Extended “retail therapy” is under way as summer sales keep the festive splurge alive and Valentine’s Day teddies and chocolates beckon. The only problem is, extended shopping sprees tend to sabotage our saving (and retirement) plans.
Imara Asset Management MD Lara Warburton says that although a little “retail therapy” can lift post-recession spirits, if we can’t get our spending under control it’s absolutely fatal for our savings. And spending becomes a “high” that needs to be repeated, so we keep finding goods we simply must have — regardless of whether we actually need them or not.
Warburton has some tips for those of us who are determined not to get it wrong this year.
- Get a boost by measuring gains. Financial progress is measurable, so set reasonable and achievable objectives. Complement long-term goals with short-term ones. Far-off goals seem unreal but achieving short-term ones keeps you motivated. Every time you reach a goal, give yourself a pat on the back — but don’t go shopping!
- Get warm and fuzzy.
You get this feeling when you can see your money is working while you sleep. Allocate some money to products known for solid, long-term gains. Seeing this money grow helps you keep the faith.
- Save first, not last.
Channel money to savings via monthly debit orders. Cover household expenses as well. The money that’s left over is available for spending. If you spend first and try to save from what’s left, you may end up constantly complaining that you don’t have enough money to save.
- Get a tax break.
This means sensible exposure to pension products and retirement annuities.
- Get smart.
Canny savers maximise (and prolong) gains while limiting losses (often by timely adjustments to asset allocation). Expertise like this may entail a fee, but you end up a net winner if you achieve the right balance at the right time through the right advice.
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