Would you rather listen to The Wiggles – “Big Red Car” on repeat for 4 hours, than sit down and put a family budget together? I’ve never been a fan of doing a budget, especially in an OLD school excel spreadsheet. What I do like though, is keeping track of my personal spending (you can forget about excel though!).
I’ve written before about why I think you need to track what you spend. You can shoot over and read it here. I will add that I believe it doesn’t matter how much money you make – you will get value from this exercise. Why is this important? I reckon it has never been easier to spend money – from one-click purchases to internet sale frenzies to retail member clubs. Those bloody marketers are employing psychologists and behavioural economists these days to study your behaviour to make you buy – we are up against it!
Now the problem I have with tracking my spending is: that I get excited about it for a while (I’ll cut back here, save more there). Then after a month or two – fatigue sets in and I ignore it. And sure enough, old habits return.
So the question I’ve been asking myself recently is – how can I make this more interesting and get better results?
Well, the fabulous Dr Jason Fox talks about using “the science of motivation with the power of game design to shift behaviour…and make clever happen”. Dr Fox is a motivation strategy and design expert who works with multinationals to educational organisations through to startups. In his book “The Game Changer” Jason reveals his number one piece of advice for attaining the motivation for great work:
“Make progress visible”
This concept has been hugely successful for fitness (fitbit, garmin etc), why not for money management? I don’t expect we’ll all be walking around with a richbit on our wrists but there are other ways to make this work.
So how could you make a game of your tracking your spending? Find an app like My Prosperity, Pocketbook, or Moneysoft. (Make sure you read the security information on these and are comfortable with how they work). Many of the banks also have a money tracker style app now or similar through their internet banking.
Once you are set up you can start to track how much you spend each month and what categories your money is being spent in (eg, groceries, insurance, education…). You also want to start looking at average spend over a period of months so any other those big one-offs don’t distort the picture. A few ideas to gamify it and increase the motivation and results might be:
Keeping track of your highest score (lowest spending month) and trying to beat it
Setting a target to aim for on your monthly average spend
Giving yourself a penalty (a donation to your favourite charity?) if your spending increases
One aspect of the My Prosperity software that I love is the Net Wealth Tracking. You can get data feeds for a valuation of your properties and vehicles. Link your investments, bank accounts, loans and super fund to give a picture of your financial position that is updated daily. Once it is set up, it starts to track it over time so to you can see your progress. As Dr Fox says, this is the key to motivating you to greatness.
But I think this is just the start. The potential for behaviour change to achieve better financial outcomes is enormous. What if you could say:
Set yourself a spending limit so that any time you are about to spend above it, you get an alert first – checking that you really want to proceed!
In the lead up to the end of financial year, you get a reminder that you haven’t given as much to charitable causes this year as usual.
Easily analyse regular spending and access suggestions for how you could save
Use Virtual Reality to see your FutureSelf and experience the financial life you will be living in say 30 years. (This idea is my favourite! I’ll be writing more about it soon, if I ever finish the half done article!)
So the tools are out there and they are only going to get better. Make the most of them! Or you could just keep sticking your head in the sand.