’ worth of salary for emergencies. If you can only dip in for specific items, it’ll stop you spending as fast as you save.
Read: Eight tips to save money when shopping online
5. Finally, enjoy the thrill of being a saver
Spending brings regular small bursts of short-lived pleasure, so don’t just try to remove this from your life or you’ll end up fixating on it. Make sure at least one of your savings goals is something that brings you real joy – such as a debt-free Christmas, or much-needed holiday.
Take the time to check your savings regularly, feel good about what you’re achieving, and bask in the pleasure of getting closer to your goals.
Do you identify as a spender or a saver? Let us know in the comments section below.
– With PA
