Using money to make an impression

It's pretty normal to consider how other people will respond to our choices. We are social creatures and making a good impression is useful in many situations. There are times when it's very valuable to stand out in a crowd or fit in with a group. It can influence others to pay attention to us or support us when they might not otherwise do so. Money, especially our spending choices, can be a part of that.

Sometimes using money in this way can become overly important to us. This can even happen to people who wouldn’t normally think of themselves as “people pleasers”. When the good opinion of others is the main driver for our decisions, especially those involving money, we can end up living inauthentically or using money in ways that doesn't support our long term goals.

The most obvious example of this is when a person goes into debt buying expensive designer or luxury items to signal to others a wealth they don't actually possess. Overspending on gifts in order to appear generous or on socialising at trendy bars and clubs in order to seem like part of a fashionable in-crowd are other variations of this.

There are also more subtle ways this tendency can show up. For example, it can appear in reverse. Imagine someone whose social circle disapproves of, or is suspicious of, people with wealth and power. A member of this group might feel compelled to deny themselves anything that might be seen as a status symbol, even if they would enjoy it or it would make their life better or easier. Or they might not to make any overt moves to improve their career and earn more or manage their finances effectively, leaving them worse off and possibly stuck in unfulfilling work.

The interesting thing about this tendency is that it can occur even when there’s no active pressure from the people we’re trying to impress. The compulsion towards certain choices can come entirely from within. We form beliefs about what others want from us and anticipate getting a negative reaction if we don’t meet their expectations. The trouble is that all of this is a story we’re telling ourselves. It may or may not be true. Sometimes the people we are trying to please couldn’t care less what we do or may want something different from us than we’ve imagined. It’s worth looking for evidence of people’s true expectations and opinions. Sometimes it’s simplest just to ask!

And if a person or group really does expect you to make financial choices that don’t align with your values or goals, it’s worth considering whether it’s really worth going along with their wishes. Are you really getting what you want from this person or group’s approval?

Getting a balance between using money in ways that support your relationships and also your individual life goals is key to financial wellbeing.

If you are facing a dilemma around money in relationships, coaching can help.

Cutting recurring expenses - a handy checklist

Recurring expenses are often the hidden drain on our finances. It’s easy to remember that we ordered a takeaway when we could have cooked or bought a shirt that, on reflection, isn’t a flattering colour in natural light. It’s easy to let our insurance renew without shopping around or stay on a broadband contract that stopped being a good deal months ago. Automated payments are great, but the convenience sometimes costs.

I’ve put together this handy checklist to help you identify where you might be wasting money on recurring expenses. Of course, it’s prompted by the ongoing cost of living issue many of us are facing, but I hope it will remain useful into the future.

I have created a printable version that you can download and use to track your progress.

Check your spending on these categories of recurring payments. Are there ways that you can reduce your costs and/or increase the value for money you receive?

If you are in the UK, use the following resources to research your options and answer the questions below. (Unfortunately, I am unable to provide reliable international resources.)

Money Saving Expert

Money Helper

Which?

This checklist has been designed to be as broadly applicable and timeless as possible. If some item are not useful at present or to you personally, ignore them.

Utilities

Ask yourself:

• Have I signed a fixed term contract with penalties for ending it early, or could I switch without a cost?

• If I could switch without a cost, am I on the best available tariff? Could I find a new deal? If you take up a deal remember to put a reminder in your calendar shortly before it ends to prompt you to shop around again.

• If I am mid-contract, would the cost saving from switching be high enough to make it worth paying to end the contract early?

• If not, when does the contract end? Put a reminder in your calendar shortly before this date to be ready to find a new deal.

Expense

• Gas

• Electricity

• Other fuel

• Mobile (cell) phone

• Landline phone

• Broadband

Credit repayments

It is usually advisable to avoid borrowing money where possible except in certain cases such as mortgages. Even then, it is usually wise to borrow as little as possible, keep interest rates low and repay quickly. Minimising the interest you pay on credit can save thousands over time.

If you have both savings and debt, you will almost always be paying more interest for the debt than you are receiving for the savings. The exception is mortgage debt and most UK student loans. This means it’s often wise to use at least some of your savings to repay outstanding credit as long as there’s no early repayment charge.

Remember that if you are shopping around for credit, it pays to use an “eligibility calculator” that does a “soft search” on your credit reference file and does not affect your credit rating. Don’t make speculative applications to see what you will get, as these can negatively affect your credit score.

If you have a fixed rate or low cost variable rate mortgage deal that is going to end in the next six to 12 months, speak to an independent specialist mortgage adviser sooner rather than later to get advice on securing the best possible replacement deal.

Ask yourself:

• Is there a zero-interest deal available? Would there be a cost to transfer a balance to this?

• Will I have to pay an early repayment charge, or could I switch without a penalty?

• If not, am I on the best available deal? Could I find a new deal and what would be the costs to switch? If you take up a deal remember to put a reminder in your calendar before it ends to prompt you to shop around again.

• If an early repayment charge would apply, would the cost saving from switching now be high enough to make it worth paying?

• If not, when does the charge no longer apply? Put a reminder in your calendar before this date to be ready to find a new deal.

Type of credit

• Mortgage

• Credit cards 

• Secured loan(s)

• Unsecured personal loan(s)

• Car loans or hire purchase agreements

• Store cards

• Other kinds of in-store credit

• Overdraft (enter amount of interest paid monthly instead of repayment amount)

• Any other credit arrangements

A note about buy-now-pay-later schemes:

Although these are convenient and charge 0% interest as long as all payments are made on time, some mortgage lenders see them as a sign of poor budgeting. Leaving aside whether this is fair, if you are likely to be applying for a mortgage or re-mortgaging in the next six months, it is a good idea to avoid buy-now-pay-later.

General Insurance

Ask yourself:

• Do I have the right amount of cover? It’s important to avoid either under-insuring and leaving yourself at risk or over-insuring and spending money on cover that you will almost certainly never need.

• When does my insurance renew? Put a reminder in your calendar to shop around six weeks ahead of the renewal date.

• Could I save money by changing how I insure my goods, for example, by insuring gadgets through my home contents policy or adding a second named driver on a car insurance policy?

Type of insurance

• Home contents insurance

• Buildings insurance

• Vehicle insurance(s)

• Breakdown cover

• Travel insurance

• Pet insurance

• Mobile device insurance(s)

A note about appliance insurance/extended warranties:

Usually these are expensive and poor value for money. If a salesperson is being pushy about these, ask if they are saying that their products are poorly made, unreliable and likely to break down.

If you decide to replace a policy, never cancel the existing insurance until your new policy is live.

Life and health insurance

Making the right choices about protecting your income in case of serious illness or injury and protecting those you love in case you die is a topic that is too complex for this checklist. Please consider speaking to a specialist independent protection adviser about your needs.

If you review your protection insurance cover, or you are considering buying private medical insurance, check what your employer provides. Many employers provide at least some of these types of insurance, often at discounted group rates. However, be aware that if you have to leave your job, for example, because of long term illness or disability, your cover may end.

If you decide to replace any of your existing cover, check your new terms and conditions very carefully to make sure that your new cover is at least as good as your old. For example, if your health has changed, it may be that a new policy won’t pay out for a condition that was covered under your old policy. 

If you decide to replace a policy, never cancel the existing insurance until your new policy is live.

Subscriptions

Ask yourself:

• Am I using this product or service enough to justify this subscription?

• Do I need this tier subscription or would a lower priced tier meet my needs?

• Would a pay-as-you-go option be more flexible and affordable?

• Have I signed a fixed term contract with penalties for ending it early or changing pricing tiers? 

• If not, am I with the best value provider and on the most suitable pricing tier? Could I find a new deal? If you take up a special deal, remember to put a reminder in your calendar shortly before it ends to prompt you to shop around again.

• If I am mid-contract, would the cost saving from switching or ending the contract be high enough to make it worth paying to end the contract early?

• If not, when does the contract end? Put a reminder in your calendar shortly before this date to be ready to find a new deal.

Type of subscription

• Gym, fitness and wellbeing memberships

• Meal-kits, beverages, snacks, supplements etc

• Additional TV channels (cable/satellite/streaming)

• Music and audio streaming

• Household goods (paper products, cleaning items etc)

• Clubs, societies and leisure memberships

• Other physical products (e.g. contact lenses, razors, cosmetics, children’s items, pet items, flowers, clothing, hobby/craft supplies etc.)

• Magazines and newsletters

• Premium bank accounts

• Software, web-based services and in-app purchases on mobile devices (e.g. games, downloads, social media and communities, dating, educational, productivity, wellbeing apps etc)

• Any others?

Others

You may also choose to review how much you are giving to any charities or religious organisations, or to creators through services like Patreon.

Map your money year

Planning our weekly and monthly spending is how we find the money to repay debts and begin to save and invest. When I’ve talked about this with people in the past, they tell me that they can start to save but “something always comes up”.

Ah yes, the something-always-comes-up effect, or as it’s otherwise known, the occasional spending issue.

If your spending plan only covers the day-to-day expenses that occur every month, then it will seem like “something always comes up” because many months have additional expenses that only occur once a year. If you don’t plan for these, they will always derail you.

So how can you get on top of your occasional spending? Well, occasional expenses can be categorised as fun vs boring types and predictable vs random types.

We’ll start with the predictable expenses because these are where the map of the year comes in. Get a calendar and write in each month any big expenses and also any times when your income changes. For example, if your employer pays a bonus (and you can be very confident you will be getting this bonus) when would that come? Is there seasonal variation in your hours, commission or profits? Mark that in.

This is your money map of the year. It could look something like this*:

Using the map will help you to see if there are particular crunch points in your year when several expenses come at once. You can then work out if any of these could be paid early or delayed to smooth out your costs. It can also help you to be clear during the “good” months how much you need to save for upcoming costs and how much is actually available for a bit of fun.

The random expenses are a bit trickier. You need to think about roughly what you expect them to cost and how often you expect them to happen e.g. if you’re in your mid-late twenties you can expect quite a few of your friends to be getting married and having babies, so it’s a good idea to put a small amount of money aside each month, so you can really enjoy these celebrations when they happen without worrying how much you’re spending.

If you’re a homeowner, you can probably expect one significant repair or replacement every year, so consider how much you’d expect to spend on a new appliance, item or furniture or repair call-out and divide by 12.

Mapping your money year and having a pot of savings (or two) for random costs, brings a strong sense of control and peace of mind. There’s nothing like knowing you’re not going to have to borrow for Christmas and you won’t be caught short by a blocked pipe or a bricked phone.

What is on your map? Can you take a photo and send it to me on Twitter @marthalawton?

*This is not my actual map of the year, it’s loosely based on UK averages.

Considering cost per joy

I spent my childhood in the countryside and my parents are keen gardeners. So when I was growing up there were always flowers around and flowers didn’t cost money. Occasionally, a guest would bring my mother a bouquet and she would treat this like a huge indulgence. I have memories too of her tutting at the price of cut flowers. She obviously thought is was wasteful to spend on something that was going to die in a few short days.

As an adult I carried this inherited attitude for years. As a reaction to my extremely frugal childhood, I sometimes overspent on clothes and shoes, cocktails and meals out, club entries and gig tickets and, of course, the much reviled “fancy coffees”. I didn’t buy myself flowers.

Sometimes a romantic partner would buy me flowers and I would be overwhelmed and almost resistant. It seemed an extraordinary act. Over time this feeling lessened but it never disappeared. If someone else wanted to throw silly money at flowers for me then that was their choice. To buy my own would be ridiculous. I was someone who would unthinkingly spend £35 on a forgettable lunch, but wouldn’t pay £10 for a bouquet that would make me smile for a week.

I remember the moment I realised how foolish this was. My then boyfriend, now husband, and I had braved drizzly weather and gone to Columbia Road Flower Market for a Sunday afternoon out*. I had chosen an array of blooms and foliage; some scented, some merely elegantly shaped. I was clutching them against my chest, almost up to my face, as a I walked to the train home. My mind was on which vase would suit them best for arranging.

I love London, but grey streets under grey skies can bring you down. Having this armful of living colour with me brought me so much joy. As a noticed my joy, I had a flash of insight. The flowers had cost the same amount as the tea and cake for two we had bought in a chichi independent café at one end of the market. I hadn’t thought twice about the refreshments. I was revelling in my flowers.

That was a defining moment in how I think about my non-essential spending. It stopped just being about whether something was cheap or expensive within its category of expenses (food, event tickets, clothing and accessories etc). I started to compare across categories and to think about how much joy each purchase would bring me for the price. This changed my appreciation of value and means I spend more wisely and get more from my purchases of all kinds.

I’m still more likely to buy coffee than flowers, because catching up with a friend is joyful too. (More than ever after months of lockdown.) However, I no longer rule out a whole type of spending without considering it first, and I suggest you don’t either.

Did this blog post make you think? You will probably enjoy the episode of my podcast, Squanderlust, where we talked about ‘mental accounting’ and the weird tricks our minds play on us about prices. Listen here.

*For those not in the know, Columbia Road stall-holders discount their plants and flowers after about 1pm, so they can pack up and leave with minimal waste.

Money isn't food - do you treat your pay like it has an expiry date?

I have a long-held theory that, on some level, many of us secretly treat money like it’s food. We don’t do it on purpose, but our poor old monkey brains struggle with the concept that we keep a stock of otherwise useless tokens in order to trade them for the things we need later. Why would anyone give you a thing you want in exchange for a useless token? Make money even more abstract (just a number on a screen) and the monkey mind gets completely fuddled. Why are we keeping the numbers high? What use are they? They are only useful when they get us stuff. Stuff is real. Numbers on a screen are not real.

I think for some (read many) people our subconscious minds try to make sense of money by deciding it’s just another type of food that we ‘eat’ by spending it.

It’s well-documented that people whose eating is disordered also often have money issues. This is not only because some eating disorders are expensive, but because the same attitudes of perfectionism, self-denial and shame and around pleasure and self-care that drives much disordered eating, also affects our feelings about money.

So, if we unknowingly, secretly believe money is food and we get the value of it (eat it) by spending it, of course we don’t want to save it. If you save food for too long it goes off. I think some of us deep in some part of our brains believe money will too! This goes double if we’ve never saved successfully before. Until you have saved successfully you have no evidence that money can be stored and not decay.

Of course, the rising cost of living does, to some extent, reduce the value of money saved over time. To make sure money keeps pace with inflation and ideally outgrows it, that money must be put to work, i.e. invested. Here I think we can come to an analogy that might be ancient enough to allow our under-evolved brains to grasp it.

Money isn’t food, or at least it isn’t just food, money is seeds. If you can convince yourself that money is grain you can start to get a feel for what you need to do.

When you get your grain harvest (pay cheque) you don’t grind and eat too much of it, because you need what you can get for future crops. You plant it (invest) in the best locations you find, but maybe not all in the same field in case something goes wrong in that one field and you lose all your crop (diversify). You also hold a bit back in case the crop fails and you need to sow again or in case you miscalculated and your food stores run low (save).

Seeing yourself as a money farmer, instead of a consumer, makes it easier to remember what you have to do to shift away from living pay cheque to pay cheque, and start saving and investing for your future.

Now go out and tend your crops!

Does this post sound like you? Or someone you know? Share it and tag me in @marthalawton on Twitter or @squanderlustpod on Twitter, Facebook or Instagram.

The first time talked about this idea was on the Seize The Moment podcast and you can watch the whole show here or jump to 3:25 where I talk about treating money like food.

Need the willpower to stop overspending? Cut out scratchy clothes labels

Have you ever got up in the morning with the best frugal intentions, then by night time you find yourself looking at an order confirmation email wondering how you ended up browsing for window boxes or signature scents in the first place?

You have just been caught out by ego depletion and you are not alone. Ego depletion is the term for the way your willpower gets drained through the day by the effort it takes to meet the challenges we face. Every time we face a challenge or temptation we have to decide whether to take the option with the best long term outcome or the one with immediate rewards and these are often not the same option. research ahs indicated that willpower is like a muscle and as you use it through the day, it gets tired.

Basically, you can only be patient, tolerant and self-denying for so long before you run out of willpower and do something that feels good in the moment and damn the consequences. That might be snapping at a co-worker, eating a grab bag of Hula Hoops or treating yourself to some fancy new underpants from that store that always emails you.

Let’s face it life sucks sometimes and growing more willpower just because we want to isn’t really an option, so how can we make the best use of the willpower we have?

Get rid of minor irritants

Wherever possible:

• Cut out scratchy labels and donate or sell stiff, itchy or tight clothing and shoes that pinch;

• Learn about your devices’ settings so you can customise them for your personal preferences;

• If there are tools or pieces of equipment you use often, make sure it’s the best quality you can afford, so you’re not frustrated by bad design or shoddy construction;

• Ask colleagues, family members, friends and neighbours to change habits they may have that annoy you, it’s possible to have these conversations tactfully and still ask clearly for what you want;

• Consider noise-cancelling headphones for times when you need to focus;

• Keep your environment at a comfortable temperature, clean, pleasant smelling and uncluttered.

Generally pay attention to low-level irritants that drain your willpower without you even really noticing. The more of these you’re putting up with, the less willpower you have for making positive choices when faced with temptations.

Look after your health

Physical and mental discomfort from poor health is something that drains willpower

• Do what you can to get enough sleep;

• Eat well so you’re not hungry, sugar-crashing or suffering from indigestion.;

• Move your body and stretch often, so you don’t end up stiff and cramped;

• Ensure your work environment is as well-designed and ergonomic as possible, so you’re not straining to complete tasks;

• Don’t overdo the screen time and stay away from social media drama;

• Find ways to relax, ideally somewhere quiet in nature, and take a few deep breaths.

Treat yourself (in moderation)

Pre-emptively doing small, nice things for yourself will help you to replenish your willpower and avoid the need to vent, binge or splurge. This is why no spending plan should completely exclude treats. You know what treats look like for you, make sure you have a supply to keep you going, so you don’t feel deprived.

Celebrate your wins (including times when you successfully exercise willpower). Giving yourself a pat on the back is an immediate reward and takes the edge off the pain of delaying gratification.

Finally, forgive yourself. If you are fighting the willpower war on too many fronts and lose a particular battle, don’t get too down. Instead think whether you’d be better served easing up on one or two areas and focusing your efforts elsewhere. Nobody’s perfect and a constant feeling of failure is a drag on willpower too. If your focus is your finances, just keep everything else ticking over for now. Once you’ have your money in better shape, you can choose a new goal elsewhere.

If you want to hear more about ego depletion and the science behind it, listen to this episode of my podcast Squanderlust: Episode 3. Willpower Outage.

Understanding the poppadom effect

Who loves poppadoms? I know I do. Crunchy savoury appetisers are my favourites.

You know who else loves poppadums? (Or olives or prawn crackers or bread baskets or whatever…)

Restaurants. You know why?

Because they cost almost nothing compared to the sale price and almost everyone orders them, even customers who intended not to.

In fact, we quite often order little extras we hadn’t meant to buy. Going to the till with a new sweater we see some earrings that would go with it and think we might as well have them. We get a screen protector to go with our new phone. We buy the upgrade, the insurance, the add-on.

Why?

The poppadum effect.

Once you’re already paying for a whole meal, the cost of poppadoms seems trivial in comparison, so why not? The poppadum effect is a type of mental accounting; a way our brains trick us into making unwise decisions by using a cognitive shortcut that doesn’t take us where we really need it to go.

Once you’re committed to purchasing a new tablet (say), adding the cost of a case seems negligible. Shops know this and they play on it. Salespeople are trained to offer the extras after you’ve decided to buy and there are always tempting small items at the till.

The truth is these little extras are often the poorest value for money in the store and if we were thinking clearly, we wouldn’t have bought them at all, but in the moment of purchase we’ve already overcome the resistance to spending and the part of us that always wants more can take its chance and add to basket.

Being aware that this is a common phenomenon can help you make better decisions. I, for example, will always want poppadums, but only one, thank you.

Take a minute when a shop offers you an extra or an add-on and remember you almost certainly don’t need to make a decision about it straight away. Say you’ll think it over, because nine times out of ten you can come back for it. You might even get a discount.

I did a podcast episode on our weird irrational responses to prices. You can listen here.