According to behavioural science, that initial motivation and willpower won’t always be enough when it comes to sticking to spending goals as our willpower and attention has its limits, particularly in such a fun and tempting festive environment.
To boost your chances of sticking to these goals it is important to design the right supportive environment and money systems. This might mean:
- Creating small spending speed bumps, like separating our money into separate accounts, setting limits on our cards, or even taking cash on some shopping trips.
- Set up regular feedback on your spending so that you have a constant, immediate and accurate view of how your shopping behaviours are either on or off track.
- Automate good behaviours ahead of time, rather than trying to remember all aspects of your financial goals and constantly avoid festive temptations, like sending part of your pay cheque to a hidden or locked savings account.
Remember the trade-off
When we take on a new expense, we often forget to tell ourselves: ‘by buying this, it means I won’t be able to buy that’. Economists call this Opportunity Cost Neglect, and it means we spend more in the moment, leaving us less for other future expenses.
To manage this, try setting your sights on some financial goals that you would really like to achieve in January or February. This could be anything from a family trip through to easily covering the utility bills. Then before each purchase, take a moment to consider the trade-offs between those goals, and that purchase.
For further control, consider naming your accounts with future goals (e.g. bills, shopping, holiday), or creating passwords which reference those goals to ensure the trade-offs are front of mind as you spend.
The social dilemma
Rather than just weighing the costs and benefits when shopping, our spending can be influenced quite a lot by the social context around us. For instance, our spending can be influenced by people we follow on social media, the buzz of the shopping mall, or even spending time with friends that have expensive shopping habits.
Consider ways that your social environment may be encouraging higher spending, and any changes that might support your holiday spending goals. This may mean unsubscribing from the newsletter of your favourite brand, or avoiding some festive events which surround you with a high spending context.
Avoid the noise and shop early
When we’re tired, stressed, and short on time we tend to make impulsive decisions and fall back on bad shopping habits that we regret later on. So if you’re prone to leaving your Christmas shopping to the last minute, consider getting to the shopping centre early, or making your purchases at a time when you have space, energy and more chance of thinking slowly and carefully. In a quieter setting without the excitement of the holiday smells, noises and last minute sales, we’re more likely to make cool and sensible long-term choices about how much we want to spend this holiday season.
Make a list
Behavioural studies show that we often:
- Under predict how much exceptional costs (like Christmas gifts) will actually cost us as we plan ahead;
- Overestimate our ability to manage financial surprises; and
- Make better decisions when we consider purchases together, rather than one by one.
Consider setting a Christmas budget that you will be happy with. Then, make a list of your spending for the month ahead that fits comfortably within this amount. When making the list, carefully consider why December’s expenses will be very different from November, and factor in any potential surprises.
Commit to this list and even set up controls such as limits on your cards and accounts to avoid going over this amount.
At the end of the day, if you want to ensure your Christmas spending stays on track this festive season it’s important to have more than good savings intentions. Take note of how the excitement of the holiday season can influence your behaviours, and set up good behavioural controls, environments and support tools at home and with your bank to avoid any financial blowouts in the New Year.