Break the habit - for good

Spill is a startup that lets employees book video therapy sessions through Slack. We asked them to pull together (with the help of their therapists) the psychological explanations behind common bad financial habits. We then challenged them to provide some practical tips for how to overcome them. 

Spending impulsively

Why it happens: Not knowing how to process a certain emotion is a common issue for many of us. When we feel frustrated, sad, or stressed, it’s hard for us to just sit with the feeling and let it pass. Instead, we look for ways to try and resolve (or at least repress) it. When we’re angry, we might throw something; when we’re sad, we curl up in bed; and perhaps when we’re stressed, we open a shopping app and buy something we don’t need. It doesn’t resolve the emotion, but it gives a temporary outlet for it.

How to overcome it: There’s a habit change framework popularised by books like ‘Atomic Habits’ called cue-routine-reward. First, you need to work out what is setting off your impulsive spending. Set a ‘cue alarm’ on your phone to go off every 4 hours for 2 days. When it rings, write down the impulses you’re feeling and what you think might be causing it. Where are you? Who are you with? What are you doing? How do you feel? For example, maybe you’re more likely to spend impulsively late at night, when you’re bored with friends, or when you’re feeling stressed on your own. Next, you need to focus on how this impulse buy has made you feel. If you were stressed, did it help you let off steam, for example? Try experimenting with other activities that offer a similar emotional reward: boxing a punch bag, going on a run, having a long shower. See what works. Then write your new ritual down somewhere you’ll see it often (on the fridge, on your phone’s wallpaper): “when I feel stressed, I will do 10 rounds on the punchbag, because this helps me let off steam.” Over time, it’ll become internalised and you won’t need the prompt sign anymore.

Getting into debt

Why it happens: We all suffer from something called the optimism bias. We find it hard to process the idea that something could spiral out of control. In general, we assume that things will just turn out alright because that helps us get through the day without worrying constantly about being run over or being struck by lightning. When you combine that with the fact that we humans tend to compare ourselves to people with very different lives and incomes, it can really get us into hot water. 

How to overcome it: Make debt more real by starting to pay it off immediately. Split how much you owe into daily micro-instalments, starting the very day you take out a loan. Most challenger banks will allow you to direct money daily into a separate pot, or you can always set up a daily transfer from your main bank account into another personal bank account or ISA. 

There are various salary-linked solutions that can help with paying off debt as well. Salary Finance offers hassle-free savings accounts, advances on your earned pay, affordable loans repaid through salary and free financial education. To see which Salary Finance products you have access to, click here and select your employer.

Failing to save

Why it happens: We often see multiple versions of ourselves. There’s the version of us when we’re at work, when we’re with old friends, when we’re with our extended family, and so on. We can also easily fall into the trap of seeing our future self as a completely different person. This makes them harder to empathise with, and that means we’re less likely to take their wants and needs into as much consideration. 

How to overcome it: Sit down and really think about your future self. The best way is to actually write it all down. Try to be as realistic as possible: assume things in your life continue largely on the same trajectory they’re on now, rather than banking on any dramatic changes in fortune. For example, “I’m Anna, a retired 68-year-old woman living in a small flat just outside London with 10 years’ worth of mortgage repayments left. I get £250 a month from my government pension and £1,000 a month from a private pension. My mortgage costs £450 a month. This leaves me, after bills and food, with around £200 spare.” Try to write at least a whole side of A4 so that you can really paint a detailed picture of your life at retirement age. The more detail you go into, the more real this future becomes, and the closer it seems. Then, and only then, does it become easier to start making financial decisions that are kinder to the future you.

We hope you’ve found these tips useful. To help you turn intentions into habits, we recently hosted a webinar on how changing your money mindset could change your life - click here to watch.