She's On The Money - The psychology of saving

Episode Date: July 16, 2019

IT'S TIME TO MAKE BANK, LADIES. We have some advice, but we also have some tough love. It's time to talk about the psychology of saving - how to set achievable goals, and how to overcome that feeling of learned helplessness that often seizes women when it comes to money. Oh, and what about saving when you're a full-time student who's earning $19,000 a year? We tackle that in this week's money diary. We've got a Facebook group you can find here where you can share your missteps and success stories. We've got an Instagram page that'll keep you motivated. And we've got a newsletter that'll get you across what you need to know. Want to call the hotline and have your money dilemma featured on the show? Call us on 0435 293 886 and leave your voice message! The advice shared on She's on The Money is general in nature and does not consider your individual circumstances. She's on The Money exists purely for educational purposes only and should not be relied upon to make an investment or financial decision. Victoria Devine is an Authorised Representative of Consultum Financial Advisers Proprietary Limited ABN 65 006 373 995 | AFSL 230323.See omnystudio.com/listener for privacy information.

She's on the money. She's on the money. Hello and welcome to She's on the Money, the podcast for millennials who want financial freedom. My name is Annabelle Lee. As you guys might know by now, I'm a law student and I'm a millennial and all I want to do is expand my knowledge of money. To do that, each week I pick the brains of my friend, money expert Victoria Devine.

Hi Victoria. Good morning. So what we're going to do this week, and I think from here on out, is share anecdotes from people in the Facebook group who are making great money decisions in the last week. I've got one from Zara, not McDonald, who said, I just closed down Afterpay and deleted the Uber Eats app off my phone. I feel like a new woman. I think that's a really big one.

That is bold, deleting Uber Eats. Uber Eats is massive like I get after pay like go for it eat your heart out but I'm eating my heart out on Uber Eats so no I commend that making bold decisions sorry I have one from Alicia and she said I woke up this morning thinking how badly I didn't want to be in debt anymore so I wrung every debt that I owed and I paid them all off because of listening to you guys really inspired me and encouraged me I feel like a new woman how good is that both Zara and Alicia feel like new women absolutely killing it go girls victoria today we're talking all things saving yep the psychology of saving it sounds so basic and so simple but it's something tons of millennial

women are struggling to get a handle on so we're going to strip it back and start building those bank accounts but before we really dive in let's share a money win or a money confession from the week as we always do would you like to go first why do i always have to go first okay so i have a money confession this week to share with you all. So this weekend it was really rainy and it was quite cold and we were going to go out but I decided I didn't want to do that and so I sat at home and I thought oh what should I do I should clean my house that that makes sense. So responsible right except for the fact that I got to the part of cleaning my house where I was tidying up my pantry and I decided that I needed all new pantry containers so I went out and purchased all new

pantry containers and redid my pantry over the weekend and I'll have you know it looks beautiful it's got to be aesthetic but that is expensive I did not realize how much containers could add up to did you like label all the containers as well yes I absolutely did we need a photo we need a photo I'll put it on my story for today I've got a money win this week I actually started seeing a psychologist last Monday the first session was last Monday for no particular reason I just thought It's important. Psychologists are important. But I thought I'd left it so late because I thought you had to pay for psychologists. Turns out I can get 10 free sessions. What's it called? It's called the mental health care plan. That's it. Yeah. It's actually really, really cool. Yeah. And I think it

gives you a really good base. So each year, 10 sessions that you can use to keep on track. So I started doing that. Yeah. Very useful. Good work. Thank you so much. Moving track a little bit. let's talk about something that keeps rearing its head in the Facebook group, savings. First of all, do you have to be on a cushy salary to be able to save money? So I think that this is a really big misconception that you need to be earning a lot to be saving at all. And I think a lot of people say, well, when I earn $80,000, I'll start saving. And to me, that's very like saying, well, I'll go to the gym when I'm skinny and I'm fit. And I think that that's just the wrong way to look at it completely. I think that you should be starting to create habits with whatever salary you

do have. And whilst I know that that's not an easy thing to do, if you've got goals and you want to be creating the life that you think you deserve, saving is a very key part of that. And being able to compartmentalize your salary and work out, you know, what part of it you're going to be putting away each week or each month is really important. And the time to do that is now, not when you're earning more money. So some background to all of this, the median Australian income is $57,918 a year before tax, which equates to the average Aussie having about $1,900 deposited into their bank account every fortnight or $3,800 every month. On top of that, Aussie men are saving on average $507 a month, while Aussie women are saving $346 a month. Why does the average

Australian woman find saving so tough? So I think first things first here, women on average earn less than men so that obviously could play into why women are saving less than men and I think that's you know an important point but it also doesn't get you guys off the hook at all I don't want you to think that because we're earning less or maybe working less or you know we have part-time roles or you know we spend more on you know life than men do I think that that is those things are all just excuses for you not putting money aside and saving I think that people are really good at not taking ownership of their own issues and blaming other things like their upbringings or their influences or you know the friends they circulate with or the lifestyle they think they

deserve to have so I think women are not saving as much because they haven't put plans in place and it's as simple as that if you guys wanted to be saving that amount you potentially could be obviously dependent upon you know how much income you're deriving in the first place and you know whether your income actually leaves enough after basics for you to save. I think women are finding it tough because they haven't been tough enough on themselves. So do you think our attitude towards saving needs work then? Do you think we assume it's too out of reach? I think it does need work and I think that this is one of those harsh but true realities of life and I don't want to sit here and say oh well I can save and people look at me and go well okay she can save but that's

definitely beyond me like she's putting unrealistic expectations on us I think there's a couple of reasons why people struggle well the first is our upbringing you know if you've been raised in a frugal household you're more likely to be frugal and have the perception that money is not everlasting it is something that you know you you've got to spend it the second you get it and you know look after yourself when you can I think another reason women actually struggle is this concept called learned helplessness um and what is that so it's a state of mind that causes people to believe that there's nothing they can do to escape their negative situation when the opposite is actually true the power is actually all in your hands and if it relates to saving money learned helplessness

often arises in people who have had consistently negative experiences with money so they believe that negative things are going to happen around money that they're not going to be able to save money because historically that's been true for them but it doesn't have to be true moving forward I feel like it ties back kind of to the your money stories episode that we did absolutely I feel like I avoid that because I've gone through or my family have gone through some kind of financial hardship yeah absolutely and I think for everyone yeah I think learned helplessness comes into play because it can most often come up during childhood it's something that is kind of drummed into them inadvertently, but it can also come up from adult experiences as well. So the more often you

experience failed attempts at saving, the more likely you are to believe that you're simply not capable of doing so. And I think in other words, you begin to think that that inability to save money is a part of who you are, not something that you can actually achieve. And I think we really need to push forward with this. And, you know, a community like She's On The Money is here to support you and lift you up. And, you know, we're all in it together. And I think that that is something we can get over together as well 100 some people worry that saving money might restrict their lifestyle do you think that's true yes I do think it's true because if you're spending every dollar that you are earning on the lifestyle that you currently have bringing it back a little

bit and saying well now I want to save a hundred dollars a month two hundred dollars a month is going to impact the way you live your life because if you were spending that money before and you're now not wanting to spend that money you know what are you missing out on and I don't want it to be a situation where you're missing out on anything but saving is about delayed gratification and essentially deferring instant gratification for later so I think the mindset of people needs to change dramatically so you need to be looking at it not oh well my lifestyle is going to change negatively and I'm not going to be able to you know go out for coffee with my friends or do this or do that to if I don't go out for coffee with my friends

and spend $30 on brunch today, it means that at some point in the future I can use that money for something else. So I often or I sometimes find that I'm either aggressively saving at the expense of having fun, like going out on those $30 brunch dates, or I'm finding that I'm spending far too much. Is finding that sweet spot difficult for everyone, do you think?

I think it is and I wish I was more like you and I was a little bit more frugal with my brunches and going out and made some smarter decisions but I think we all feel like we have things that we can improve on I think it's about goals I think it's about setting realistic goals and having a look at all of those little things that you do in your life that add up so if brunch is an issue for you and I never think brunch is an issue but if brunch is something that you're spending a significant amount of money on have a look at how you can change the way you're spending at brunch could you potentially go with your girlfriends to brunch and just get a coffee could you go

and pick a menu item that is a lot less than what you'd usually do if you're going and getting the $19 eggs benedict with extra bacon with extra bacon and like me yesterday halloumi on the side i did not need that you're then spending close to $25 on a brunch can you go along and maybe get a toasted sandwich and a coffee maybe you don't need the additional coffee at the end of brunch i think It's all about looking at what your situation is and tweaking small things along the way instead of just going along and going, well, okay, I'm helpless now. We're going to brunch. I guess I'm going to have to spend $19 on Eggs Benedict.

So you don't have to give up those fun experiences altogether, which I often find that I do. No, I don't think so. I think it's about being reasonable and really aware of what you're spending. So having a think about what you're going to spend going into it is a really good idea and not feeling helpless about it the entire time. not saying, oh, I've accepted an invitation to brunch and now look at me, I'm going to have to spend $25 when it's not the case. The power is still in your hands and it's only up to you to make a good decision or a not so good decision. Lots of Australian women feel like they don't

have control over their financial position and their wealth. Do you think this is accurate? I think so. And I think that goes back to this learned helplessness. We have experienced negativity in our experiences thus far so therefore we think it's going to carry through and I think that we've always felt maybe a little less educated or a little less financially literate than men so therefore we feel less empowered and I think you know we're doing a lot to change that or we're trying to do a lot to change that right now but we've always felt less empowered over their position and their wealth because potentially we don't understand what we're doing or how to do what we want to do. So talking about and sharing your own missteps and

everything is important I guess. Yes I think it's really important to be sharing those things and having discussions about money and a discussion about money with your friends doesn't necessarily mean divulging all your personal details and telling them how much you earn and how much you've been spending and you know the personal debt you could be in. I think having a conversation with friends around hey brunch is pretty expensive why like is there something else we can do is there somewhere else we can go is there something that we can change because you don't have to divulge all your information to tell your friends you're working towards a bigger goal and that brunch doesn't align to that. These days I've been catching up with friends and going for walks

because it's like you get your social interaction in you don't have to go to the gym you can just go for a nice leisurely walk. A couple of my friends and I have been doing that recently as well and albeit it's been very cold I actually prefer it I feel like we have deeper conversations and we end up you know waffling on about things that I never would have waffled on about at brunch because I feel like brunch can be a little bit disjointed at like and there are people around you there are people around you you know someone comes over and asks you if you want a coffee and your conversation ends or you're sitting at brunch and you're looking at someone else you're like oh you get a little bit distracted whereas I feel like the walks I've been on

recently i've had some very deep and meaningful conversations with my friends i'd recommend it guys yeah hi there you've called the she's on the money hotline do you have a money problem you want help solving do you have a money dilemma you just want to chat about victoria is here to help every week we'll be playing your hotline questions to help make sense of the money mess you may have found yourself in. Give us a call on 0435 293 886 and you might find yourself on the show. Over to today's listener question. Hi, Victoria and Annabelle. I love listening to your podcast. I'm new here at home for the first time and I'm wondering what percentage of my income should be going towards rent

as I'm also trying to save for a mortgage at the same time. I'm a little bit concerned I'm spending too much but also not sure how little I should be spending. Any help would be great. Thanks. So Victoria, what in your opinion is a figure or a percentage you can justify spending rent on? So this is a really hard question to answer because it depends on where you live and the lifestyle costs of the, you know, state or city or, you know, town that you're living in. But I would never want to see someone spending more than 30 or 40% of their income on rent I think a lot of people do and they live these lifestyles that they you know really love but if you want to live in an apartment that is costing you 70% of your income I'm not surprised

you're not able to save I'm not surprised that you're not able to you know defer that gratification of living in a nice house now so you can live in a nice house later I think it's honestly a little bit baffling when people say to me hey Victoria this is how much I'm spending on rent how else can I save? And my first thing is, well, you're spending 70 or 75% on rent, move. Like move into an apartment that is more aligned to your goals, move into an apartment that doesn't cost you everything that you're earning. So I'm currently renting, but I'd also like to buy property one day. There's this big idea though, that if you're renting, you'll never be able to buy a home or save money. Do you think this is a myth that we need to bust? Yes, absolutely. So I think that

If you're renting, you are absolutely still in a position where you can purchase a home because you need to be saving as well. If you are spending so much money on rent that you are unable to save, that is too much money on rent. So potentially it's time to have a look at how you can cut that down. If you're living with your partner and you have a beautiful apartment, but you're spending 70% of your incomes on rent, is it time to have a look at maybe having a housemate or is it time to look at moving into a share house or moving into a cheaper apartment that you can

live in in the short term so that you can achieve your long-term goal of purchasing a home I think it's you know there's a meme going around on Instagram at the moment that says if you live fake rich now you're going to live real poor later and I think it's very very true I really like that statement because I think that a lot of people are living beyond their means right now while still being able to afford that. Memes are so relevant. On that note though how important is it to make sure your partner or your housemate and you share similar money values? Back to our money story conversation I think it's really important to not only understand your own money story but understand the money stories of those around you so that you can fit with them because

if you don't take those things into consideration their money stories and potentially the bad parts of their money stories become a part of yours so if they're a person who is not usually into looking into you know how to best save money on bills or looking for the best deals but you are but you let it lapse you're potentially not putting yourself in the best possible financial position equally are they you know are they dining out every night and you become a part of that culture like what are the expectations up front how do you spend money what are your values how are you working towards goals together having a housemate is really fantastic in some of these situations too because they can be your accountability buddy they can be the one that calls you out

when you're ordering uber eats too many times per week so i think we need to see housemates as a really good accountability buddy now instead of someone that costs you money and as always now it's time for the fun stuff what good would this be if we didn't bring you the pervy stuff yep it's time for our weekly money diary let's go today's money diary is from a 23 year old student who says she's still figuring it out i feel like i am i have an idea of what I'm doing with money, but I feel like sometimes priorities aren't really where they should be. But at the same time, like I know where they should be, but I feel like my situation sort of prevents me from doing what I feel like I need to do or what I should be doing.

I'm currently a full-time student and then I have about four jobs, but I feel like I am always paying out so much more than what I am getting in. So I feel like I'm always not balanced. Like I'm trying to do what I can with what I have, but every time I have money coming in, it's just in and out straight away. Like it, yeah, I feel like it's never in my account long enough to do anything with it. Okay. So we know 23 and figuring it out has had it tough, but let's hear the juicy stuff. How much does she earn and how much is sitting in her bank account right now? So I have all four of the jobs are casual. Two of them I get paid fortnightly. One just works on school holidays and the other one is like a mentoring program. So that comes in thousand dollar lots. So four times a year we get a thousand dollars. So yeah, there's that from that. So four thousand for that one. And then, well, having just done my tax, I think for last year, I earned about $19,000 across the

year. I have about $500 in my savings account. For the last two years, last year, I made my New Year's resolution to save $10,000. That didn't happen. So this year, I adjusted and thought, okay, let's just go down a little bit and go to $5,000. So $500 and $5,000, not quite the same. But yeah, I feel like I've done things that I want to do with my money. Like I sort of feel like if with my money that at least I'm enjoying what I'm doing, but I do understand that you do need to have money as well. So I would like to have more than $500 in there. But yeah.

So we know how this 23-year-old gets paid. But what exactly happens to that money after it's deposited into her account? So when I get paid from my two, like fortnightly from two jobs, one of them I get about $120 and then the other one I get about $200. And so I have a debt for Invisalign, so for like a teeth treatment. So I pay $80 a week for that. So that goes on a Wednesday and then I pay off $125 each fortnight for my car. So that's $200 pretty much straight away.

so it leaves me with about $80 and then $40 for petrol to fill my car for the week and so I'm yeah sort of left with $40 for me. It's time for the dreaded question, what about investing? I don't invest, I haven't ever. I don't really know much about it but I feel like I don't really have enough either knowledge or money to make anything like worthwhile of that. And where does you sit with her debts? Okay so I have my car loan so I pay $125 a fortnight and I think the car was around $17,000 so plus the interest on top of that when you're paying it back and then my Invisalign is around $8,000 so that works out to be about $80 a week. Then I also have my hex debt for uni which is about $28,000 and then I also have a Centrelink debt of about $2,000 that

I pay every fortnight just a little amount. So when I was getting my car actually my car died on the side of the road after Adele's concert so I didn't actually have the money saved up to buy a new car like I didn't just decide that I wanted a new car it sort of got to a point where I needed one and I couldn't get around. And our family situation meant that I couldn't just borrow money off my parents to get a new car. It was sort of like a need and a, yeah, straight away and something that they couldn't really help with right on the spot. So I had to take out a personal loan through, not through the bank because I didn't earn enough, but through the car yard directly. Does 23 and figuring it out have any good money habits that she's especially proud of?

I find that I don't spend money on like clothes shoes going out like food or anything like that I would spend it well I do spend it on traveling and going on holidays so I feel like that is a large amount of money that is going towards that but if I was to add up if I was to buy something every week a new piece of clothing every single week and then add all that up it would probably equal the same amount as going away anyway. So I, yeah, would prefer to like bundle all of my money up and spend it on something like a week away rather than, yeah, on something like a material piece. What about her worst money habit? I think my worst money habit is probably when I do see more money than usual in my account. I think, oh yeah, awesome. Like this is good. So I can just

spend it, which, yeah, probably isn't the best. So what's today's money diarist actually saving for? What's her big money goal? I think the reason behind having or wanting to have $5,000 saved is not so much saving up for something in particular, but just to have money. Like, I don't really just have money there. Like if something was to happen, I don't really have anything to fall back on. So I think just knowing that there is at least something there, it might not be a lot but yeah just having something to fall back on um yeah it would be good so how would today's money diarist rate her own relationship with money if we forced her to give herself a grade i would probably give myself a maybe like a b minus or a c plus because i feel like i know

what i need to be doing but my situation and like the income that i have doesn't physically allow me to do what i know that i should be doing but yeah i feel like i'm not like silly with money and i understand what yeah what needs to be done but at the moment as a student I feel like I just can't do that. So Victoria what were your first thoughts? I understand that she's in a position where she has these goals but I felt like those goals potentially didn't meet her salary so I felt like she was setting herself up for failure to be honest because she at the start said her income was $19,000, but that she had a savings goal of $10,000. And I found that to be quite unrealistic for her income and all of the other expenses she has in her life. And I guess it'd make you feel

a little bit deflated if you weren't saving your goal. Yeah. And back to what we were talking about earlier in the episode about learned helplessness, this is going to make her feel helpless if she's setting a goal for herself that she's unable to achieve. If she's saying, well, I need to save $10,000 that's more than 50% of her income and she's making decisions like going and getting $8,000 on Invisalign like these things aren't adding up and I feel like it's going to leave her feeling really deflated and like she's maybe not able to achieve goals or you know create the life that she wants to create for herself. It's good that she's wanting to save big amounts of money though I guess. Absolutely and I think it's really important to have those things in place but

I think it's also really important to be realistic about these things and set goals that are in that smart framework so making sure that they are specific and they are actually relevant to your situation because the easiest way to get off track and feel disheartened is to set a goal that you're not able to achieve for yourself. So what do you think that she could improve on then how could she set those realistic goals? I think going back to the really basic smart methodology of having specific, measurable, achievable, realistic and timely goals is important. It sounds really lame. I'll post a goal setting chart in the Facebook group this week for everyone if they want to use that. But I think setting really unambiguous goals is really important because if we set

ourselves up for failure from the beginning, there's no way we're going to want to get up every single time and try again when it feels fruitless. So do you think a better idea for her would be setting micro goals so maybe month to month saving a certain amount and what amount do you think she should be saving? I think that that's a really good idea actually setting smaller goals that you can achieve on a month to month basis is going to keep you motivated for the long term as opposed to looking at a big goal like ten thousand dollars and always feeling like you haven't made it so setting small goals but making sure that they are actually aligned to her income so she said she already has eighty dollars a week coming out for Invisalign that's going to impact

her savings. She has a personal loan for a car. That's going to impact how much she's able to save. So I think here debt reduction needs to be her priority because she is paying a lot back on things that aren't increasing her wealth. So both of these assets, Invisalign and a car, are not helping her achieve a more financially stable future. In fact, you could actually say that these are the things that are holding her back from not only achieving her goals but achieving financial stability in the near future. Great so it seems that maybe this money diarist should be saving maybe a hundred dollars a month instead of the big goals like five thousand or ten thousand dollars a year. Yeah and I think that that's a really smart start because it means that she can

maybe go through her current finances and tweak a few things to be able to save a hundred dollars so instead of setting a really big unrealistic financial goal she can maybe have a look at the things she's doing in day-to-day life that could add up to a hundred dollars over a month to be able to meet those financial goals in the short term. So maybe the listeners out there can do that as well if they're struggling to save big amounts of money over a long period of time they can set micro goals every month maybe. Yeah and I think that that's a really good way to keep yourself motivated on on track because if your goal is to save you know ten thousand dollars but you haven't met the halfway point you know that that either needs tweaking or you need to be you know maybe

saving a little harder one month because you let it lapse the month before. That's all we have time for today just before we head off as always let's quickly wrap the boring but important stuff the advice shared on cheese on the money is general in nature and does not consider your individual circumstances cheese on the money exists purely for educational purposes only and should not be relied upon to make an investment or a financial decision and of course we promise victoria divine is an authorized representative of consultant financial advisors proprietary limited ABN 65006 373 995 AFSL 2303 23

That was impressive once again. Thank you. I'm skilled, what can I say? Well, you are, no doubt. So join our Facebook group where more than 7,000 women share money tips and tricks every single day free of judgment.

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