RP – Robin Powell, Financial Journalist
JB – Jason Butler, Financial Author
RP: One of the most common excuses for not investing more money on a regular basis is that we can’t afford to. We simply don’t have enough spare money. It’s not just those on modest means who say it. We’re all prone to spend more than we should.
Financial author and speaker Jason Butler says, in his experience, it’s our everyday spending habits that are chiefly to blame.
JB: All those small things add up to effect them.
So: three coffees a day on contactless, two socialising events as opposed to one with some friends who’ve got more money than you and staying a bit later. Buying a mobile phone on a contract for £75.00 a month when you’re not even buying it – essentially you’re borrowing to have that, when you could probably buy a six month-old one secondhand for a couple of hundred pounds and a £10 a month SIM-only contract.
It’s these choices that people make and the habits they develop on a daily basis that all combine together, that actually stops them being able to save.
RP: A good discipline is to commit to investing more whenever our income increases. In practice though, it’s all too easy to justify spending that extra money on something else.
JB: People tend to spend more when they get pay rises, or if they get a bonus, or if they get an inheritance… they seem to sort of think “they’re worth it”, they give themselves a story. So what I find is that people develop stories based on emotion, and then use logic to justify their spending. Or they’re in complete and utter denial about where the money goes.
So developing strong, healthy, and effective money habits – and not denying yourself some fun (spending on fun without the guilt, as I call it) – that is the key.
So, whether it’s the daily spending, whether it’s your utility bills spending, whether it’s the cost of your housing: they’re all areas that are ripe for reducing spending or being smart about spending.
RP: So, what if you ARE being smart about your spending, and still want to invest more money? Your only option then, says Jason Butler, is to look at your income.
JB: People often don’t look at their job and say to themselves, “can I afford this job?” Because the other equation of spending, assuming you’ve got that under control or you can’t reduce it, is the earning! And a lot of people haven’t actually thought to themselves, what job can I afford?
In other words: what is my desired lifestyle, including making provision for my future self, and what is the right job for that?
Forget whether you’ve got the ability, skill, or capability to do get that job, work out what you need after tax to live a full life! And it’s not a massive amount but, once you’ve worked that figure out, you can then say “OK, if this job isn’t producing that income for me – can I do a side hustle?
- Is there another way of earning additional income?
- Could I let out a room in my house?
- Could I upskill myself in my current role – I might like where I work, but do I need to go on a course, do I need to get some more experience, do I need to work a bit later and do extra projects?
- Or do I need to actually move job and go somewhere else?”
RP: Putting enough money away regularly is essential if you want to be comfortable in retirement. Whatever it is that’s stopping you doing that, you need to address it without delay.