Do you ever have those moments when you check your bank statement at the end of the month and your balance is far lower than you expected? But when you try and find what you spent your money on there’s no big purchase or unexpected expense, there’s just lots of small payments which surely can’t add up to that much… This is your invisible spending. It’s payments that you make without realising you’ve even made them until you check your bank account balance.
It can be hard managing your money sometimes, especially if you are recovering from an unexpected income shock or you’ve just moved out and you’re getting used to paying a large chunk of your earnings towards rent each month – whatever it is, there is bound to be some money to save by cutting down on your invisible spending.
The first step in working out how to reduce your invisible spending is to start tracking your payments and purchases to see how much you’re spending and where you’re spending the most. You can do this easily with mobile apps that link to your bank account, or by joining a bank which offers the service as part of your normal current account.
The app or bank account will record your payments each month and organise them into categories such as bills/services, shopping, eating out etc. It will really clearly show you how much money you spend in each category and it might highlight some key areas for saving.
Of course, you can do this manually as well. It may take slightly longer but all you need is a pen and note pad. Jot down each purchase and how much it costs – and maybe even the date so you can see when you tend to spend the most. You don’t need to write down each item in your grocery shop, just maybe ‘food shop’ and £44.67, for example. You should try and do it every day to keep a good record of each payment as waiting until the end of the week will probably cause you to miss most of the invisible expenditure as you’ll probably have forgotten about it by then.
You might be surprised by how much you spend on coffees throughout the week, or additional food bought at lunch even though you brought your lunch in from home. These are the kind of payments you want to reduce if you’re trying to cut down on your invisible spending – payments which you think of as a ‘one-off’ or ‘as a treat’ are probably your biggest downfall.
There are ways to save quickly, but it’s a good idea to start implementing long term saving habits so eventually it becomes second nature. While you don’t have to stick to a strict budget with no wiggle room for a coffee with friends, or a fancy cake on your birthday, cutting down on day to day purchases will help you save some extra cash for when you need it most.
A great way to start is budgeting in cash. If you find spending money on a debit card too easy because it doesn’t really feel like you’re spending anything, then try withdrawing a set amount of cash at the start of the week and see how it fares over the next few days. Because you will visually see the money going down and you have to physically hand over the cash, it can be a really good way of getting a good grip on your small daily purchases. While it’s not always convenient to carry cash around all the time, after a couple of weeks you should have an idea of where you can be saving money and you can start to think twice before making the same payments on a debit card.
Plus, if you have any cash left over at the end of the week, why not put it in a piggy bank and save it up for a later date, whether it’s a treat for a loved one or an emergency cash fund, having a little extra money saved will always be beneficial.
Alternatively, if you don’t fancy handling cash, then having a separate bank account for daily expenditure might be a better way forward. While the bulk of your income should stay in an account where your bills and priority expenditure is debited, there’s no harm in opening a new account (either with the same current account provider or an alternative bank) which you can transfer maybe £15 or £25 a week into, for miscellaneous payments. This will be beneficial if you have mobile banking so that you can easily and quickly see your current balance because you don’t want to accidentally enter an overdraft. You can always transfer a few extra pounds across but hopefully the extra effort in doing this will help you consider whether the transaction is necessary or not.
New behaviours take time to build, especially when it comes to managing your finances, but putting a little extra effort into your money management every day will soon help you build up infallible habits that make saving money a piece of cake – even if it means forgoing cake from time to time! With every pound you save, you are better protecting yourself against future financial difficulty. While it would be nice to save towards a holiday or an expensive birthday treat, having an emergency cash fund for life’s little dramas will never go amiss. Get this sorted first, and once your saving habits are established, you’ll have no issue saving for all those luxury treats we all crave from time to time – and all from cutting down on your invisible spending!
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