How can I intentionally save and spend?

Not having enough money is a fear held by most people – for the now and for the future
To help alleviate this fear I have described how to save for a goal intentionally and spend mindfully to give you the most happiness in life & help you achieve this goal.

Intentional saving and spending is a combination of psychology and finance, or “behavioural finance”. It’s really complex & hard and if you do not save or budget, you are not alone.

Intentional saving – Shlomo Benartzi, American behavioural economist states that “when it comes to saving – self control is not a problem in the future, but a problem now. We know we should be saving, we will do it next year, but
today, let’s spend”. This immediate gratification causes us to think about saving but end up spending.

Intentional spending – Behavioural Economist Dan Ariely has spent most of his career understanding why and how we make decisions – and he has recently focused on those everyday financial decisions we make. He says that
money is all about opportunity and opportunity costs. “Every time you buy a cup of coffee, you should be thinking ‘what can i do better with four dollars?’’”. He also says “saving is hard, spending is easy”.
So if the smartest scientists out there have told us that it’s really hard to be intentional with our money, both for saving & spending, what are some really easy steps we can take to help us alleviate the fear of having enough money and some easy tools to help us?

Easy steps to start intentionally saving and intentionally spending

1. Determine “what is your goal?”

Whether your goal is to save for a holiday, a new car, pay for your children’s private school fees every year, save a house deposit or have enough in retirement – all goals big and small are a really critical first step.
So step one is to determine your goal(s) and how much you will need – over what time frame. Through a few calculations, we can work out how much you need to save each week or month to achieve this goal. Make note of this.

2. Understand where you spend your money today & reflect.

This is a really hard one to do…but worthwhile. In taking Dan Ariely’s view on spending = opportunity cost, it’s really important to understand where you spend your money today.

3. Work out if you can realistically achieve your goal – and readjust your spending without too much sacrificing

Based on what you need to save – and what you are spending, can you realistically achieve your goal?
Reflect on the opportunity costs of your choices for where you spend your money, are there any areas you could spend less? What can you live without?
You could actually spend less just by looking at your big ticket expenses and making a phone call to their provider. For example, call up your gas/electricity provider and ask if they can give you a better deal, the same for your health insurance and so on.

4. Unintentionally save intentionally

There are many ways you can do this, but the best ways are those systems that are set and forget – until you need to access the funds! What my husband and I have done for all our savings goals is to create “saving folders”. We currently have one for each of our children, and have had ones for “holiday”, “school” and other goals. These folders are savings accounts we have set up with the bank, that earn interest (I will post separately on the differences between all savings accounts out there and how good accumulative interest is) and we divert a certain amount of our income towards these savings accounts on a weekly basis. It’s amazing how quickly the weekly contributions add up.

To do this, just call up your bank and ask to set up a savings account(s) (remember to name this account with your goal), with an ongoing debit from your chosen account of your chosen amount. Alternatively you can apply for these accounts online.

For those that want to try save through a little investing, there are apps or websites available which invest your money on your behalf depending on your risk appetite. Some, for example Raiz (previously known as Acorns), or
First Step connect to your credit card and round-up your purchases to e.g. the nearest dollar, and the loose change is invested. Or Betterment, which is an easy to use robo-advisor (as name suggests, an adviser that is a robot that
invests your money (no minimum deposit) based on risk tolerance and goals. My words of caution would be that the returns on your savings are less guaranteed (compared with a savings account) and a relatively high management
fee is typically charged. The upside – interest rates are so low at the moment other options may be useful. I can’t give you any advice though – you need to consider what is right for your situation.

5. Check in & repeat

It’s important to check in on your intentional savings and spending on a fairly regular basis. Dan Ariely recommends once a month to create a habit of it. Ultimately, this is about creating positive money habits and being more conscious about the opportunity costs when it comes to spending and ensuring you are intentionally saving to help you achieve your goals.

So remember:

1. Intentional saving & spending is hard.
2. It is important to know what your goals are and how much you need to set aside per week/month to achieve your goals.
3. Spending is about opportunity costs, so make sure you are making the most from your spending decisions.
4. Set up systems to help you save to achieve your goals.
5. Don’t just do this as a once off, repeat until it becomes a habit.