Is This The Real Reason You Always Run Out Of Money At The End Of The Month?

Photographed by Meg O'Donnell
Deep in a climate emergency, in the midst of a constitutional crisis and suffering from an increasing lack of social mobility, young women in Britain today would be forgiven for exercising a 'do or die' attitude to most things in life, including their personal finances. What’s the point in saving for that home in the city you might never afford when everything seems apocalyptic? Why tuck a little away for a rainy day when it feels like it’s already pouring?
A recent study by Nesta, a foundation that promotes innovation in industry, found that half of 18 to 34-year-olds say they regularly run out of money. Annual research by F&C Investment Trust looks into the spending habits of millennials more generally. This year, it found that 68% of millennials want to turn over a new financial leaf and start saving, while 66% said they were so worried about money – and being in debt – that it keeps them awake at night. 
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Our financial habits and how we feel about money seem to be at odds with each other.

What's the point in saving for that home in the city you might never afford when everything seems apocalyptic? Why tuck a little away for a rainy day when it feels like it's already pouring?

With stagnating wages, a rising cost of living and, of course, a housing crisis, many of us don’t have much excess to play with anyway. But even those who have had a significant pay rise manage to expand their spending so that, rather than saving, they remain stuck living from paycheque to paycheque. 
Billie, 29, is a prime example. She recently had a pay jump from £40,000 to £80,000 after she quit her freelance job to work in-house at a law firm in London. Somehow, though, she still ends each month with a few pounds to spare, and has "very little to show for it". 
"I live moment to moment with my money. I have a thing that I might get hit by a bus tomorrow. I do often regret it, and I used to take out a payday loan to cover myself at the end of the month. 
"I mostly spend my money on going out or small treats through the day. I live on my own so I hate cooking, I always get takeaway or Deliveroo, I go out to dinner and get Ubers everywhere. 
"I don’t really buy clothes very often at all – apart from nice holidays and experiences I really have nothing to show for it in a material sense. 
"I would really like to be able to save, I’m turning 30 next month. I do eventually want to have the security of my own savings, my own home and eventually a family. At the moment I’m spending around £3,000 a month on non-essential items."
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I mostly spend my money on going out or small treats through the day. I live on my own so I hate cooking, I always get takeaway or Deliveroo, I go out to dinner and get Ubers everywhere. 

Billie, 29
Kate, 31, lives in Oxford and has a mortgage with her partner. After paying off numerous credit card and household bills, she has £500 to spare for non-essential items. She regularly ends the month in her overdraft.
"Because I don’t think in the long term, I have a terrible habit of assuming it's going to be fine," she tells us. 
"I’ve never run out of money completely, which is not a brilliant bar, but I am a bit more aware of my spending now. 
"If something goes wrong in the house, I don’t have the savings to contribute to fixing it. If a hole appeared in the roof tomorrow, I realistically could not afford to have that fixed."
Most of her spending goes on presents for other people.
"I buy dinner or tickets and I’m generous with gifts for birthdays and Christmas, etc. 
"It doesn’t matter what I spend on myself, so if I see something I really like, I get it for them. I don’t have a budget so I don’t compromise. 
"I will go out for dinner with my siblings and I will pay for it. I am the eldest so I feel like I should, although there is no expectation for me to do that."

However, this mindset – this constant 'living in the moment' – is one of the key reasons why so many of us find it hard to make it to the end of the month with money to spare.

If a hole appeared in the roof tomorrow, I realistically could not afford to have that fixed.

Kate, 31
"We all have something that is called the 'present bias' – it feels much better to make me today happy than me in the future happy," says Dr Peter Brooks, the head of behavioural finance at Barclays. He studies the psychology of our spending habits and helps the bank better equip us with tools to do things like save.
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"We find it difficult to look into ourselves in the future, so we forgo those things that make us happy in that moment.
"A third of women tell Barclays they save regularly – two thirds say they don’t. The active choice of saving at the end of the month is either difficult, or something they try and do later, and therefore people fail to do it."
Catherine Morgan is the founder of The Money Panel and coaches women in managing their finances. She says our emotional connection with the way we handle money starts from the age of seven. 
"How we feel about money is driven by external factors like media, family, peers but also from our internal influencers – our personality and our beliefs and experiences," she says. 
"These messages and experiences have a huge impact on how we feel about money. They sit in our subconscious mind and shape our internal belief system, which then drives how we behave with money. 
"This then becomes the money story we believe to be true. We anchor every thought about money on our belief systems even if they are not true. This creates money blocks and this is what stops us from making any progress."
"Because of my history with money and finances I try really, really hard not to spend on anything, and then I spend it on silly things," Jessica, a careers advisor earning £38,500 per annum, tells us.
"I left home at 16, I lived in a council flat, and I became so used to not having any money that I’d see money in my bank account and I’d panic. 
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"If I’ve got very little left, I’ll go and spend it all on food. I’ll think, at least I can live even if I’ve got no money."
Both Billie and Kate’s relationship with money is rooted in their upbringing and emotional psychology.
"I’ve worked through a lot of depression and anxiety over the years, but a lot of the times, I don’t often see that I have much to offer, and at some point I decided to do nice things for people instead," Kate says. 
"I’m trying to contribute in ways I’m not confident I’m able to do otherwise. I’m good at buying people things they really like."
Billie grew up seeing her mother, the main breadwinner of the family by a significant amount, treat herself regularly. 

What we do have on our side is technology. If we learn to use things like banking and saving apps properly, we may be able to unpick our less helpful spending habits.

"She used to say, 'I earned it, so I deserve it,' and she’d buy herself a new handbag or go for beauty treatments. I guess I’ve learned to do the same, especially as my working life is more stressful now."  
Dr Eliza Filby, a generations expert and historian, adds another factor that influences millennial spending habits. While our parents, the baby boomers, were encouraged to invest in houses – which were then much cheaper – and save, we are actively encouraged to behave more recklessly. 
"We must stop trying to fit millennials into the baby boomer straitjacket," she said in response to the F&C Investment Trust review
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"Millennials will have very different lives and the previously available incentives – great savings rates and pension schemes – do not exist for them today. 
"In fact, they’ve been actively dissuaded from saving or acquiring assets. Millennials still want to buy a home but see it as exactly that – a home not an investment – as baby boomers may see it. 
"Millennials still worry about their financial future, as these findings attest, but they have a very different set of priorities – both short and long term – than their boomer parents. They would rather spend their money travelling when they are young than saving up for the dream cruise in their seventies. Given they expect to work much longer, they see their pension not as funding their post-sixties lifestyle but as a social care plan for their final years."
What we do have on our side, however, is technology. If we learn to use things like banking and saving apps properly, we may slowly be able to unpick our less helpful spending habits and start saving more regularly.
Dr Brooks encourages us to override our "fear of finding out" what we spend on, and use saving apps – like Plum, the Barclays app or Monzo – to monitor the areas where we do overspend. 
"People have a fairly good idea of what they spend on rent, travel season tickets, but much less on other items," he says. 

Next time you go to reach for your credit card to make a purchase, just pause.

Catherine Morgan, Founder, The Money Panel
Knowing that we find it hard not to spend money in our account, he also recommends setting up a standing order to come out the day you get paid and go into an account that is harder to access.
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Morgan says the key to getting on top of our finances is to focus on our impulse control. 
"Next time you go to reach for your credit card to make a purchase, just pause," she says. 
"Ask yourself: what emotion are you feeling in that moment? If you are stressed, or feeling sad, or guilty, ask yourself: what could you do differently? 
"Implement a 24-hour rule for yourself next time to allow your brain to think more rationally, when the emotion has gone."
She also encourages women to take a good, hard look at their expenses.
"Rate on a scale of one to 10 how valuable they are to your wellbeing. Remove the ones that don’t bring you happiness, focus on ways to save money on the ones that you have to pay, like utility bills, and plan ahead for unexpected costs over the next 12 months. 
"Setting aside money into pots or different accounts for different expenses can help too. Perhaps have a treat pot, a Christmas gift pot, a car expenses pot, and skim money into each pot each month. Automate this if you are a spender."
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