Invisible spending can often be the reason your finances fall off track throughout the month. It can make budgeting difficult and result in unexpected cashflow issues, as well as increase any stress or anxiety about money management that you may already have. However, just because invisible spending can have a huge impact on your finances, it doesn’t mean you can’t get some semblance of control back by changing your habits little by little.
Invisible spending consists of all the payments you make throughout the month that you haven’t budgeted for and write off as too insignificant to make a difference. Often, these payments are under £10 and can occur multiple times throughout the day. While small payments on their own might not make a big difference, several small payments add up quickly and can account for a huge chunk of your wages.
If you are fortunate enough that ad hoc payments throughout the month don’t make a difference to your overall budget, then managing your invisible spending probably isn’t a top priority for you. However, if you find you are consistently shocked by your bank balance being lower than expected each month, or you miss occasional financial commitments due to lack of funds, then reducing your invisible spending is something you may want to start considering.
We can all fall victim to unplanned payments – life isn’t so certain that every last penny can be budgeted in advance – however, making better financial decisions when your finances are up should help you navigate your finances more easily when they’re down.
An easy way to grasp just how big a difference invisible spending can make, is by thinking about the cost of greetings card. They are usually around £2. While you might think of £2 as insignificant, if you had to buy birthday cards for everyone you know in one month, that £2 could easily turn into £20 or £30. While it’s unlikely you have 15 birthdays to buy for on one paycheck, it shows just how quickly small payments can add up, and for some people £30 is a week’s food shop.
The best way to get in control of your finances is by making small changes every day to slowly change your financial habits and perspective. Making one change is less likely to help you form sustainable habits, and more likely to cause you further financial difficulty down the line. Consider your current lifestyle, the way you spend your money and how you view your financial health generally. If you have a negative view about your finances, you might find it harder to develop good money management skills because you’ll be attempting change in a bad headspace which might negatively affect your results. When trying any of the tips below, start with a smile and picture how much happier you’ll be at the end of your journey to financial health; this can help motivate you and make the tasks a little less taxing.
Being a conscious spender doesn’t mean you need to be fixated on every penny you spend. Instead, it means you are aware of the financial decisions you make, and you give thought to each purchase. This generally slows down the process and allows you to tackle impulse buying which is a big factor when it comes to invisible spending.
When it comes to budgeting, you may only outline your priority bills and essential expenditure, but giving yourself a set amount of money for everyday spending – coffees, clothes, unplanned lunch dates – will make it easier to manage your money on a month by month basis. You may also find financial planning easier and by trying to stick to a budget with your disposable income, you might also be able to put some money into savings too.
If possible, try to avoid using your overdraft at all costs. While overdrafts can be very helpful in managing cashflow and unexpected bills, when used for everyday purchases, they can massively disrupt your budget both this month and the following months. Try to think of your overdraft as a loan rather than an extension of your bank balance and remember that any overdraft funds you spend results in less disposable income from your next paycheck. We apply this to overdrafts because it’s easy to spend this type of credit without realising, but the same goes for all types of credit: if you’re trying to positively impact your financial health, you need to reduce your use of credit.
There are some similarities between getting fitter physically and financially: binging is often the result of restriction and can lead to worse results than if you’d allowed occasional treats in the first place. Restricting luxury purchases for 3 weeks of the month, only to then spend all of your remaining wages in the final week before payday isn’t a super responsible way to manage your money. Instead of starving yourself of all shopping (if that’s what you enjoy), make occasional small purchases throughout the month so you still feel the benefit of spending money without spending all of it.
Reducing your invisible spending is only a small part of your overall money management but it can make a big difference to your financial flexibility. You may find that instead of borrowing money for emergency payments, you already have the funds available – you may even be able to start making significant contributions to your savings account too. Financial sustainability is a long-term process and requires personal and emotional investment, but it can be done in tiny stages so it’s not daunting or overwhelming. Every good financial decision you make leads you one step closer to controlling your finances – rather than having your finances control you.
For more helpful information about how to manage your money, different financial products or what we do at Polar Credit, take a look at our Info Hub.