With the cost of living crisis still biting, and winter drawing in, many of us will be looking at our bank balances with a degree of trepidation. How are we going to cope with the expense of Christmas? And what happens when January rolls around, and the Exchequer expects another payment?
When we’re looking to limit our outgoings, it’s important to deal not just with the major expenses, but with the smaller ones, too. Those little payments can add up over time, imposing a significant burden.
When you agree to pay a certain amount of money every month, it’s easy to forget about the agreement. But they’ll still come knocking every month, draining your finances, unnoticed, like a leech in the small of your back.
If you’re paying for Disney Plus, Amazon Prime, Spotify, Youtube Premium, and Netflix (which recently announced a price hike) then you could be putting down hundreds of pounds every year. Then there are gaming services like Playstation Plus and Xbox Game Pass, which do much the same thing.
Are you really making the most of these services? Could you do without a few of them? Think about what you’re actually watching, and cut your expenses accordingly.
It isn’t just digital entertainment that we need to think about. What about that gym membership that you aren’t really using? You don’t get fitter simply by paying; you do have to actually go to the gym. If you’re not doing that, then you might as well cancel!
We’re all susceptible to impulse buying. We see a product or service that tempts us, and we feel an intense emotional reaction that drives us to put our hands in our pockets. Certain industries, like cosmetics, might market their products entirely using emotional manipulation, without any rational appeal.
We’re social creatures, as well as emotional ones. If we see our peers making a purchase, or we perceive that it’s normal or expected behaviour, then we’ll seek to emulate it. This is why celebrity and influencer endorsements can be so powerful.
Then there’s the ‘anchoring effect’, which causes us to give undue weight to the first piece of information we hear. You might see the discount on a product advertised first, before the price itself. You might not consider whether the price makes the product worthwhile; you’ll just remember that it’s 50% off!
As human beings, we’re unable to entirely escape these biases. However, we can be aware of them.
Paying for convenience
Sometimes, it makes sense to pay a little bit extra for convenience. But it’s important that we do this in a deliberate way. If you’re paying £5 extra to avoid half an hour of stress and hassle, then this might be worthwhile. If you’re paying £5 to avoid two minutes of hassle, then it might not be.
In some cases, convenience can compound over the long term. If you’re driving into work every day in order to avoid a thirty-minute walk, then you might end up paying well over the odds in the long run, while avoiding an opportunity for exercise.
The true price of cheap clothes
Terry Pratchett fans might be familiar with the Sam Vimes ‘Boots’ theory of economic unfairness. It’s derived from a passage in Man at Arms, wherein Vimes observes that the cheap products bought by poor people don’t last as long as the expensive ones bought by rich people. If you have a choice, in other words, it’s often cheaper to buy expensive boots.
Due for an upgrade?
If you’re tempted to upgrade your phone, then it might be worth taking a step back. Is the new one really worth those extra hundreds of pounds? The same applies to games consoles, televisions, and countless other gadgets. Don’t let your disposable income determine your expenditure – you’ll never save anything that way!
Sneaky banking fees
Finally, we should be aware of the hidden fees charged by banks. If you go into your overdraft, or beyond the limit, then you might find yourself saddled with additional costs. Read the small print, and learn from your mistakes. You might also be tempted to switch to a specialised savings account.
Saving money doesn’t have to be difficult. Look at it instead as an opportunity. There are dozens of small costs that you could do away with right now, and larger costs that you might do away with by changing your mindset.