Why do I spend so much money, especially when I am consciously trying to save?

Consciously trying to save is a step in the right direction, but isn’t necessarily enough.

Imagine someone taking on a diet, and consciously trying to follow it.

So when they have a meal, they consciously choose healthier options, they might even go to the gym and take the stairs up to their office instead of the lift.

But if they don’t love the diet they’re trying, if they feel like they’re missing something, it’s just not gonna work.

Whatever they’re craving for, they’ll have it without even noticing. Someone brought cakes into the office, “well it’s only one what harm can it do, besides I deserve it!” Or popping into a Starbucks, they’ll have that frap that has 20 spoons of sugar in, and before you know it they’ve made up all the calories and fat and sugar they were saving with all those healthy meals.

It’s really the same with budgeting. It’s not enough to be conscious or committed, you have to enjoy what you’re doing. Believe it or not, some people do enjoy the act of saving by thinking about what they’ll be able to do with the money they’ve saved.

However, this isn’t how we’re wired. I can only guess it’s a survival mechanism from when humans lived a subsistence existence and whatever food they got their hands on – they ate right away.

It’s called time preference, and most of us have a high time preference, which means we prefer to have something now rather than later. People who enjoy budgeting and saving have a low time preference, meaning they prefer having more of something later rather than less of it now.

The problem is most of your financial advisers will have a low time preference, while most of their clients will have a high time preference. And trying to get people with high time preference to budget and save is setting them up for failure if they don’t actually enjoy it.

That’s why, if you want to focus on reducing expenses rather than increasing income, you should really restrict yourself to those expenses that don’t really impact your quality of life – get the best phone/ tv/ broadband/ electricity/ insurance deals, don’t pay with credit card for anything you don’t have to and work with your bank to clear down that debt, etc.

And, of course, you can work to increase your income. If you’re under 50, you probably need to think about doing that anyway.

Hope that helps.

Jon