Budgeting and money management might be a task we don’t enjoy, but it’s something most people take very seriously – especially if you live on a low income or have high essential expenditure. Budgeting can be the difference between meeting all of your financial commitments on time and landing in financial difficulty, even if you think you’re being careful with your money. One major enemy of a good budget is invisible spending.
Invisible spending can often lead to missed payments and cashflow confusion: when you aren’t aware of certain expenditure, it becomes very difficult to budget. So, what is invisible spending? And how do these seemingly harmless payments cause financial difficulty from month to month?
What difference does invisible spending make to your budget?
Simply put: invisible spending is all the purchases you make either without realising, or by considering them too small to make a difference to your budget. Unfortunately, too many small payments can add up quickly, and can easily account for a large chunk of your income, causing issues with other financial responsibilities towards the end of the month.
Invisible spending is usually the £10 food shops you do to stock up on snacks between big food shops or an unplanned shopping trip because there’s a great sale on. Sometimes, invisible spending is harmless – often people allocate some money in their financial plan to random or unplanned buys throughout the month – but when it’s unbudgeted and untracked, invisible spending can massively affect your finances.
Why does invisible spending matter?
Apart from the fact it can throw your whole budget off, invisible spending is important because you probably don’t realise how much money you spend in this category. If even half of your invisible spending funds went straight into savings, you’d probably find your credit dependency reduces elsewhere. Of course, you don’t have to change your entire lifestyle just to avoid making these unconsidered payments, but you do need to be aware of them so you can at least factor that money into your budget. By having a sustainable budget, you’ll be less likely to miss repayments and other important financial commitments that could land you in arrears.
What is a sustainable budget?
A sustainable budget only differs from a normal budget in that it prepares you more for your financial future. Instead of budgeting from month to month, a sustainable budget aims to ensure you have the resources in place to tackle potential cashflow shortfalls and emergency payments over the next year or two. As well as allocating money to savings, a sustainable budget should take into account your invisible spending and day to day expenditure, so you aren’t shocked each time you log in to your online banking.
General money management tips to deal with invisible spending
Think twice before making a purchase.
It can get tedious to deeply consider every single purchase you make but giving it even just a couple of seconds of extra thought can rationalise the purchase (and help avoid buyers’ regret). Some invisible spending is unavoidable; if you’ve forgotten the milk in the weekly food shop, it makes sense to buy some midweek when you need it. But you don’t necessarily need to pick up those extra bits like crisps and pizzas that are on offer when you don’t need them yet.
Factor social events into your budget.
Meeting up for coffees and lunches is often something that gets missed from a monthly budget. It doesn’t mean you shouldn’t do it – we all need time to relax and see friends and family, but you should consider the payments as part of your budget. If you set yourself a rough spending goal – maybe £5 for a coffee date and £15 for a lunch date, you won’t be so shocked when that money isn’t in your bank account when you check later on. Even if you spent £20 at lunch, you’re then only missing £5 from your budget which is much easier to manage.
Reward yourself for good money management.
It can seem counterintuitive to reward yourself when you save money or make sensible financial decisions because the money you’ve saved should go into a savings account or towards paying more off any outstanding debts. However, treats don’t have to be monetary, and even if they are, spending a fiver on yourself from time to time might just be enough to stop you binging and spending far more.
Whichever way you decide to tackle your invisible spending, give it 100% effort and you’ll see the difference in just a few weeks. Trying to improve your money management skills isn’t about overthinking every purchase or becoming paranoid about your finances, it’s just about making sure you’re prepared for unplanned financial difficulty and protected against occasional cashflow shortfall. Whether this is by creating a sustainable budget, reducing your invisible spending or just being more conscious of how you spend your money; any positive changes – no matter how small – can make a big difference to your financial health.
