Financial health: are you in financial denial?

Research shows that almost three quarters of Australians spend more than they intend to across every category of spending from groceries to socialising.[1] One in three Australians live beyond their means and save nothing, according to a survey by CommBank[2].

Yet, despite these numbers, Australians continue to spend more than they should on things like online shopping, buying coffee and takeaway food, splurging on clothes and holidays, and other items.

If this sounds familiar, you’re not alone. It seems many Australians are in financial denial.

Spending can get out of control for any number of reasons. Here are just eight of them[3]:

1. Mental accounting: when we mentally account for our spending, we often decide we can afford things without looking at the bigger picture. For example, when we receive an unexpected bonus we’re more likely to spend it on discretionary items than on paying off credit card debt because we don’t take an overarching view of our finances and where that money can do the most good.
2. Special occasions: for some people a special occasion is a birthday or anniversary while, for others, every Saturday night is a reason to celebrate. Either way, people often overspend on special occasions without realising just how many of these there are.
3. Present bias: short-term sacrifice for long-term gain is harder than it sounds, and many of us opt for the gratification we feel by spending money now rather than saving it or putting it towards debt.
4. Real money versus credit: paying for things on a credit card tends to lessen the visceral impact we feel when we see cash disappearing from our wallets. Credit cards make spending almost invisible, so we can separate the pleasure of buying from the pain of paying, making it easier to overspend.
5. Snowball effect: when we splurge on one item, we often decide we’ve failed to save anyway, leading to further spending.
6. Willpower: compulsive behaviour is hard to curb and, if we feel better about challenges in our lives in the moment of purchasing a new item of clothing, for example, then we’re more likely to make that purchase rather than exercise willpower. Impulse purchases are a significant cause of overspending.
7. Retail as therapy or shopping addiction: for many, the buzz of spending money makes them momentarily feel better, leading to poor impulse control. This can rapidly spiral from occasional purchases to excessive buying that puts your work, family, or mental health in danger.
8. Self-justification: a bargain is only a bargain if you needed and planned to buy the item in the first place. Buying something because it’s on sale is a frequent contributor to overspending but people justify it based on the difference between the item’s original price and its on-sale price.

How to stop the overspending cycle

If you know, deep down, that you would be better off reducing your spending, then there is hope. The first and most important step is to get full visibility into your finances.

While many people can check their account balances on the go, that doesn’t deliver an overarching, comprehensive view of your financial health. If you have a clearer view of everything you own and everything you owe in a single location, you can make better-informed decisions about spending.

You need to consider savings accounts, credit cards, store cards, mortgages, personal loans, investments, and more to calculate your financial health. Without a clear view of your financial health, you can’t make informed decisions. With it, you can make smarter decisions that protect your financial future.

That’s where Enrizen’s Wealth Portal comes in. With it, you can:

view and manage your linked accounts from various institutions in a single view

• access data from ASX, RP Data, RedBook.com.au and more so you can make on-time decisions
• monitor the value of your property and other investments
• gain free valuations and performance ratings on your vehicles
• conduct wealth checks and gain personalised action plans to achieve your financial goals sooner
• track your progress towards your goals
• monitor spend, no matter where the money is going
• use streamlined budgeting tools to get more control over how you spend your money

Get a clearer view of your financial health and get off the overspending merry-go-round for good with the Enrizen Wealth Portal. Sign up today and take the first steps towards your financially-secure future.

[1] Galaxy Research, 18-22 August 2016.

[2] https://www.commbank.com.au/guidance/newsroom/financial-wellbeing-goals-201704.html

[3] https://www.psychologytoday.com/au/blog/science-choice/201801/10-reasons-why-people-spend-too-much