We often value immediate rewards over future gains. This makes it difficult to save because spending money feels more gratifying in the short term. It, in fact, prevents you from getting long-term financial security.
The key is to recognise that saving isn’t just about putting money aside. It’s about creating a safety net that can protect you when unexpected situations arise and help you reach your long-term goals.
Behaviours that could be impacting your finances in a negative way with solutions:
- Living paycheck-to-paycheck
If you don’t save for emergencies or future expenses, it leaves you vulnerable to unexpected financial shocks. It can make it difficult for you to plan for large financial goals like buying a home or building a retirement fund.
Solution
Even if you can save a small percentage of your income, you can create a financial buffer over time. To do this, set up automatic transfers to your savings account. This option is offered by many financial institutions and banks like Kotak811. So, the next time you receive your salary/income, set aside a specific sum for savings.
- Making impulsive purchases
Acting on emotion rather than logic often leads to unnecessary purchases, which exhausts your savings directly. This behaviour derails your focus from long-term financial goals, instead you seek instant gratification.
Solution
To overcome this, you can start by setting a clear budget that helps you track your expenses, allowing you to control them swiftly. Furthermore, use the “24-hour rule” for making non-essential purchases. This waiting period helps you rethink and reduce impulse buys. Also, many researchers believe that using cash makes spending feel more tangible. It can discourage overspending compared to the detachment felt when using credit cards.
- Financial fear
It arises from lack of information about the future, any negative experiences or even a lack of experience. This fear can be an obstacle to making key financial choices or make you take reckless steps such as panic-selling of investments. This fear is normally known as loss aversion whereby the pain associated with losing money is felt more than the gain.
Solution
Firstly, understand what triggers your financial anxiety, whether it’s past experiences or fear of loss. Then, educate yourself about personal finance to empower better decision-making. Focus more on future potential and opportunities. Once that is done, take manageable steps, like saving a small amount regularly or setting up an emergency fund.
- Following the herd
Also known as “herding behaviour”, this happens when you tend to make decisions based on what others are doing instead. It leads to irrational investments, financial bubbles and poor money management.
Solution
So, the resolution to this pattern is to do your own research. Don’t just follow trends blindly, ensure you understand the risks and potential outcomes of your financial decision. You can also consult a financial advisor before making investments.
- Accumulating high-interest debt:
Many use credit cards or loans to fund their lifestyle without considering long-term consequences. The interest rates on unpaid balances compound over time, leading to a debt trap that’s hard to escape.
Solution
You should focus on paying high-interest debt first. Try to use credit cards only for planned purchases and always aim to pay the balance in full each month. This helps avoid interest charges. And if you’re struggling with this, you can consolidate them into a lower-interest loan.
Endnote
Accepting the premise that financial change starts with identifying your patterns is fundamental. But if you know the behaviour patterns that are inhibiting your progress, then you can correct such behaviours. First, begin making gradual changes and then make a plan that relates to your financial goals.
This change in attitude, coupled with learning and persistence, will act as the key to achieving successful financial development. But there’s always the concept that progress is gradual, it’s a journey and every decision and change you make today will lead to that perfect financial future.
