Lesson type: Think like an investor

Forget budgeting; make a game out of your money

Would you rather listen to The Wiggles “Big Red Car” on repeat for four 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.

It’s important to track what you spend; regardless of how much money you make – you will get value from this exercise. Why is this important? It’s 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 start-ups. In his book The Game Changer, he reveals his number one piece of advice for attaining the motivation for great work:

“Make progress visible”

This concept has had huge success in fitness (fitbit, garmin, etc), so 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 out of 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 before you sign up). Many of the banks also have money tracker style apps now available 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…). It’s also a good idea to start looking at your average spend over a period of months so any big one-off purchases 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 (perhaps 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. You can also 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 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 behavioural change to achieve better financial outcomes is enormous.

What if you could:

  • 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 you usually do?
  • Easily analyse regular spending and access suggestions for how you could save?
  • Use virtual reality to see your future self and experience the financial life you will be living in say 30 years? (This idea is my favourite!)

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.)

Dave Rae is a director, owner, and Certified Financial Planner at DPR Accountants and Advisers. He is a self-managed superannuation fund specialist adviser and works with clients to explore their goals and help them to build financial roadmaps to reach these. Dave co-founded DPR Accountants and Advisers in 2014 and has over 15 years’ experience in the financial services industry. He features on No More Practice’s The Investment Series 3 – The Philosophy Series where he provides financial advice to his client and helps him to understand his financial decision-making preferences.

The opinions expressed in this content are those of the author shown, and do not necessarily represent those of No More Practice or its related entities. To view our full terms and conditions, click here.

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