A new study looking at the psychology of saving has found impulsiveness and materialism lead to bad financial decisions and poor saving habits.
Conversely, they found that the key to developing good saving habits is to focus on the future.
During the study, researchers surveyed 700 American adults about their financial behaviour (including impulsiveness, materialism and financial literacy) as well as questions that tested the extent to which they think about the future.
As expected, they discovered that high levels of impulsiveness and materialism led to poor financial decisions (more spending, less saving).
However, they also discovered that the biggest predictor of good saving and investment was focusing on the future.
Adele Martin is an Australian certified financial planner and Managing Director of Experience Wealth. She says that the results of the study don’t surprise her at all.
“As a society we want instant gratification and it’s why Australia’s credit card debt stands at $32 billion with an annual interest bill of over $5 billion,” she tells The Weekly Online.
But Martin says we can all improve our financial habits using goal based financial planning.
So how can we put this into practice? Martin suggests getting really clear bout your goal and putting pen to paper can help motivate saving.
“Having written goals is crucial for savings,” she says.
“Be as specific as possible as this will help the goal come to life and feel more real. For example ‘in July 2020 we want to buy our first home in Melbourne’.”
Martin also says that being able to visualise your goal will help you to keep saving front of mind.
“Have a picture that represents your goal and place this image on your fridge or phone screen saver as a constant reminder,” she suggests.
Martin notes that focussing on the future also gives people a reason to put their credit card away when they are tempted by an impulse purchase.
“It gives you a reason to say ‘no’ to the new shoes,” she says.
