Think Before You Spend

The concept of saving and investing can be mind boggling to some. The idea of not spending every penny earnt can be foreign. They have the concept of instant gratification ingrained within them. They have this urge for all their desires to be fulfilled today. These people need a new outlook if they are to turn their financial lives around and start saving. Psychology can help play a part in this.


One psychological way to stop yourself spending is to think how much £1 now will be worth to your future self.


For someone that has just entered the workforce, you have probably got 40 years before you retire. That is a long time to make your money slave away and work hard for you. Going by the historical returns of the stock market in real terms, that is after the effects of inflation, every £1 you save and invest today will be worth £7 in 40 years time.


Yes you read that right, for every pound you sock away today, you can have the equivalent of seven pounds 40 years from now.


That coffee on your way to work is robbing your future self of a week’s worth of coffee when you’re retired.


That sandwich you buy at lunch is robbing your future self of a week’s worth of lunch later on in life.


If you think that everything you buy today is costing your future self 7 times that, then you may not stop spending all together but you may stop and think before you do spend.


Everything you buy today has an opportunity cost. In most cases, the opportunity cost is having more in the future. This is why it is imperative to practice delayed gratification. By doing so, you are transferring wealth from your current self to your future self. You are putting the future you in a better financial position. Imagine if you started saving 10 years ago, how grateful would you be to your past self? Likewise, by starting to seriously consider saving and investing today, your future self will be extremely delighted.