The power of saving lies in your mind. No, really!
We’re far more likely to achieve the goals we consciously set for ourselves. So why then, do 92% of us still struggle to reach our targets? Well, there are a number of reasons, but the first is very simple – it helps to make your goal as clear as possible.
Research shows that the more specific and challenging your goals, the more motivated you are to hit them. Which could be why vague New Year fitness resolutions never seem to do as well as we’d hoped.
“That’s all very well”, you might be thinking. “But even with a clear target, what if I still can’t motivate myself to put away the pennies?”
We hear you.
That’s why we went to James Suter, Divisional Director of Behavioural Economics at London Economics , to ask for his expert advice on helping you reach your money goals.
What’s standing between you and your money goals?
You’ve got your saving goal in mind. Maybe it’s something small, like a new phone or a weekend getaway. Or a bigger focus, like saving for a house or a car. You might have even planned a budget. But you can’t seem to make it stick.
However big or small, James highlighted a couple of reasons why you may be tempted to stray from your goal:
Saving takes effort
Most of us are used to following default habits. It takes more effort to make budget-friendly choices if we automatically go for our preferred option. And it’s even harder to fight the default when it’s automated.
Think about your direct debits. How forgotten subscriptions roll over from month to month? It’s a simple enough fix, but it takes a bit of effort to cut yourself loose.
“Defaults are everywhere and can get us stuck in bad habits,” James says, “but they can also be used as a powerful nudge to help us get into better money management habits. Setting smart defaults, like setting up standing orders into your savings account, can help you start making good decisions on autopilot.”
Top tip: The Round Up Jar Booster in the Yolt app automatically rounds your day-to-day spending up to the nearest pound and puts the difference into a saving pot, so you’re saving without even thinking about it.
Commitment can be scary
Do you ever put off making concrete plans until the very last moment? Or back out if things start feeling a bit too serious?
According to James, this is pretty common – especially with things like the internet and texting allowing us to change our minds easily and at the last minute.
“What’s your point?” you say. We’re glad you asked.
This last-minute approach can actually affect more than your commitment to your personal plans – it can impact your money goals, too.
We're subconsciously influenced by a number of different behavioural patterns and habits, like procrastination, that can mean we put off making plans. So when it comes down to it, we find that we haven’t allowed enough time.
James says: “These sorts of commitment-averse habits make it even more important to set defined tasks or goals. That way, we’re more likely to think a bit harder about how to overcome possible setbacks and stay on track to hit our goals.”
Top tip: Turn on notifications in your Yolt app to get helpful nudges whenever you get close to overstepping your budget, helping you stay on track without having to actively check your balance.
Incentivising your goals
So, if that’s what makes it harder to achieve your goals, what would make it easier?
The closer you get, the easier it feels
It’s true. Seeing how far we’ve come and experiencing rewards from our progress really can help motivate us towards achieving our ultimate goals. That’s why so many companies try to gamify their loyalty schemes by setting goals and milestones.
Have you ever made a booking online and noticed messages like: “you’re nearly there” or “only two steps to go”? This is because the retailer knows these signposts will encourage you to complete the process.
James gave us some advice on how to incentivise our own savings goals: “Breaking down your long-term goal into smaller, bite-sized chunks can be a great way to keep yourself motivated while you’re on your savings journey, by seeing the progress you are making.
“Not only will this stop you feeling overwhelmed by your end-goal, but will give you little boosts of added motivation along the way.”
Top tip: Set your own unique goals and track your progress using the Yolt app. Key saving stats on your dashboard and Saving tab help you visualise exactly how much progress you’ve made.
The power of rewards
Hey, I mean – we’re only human. It’s all good having an ambitious goal, but if the time scale is long, you could find you lose momentum along the way…
To avoid getting caught in this trap, James suggests giving yourself a few incentives. For example spending on an occasional treat shouldn't be seen as a saving setback - instead, think of them as rewards for your progress so far, or as incentives to keep going.
James says: “It seems pretty logical to say that you're far more likely to stick with new habits like saving and budgeting if you feel you’re being rewarded along the way.
“We’re heavily influenced by rewards we can receive soon, even if these are relatively small, as opposed to those that are a long way off – this is known as present bias. So, treating yourself every now and again might seem a little counter-intuitive, but it’s also very important for motivation, so you can maintain good habits and see your goals through to the end.”
Top tip: The Cashback Collector in the Yolt app lets you earn cashback from some of your favourite brands – plus the savings you make go straight into your Money Jar, helping you reach your goals faster.
The road to financial freedom
Setting out toward a new money goal may be a little daunting at first, but you could be surprised just how easy it becomes once you get in the swing of it.
As we learnt from Wendy Wood, building habits is all about doing things over and over – repeating behaviours until they become automatic.
Of course, there are many ways to make this easier; setting milestones, gamification and small incentives can all help us on our way – especially when you’ve got your Yolt app set up for that little extra support.
But what happens once you’ve achieved your money goal? Will you ditch all those good saving habits and go back to your old ways?
Well, you could. But if you follow Wendy and James’s expert advice, we think it’s far more likely that these habits will stick, putting you well on your way to financial freedom.
Did you miss the first blog in our two-part psychology series? Catch up on the psychology of saving to discover the secret behind building habits.