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Show notes

N.B. This episode is another unedited quick one from home. Martha literally recorded this hiding under a duvet to try and avoid too many sound quality issues. Apologies for the “ums” and ”uhs” and for the doorbell near the end.

Automating aspects of your finances is convenient and ensures that you won’t forget to make important payments. On the flip side, automation leads to disengagement, when your finances seem to manage themselves why take the time to pay attention to them? This is especially true for people who lead busy complex lives and those who have mental health needs or are otherwise neurodivergent.

There are areas of our finances where it’s important to be aware of what’s happening, especially because companies combine automated and manual processes carefully to make us pay more for goods and services than we might otherwise do.

This episode is about finding the balance between automation and awareness.

Why automate?

Automating bills and debt repayments means they are paid on time and avoids late fees and unnecessary additional interest payments.

Automating savings on or near payday means that you don’t spend money you’d intended to save and if you don’t pay too much attention to your savings you are less likely to make early withdrawals and instead they will build up, potentially giving you a nice surprise when you see how much you have. You can make this effect stronger by using an account that is separate from your current account and somewhat awkward to check.

Automating regular payments into investments allows you to smooth out market rises and falls because of an effect called pound (or euro or dollar) cost averaging. Basically you get more for your money when prices are low and less when they are high and this evens out the price paid for your investments compared to the gains. It’s a way of avoiding the temptation to make emotional investing decisions such as buying as prices rise and selling when they fall. Automating your investments helps avoid these decisions, especially panic selling when markets drop and turning a theoretical (paper) loss into a real one.

When do we need to pay attention?

It’s important to check bank and credit card statements for unexpected transactions. Martha missed that her credit card had been used fraudulently for three months by not checking these.

It’s also important to check periodically the status of all borrowing, savings and investments to make sure there are no issues such as administrative problems, over or underpayments, etc. These products need to be suitable to your current needs so must be checked every few months at least.

Spending should be reviewed regularly or it tends to creep upwards. It is also important to know that checking statements monthly can’t fully compensate for awareness in the moment. Shops tend to have a mix of essential and non-essential items and just looking at the totals spent in each may not give enough information about what you actually bought.

Automatically renewing subscriptions, insurances and so on can mean missing opportunities to shop around, which can make a big difference to both the price and quality of what you get.

There’s also the issue of making sure you’re aware of when big annual or quarterly bills or renewals need to be paid.

New financial product purchases and other bigger purchases need to be mindful or you can easily get a bad deal.

Finally, not paying attention means it’s more likely you will fall for a scam.

What can we do to find a balance?

Automate payments that increase your net worth and avoid problems i.e. debt repayments, bills, savings and investments.

Consider fintech services that can round up your spending to the nearest pound/dollar/euro and put the difference into savings.

Set money dates with a friend or partner where you work on your finances together to make the process more enjoyable and as a commitment mechanism to make sure you get things done.

If you need to complete a tax return, this can be handled by an expert for a low fixed fee and you can get 10% off thanks to our friends at TaxScouts.

Set calendar reminders for your money dates and for several weeks before insurances and subscriptions renew.

Review all automations every six months or so, especially checking for continuous payment authorities against cards for example through your mobile phone.

If you mobile banking sends spending notifications enable and check these to reduce mindless spending.

Be aware that old fashioned pen and paper methods often create more awareness than technological ones. Consider a paper spending diary, even for a short time.

Know the pattern of your money through the year. Are there times when you have more or less income? Consider additional hours or bonus work. What about higher than average expenses for example birthdays and other celebrations or back to school expenses?

Be deliberate and realistic about how much attention you can give to your finances. Don’t set yourself up to fail by saying you will do more than is really possible for you.

If you love calculating your net worth every month and checking every detail every day, that’s fantastic, if not, that’s good too, as long as you have a system that works for you, that’s the most important thing.

Transcript

Welcome to Squanderlust, the podcast about the emotional side of money, why our actions aren't always as good as our intentions and what we can do about it. I'm your host, Martha Lawton. Today, it's another homemade episode, I'm just chatting about something that's on my mind again. I'm going to be talking about getting the balance, right between automation and awareness. So, once again, apologies for any kind of sound quality issues. I am hiding under a duvet doing this at home. We don't have all the magic of Wardour behind us today. But I wanted to catch up with everybody drop in. We are recording more studio episodes, we have awesome guests lined up, everything is going on, but it's gonna take us a little while. And I didn't want you to think that the podcast had completely lapsed. So this is just me.

So before we begin, I'm curious, where do you listen to the show? Are you out walking a weimaraner, or cooking a curry or knitting a necktie? Come and say "hi" on Twitter, or Instagram or Facebook and let me know. We are @Squanderlustpod.

Okay, let's do this. So today I wanted to talk about automation and awareness. Because both of these things can help us do better with money, but you have to get the balance right between the two. So we'll start with automation, which is amazing. It's convenient. It's one of the most useful things about modern banking, but it can lead to disengagement. And especially if you're really busy, lead a complicated life, or you will have memory issues or struggle to get started or focus on boring tasks because of some things to do with your mental health or you are a neurodivergent person or whatever it might be. You know, those things can be supported by automation. But it does mean that there is a higher risk of disengaging. So, you know, why would you create work for yourself, your systems are supposed to run themselves, that's the point. But sometimes, actually, we do need to know what's going on. Some areas of finances are best automated. However, modern life is full of companies trying to create automation, where awareness and attention and proactive management could actually be more financially beneficial for us. And vice versa, as well. So paying attention to that, and actually understanding so that is really crucial to avoiding being taken advantage of I guess by how companies operate.

So let's talk about when we want automation, first of all, and I will come straight out and say I love automation. As far as possible, my finances run themselves to the maximum that I can make that happen with my somewhat irregular income. So let's think about some of the things that are good to automate. Repaying debt is a really obvious one, you do not want to miss debt payments, and get extra charges, added interest, all of that kind of stuff. So just generally paying bills, but especially anything that is borrowed money, just automate that stuff, if you possibly can, and know that it is sorted.

Similarly, savings, set them up for payday if you have a regular payday. If not, then have a look back through the month and try and work out if there's a particular time during the month when you tend to have more money, I know that some of my freelance clients tend to run their payments a particular time of the month, so I'm likely to get paid around particular days. So I will tend to make my savings go out in line with those. And yeah, just set your savings up automated and then occasionally just be delighted because you check in on them and there's more money in there than you thought there might be - an unexpected treat. It also means that you're not kind of tempted to dip in if you're not looking at the amounts all the time.

It's I like it I've literally described myself as "hiding money from myself". Which sounds ridiculous but I I have an automated payment that goes into an account that's not linked to any of my other accounts. It's slightly inconvenientto get access to it. In theory, it's instant access but in practice, finding the details and getting the login sorted and all that stuff. So it's just a little bit awkward. And so I don't touch that money unless I really need it. And sometimes I do really need it. And that's great. There it is, happy days. So yeah, knowing yourself and working around that using automations is is really, really beneficial.

Similarly, with savings, investing is something that it is useful to automate. People think investing means waiting until you have a big lump sum of money and then putting that into investments. But actually, the best way to invest for most people is little and often and you can start with very small amounts, and just automate a payment out into the investment of your choice. And if you go back and listen to the episodes with Cathy Boddy with Iona Bain, and with Tom Morris, and Georgia Stewart, all of those are really good, beginner guides to different aspects of investing. And I definitely recommend going and having a listen to those if you are unsure about how investing would work for you.

So, one of the key things with investing is that because markets rise and fall, if you are consistently drip feeding money in, you buy fewer, let's say shares at the point when they're more expensive and more shares when they're cheaper. And overall, that balances out. And it smooths out some of that volatility, some of that rise and fall in the market. And that can be really useful for you. It's a risk management method to be drip feeding money into the markets as you go. And that's what automating regular payment in does. It also means that when... if you're paying less attention, because you're only reviewing once or twice a year, if the market falls somewhat, you're less likely to freak out and pull your money out at a bad time (and) sell low, you're not going to do that as much if you are paying less attention, because everything is automated and you let it run itself. So with investing, that's definitely something where an automation with occasional reviews is a good way to go.

Well, let's talk then, about when actually, we want awareness because sometimes automation goes wrong. A frustrating one, and a bit of a confession for me, right, because this is something a personal finance person shouldn't do. But I didn't check my credit card statements for a few months. In fact, I was completely out of the habit of checking them. I don't use my credit card very often, which is partly why. But last summer, I used it a couple of months in a row. And it happened that during those first two months, somebody had skimmed my card. And they started using it to pay for their Amazon Prime subscription. And I didn't notice in the first two months because I had a bill it looked about right there was nothing hugely different from what I was expecting in there. The amount was not hugely different from what I was expecting to pay. So I didn't notice that there was this additional charge for this person's flipping Amazon Prime in there as well. And so it was only on the third month when I was expecting not to have any bill at all I was expecting there to be a zero that I actually noticed and had to start calling the credit card company and calling Amazon and all this stuff to find out you know that this person had done this thing and, you know, get that reversed and get the refund and you know, get their fraudulent account booted. But yes, not paying attention to what's on your statements can lead you to end up with charges that you should not have on there. So, yeah, automating everything and not paying... paying attention not having awareness can be an issue.

And next thing is as this kind of says I don't off the top of my head know the balance of my savings, investments, outstanding mortgage etc. So that's kind of fine in some ways. But if I'm not checking often enough, I can miss where there's an issue. And I would have to go back and do some forensic work to find out when that issue began and how. And sometimes you need to make complaints within a certain time period in order to be able to get your money back or resolve them. So I would have to go back and potentially look at a lot of paperwork, and I do keep my paperwork, because I know I'm not going to check every single month, everything properly and completely, I compensate for that for myself by keeping my paperwork, and that is my... my balancing method. And I keep it for six years, which may sound excessive, but that is what I do. And it is, theoretically, that's the right length of time, because that's how far back you can go making certain kinds of legal complaints. Anyway, yeah, if you are not reviewing often enough, you don't always catch problems and nip them in the bud. And that can be an issue.

The other one is a real classic, but unreviewed spending has a tendency to creep up for our you know, like, one-off little treat, "let's go get ourselves a bubble tea, cuz it's gonna be fun". I do love a matcha bubble tea with, you know, with my tapioca balls in it, chewy. So I, you know, I can enjoy that as a one-off, or I can make it that every time I walk past a bubble tea place, I get drawn in and I start getting that every few days. And that is where you start getting a problem and expenses start to creep up. Now a lot of people will be reviewing their spending a lot right now. Because as the cost of living rises, you know, we're looking for ways to save money. So I'm really talking about this as a principle, rather than perhaps a segment of where we are now. But also, if you are looking at your expenses now and saying, Wait, how did I get to this point. And if you feeling stupid, or blaming yourself, for the fact that you are spending more than you thought you were on non-essentials, lifestyle creep is a thing. It's really normal, it happens to lots of people. And, yeah, it comes about from that lack of awareness, but once you know, you know, so "know better, do better". That's how it works.

And I will also say about reviewing spending, that there's a big difference between looking at bank statements when they come through once a month. And, you know, looking down the spends at different shops or checking an app and looking at a little pie chart that says you spent X amount in pharmacies and Y amount in restaurants or whatever it might be. You know, that's all well and good, but that doesn't tell you the nitty gritty, right, you go to a pharmacy, and you could be getting foot powder, or you could be any lipstick. One of those is a lot more essential than the other. And I, well, I mean, I guess for some people lipstick for your job. Sure. But you know, most of the time, shops sell both essential and non-essential items. And if you want to get granular in order to understand what your actual spending habits are just looking at bank statements isn't going to help you to do that you need to pay attention in the moment. So it is not always appropriate to just outsource your attention in that way.

And then thirdly.. Thirdly? Fourthly! Goodness. See, this is what happens when I'm just talking to you and I'm not going to edit this. Fourthly, auto renewing. It's really easy to auto renew things like insurances and annual subscriptions and so on but that can lead to poor outcomes. So, even though the UK has regulated out what we call the loyalty penalty, which is where new customers at insurance providers would get a better deal than existing customers who auto-renewed. It is still the case that you should shop around every year, because another provider might have a better price for the same, essentially the same product. So, even without the loyalty penalty, if you're not shopping around, you could well be missing out. Plus, if you're not paying attention to when you need to renew, are you going to have the money ready? Is it going to be, you know, all appropriately budgeted for so that can be an issue as well.

And then there are times when you are going to be taking out new financial products or making big purchases, and you need to be paying attention to how you're shopping for those where you're going to go, whether they're a better deal somewhere than where you would normally go to. All of that stuff is time when you just need to be paying attention. And doing your research. And then finally, as I guess I said at the beginning, but watching out specifically for scams, so not just where somebody has kind of skimmed your card or whatever. But actually, you know, if somebody is trying to steal from you in a more proactive kind of way. Yeah, we need to have that awareness at that time. I think a lot of people get caught out, particularly by text message scams at the moment, because our lives are busy and quick. And some of those things are very plausible. And so it only takes a moment of inattention or non awareness to get caught out. Now I'm not trying to be blamey about if you've got caught out by a scam, by the way. I truly believe there is a scam for everybody and you should not be ashamed to get caught out. But you still need to try and avoid it if you possibly can.

Okay, so I've talked about when we want automation, when we want awareness, let's talk about what we can do to try and help ourselves to kind of bring these things together. So the first suggestion I have is to automate anything that increases your net worth, or prevents problems. So that's what I was saying previously about making sure your bills are paid, ideally, debts repaid, savings and investing, those things should all ideally, the money going towards them, it should be automated if you possibly can make it. I would also say though, that you should review all your automations at least every six months or so. And particularly pay attention to direct debits, subscriptions, and even more. So any kind of subscription that comes out through your phone. So apps that have a subscription, pay a lot of attention to those go into Google or Apple into your accounts. And it usually takes some time to find them because they kind of hide this information. But where are the subscriptions to apps that going through from their into into through their systems. And the reason I particularly find those up, is because they're usually on a continuous payment authority, which means they don't show up like a direct debit does in your list of regular payments going out in your bank statements in your online banking, continuous payments, authorities just linked to your cards are harder to find. So they can take you by surprise. And you can end up not cancelling in time before a payment comes out that you don't actually want for a service you no longer use to pay special attention to those.

Another thing to consider as a way of doing an automation that can be really beneficial. It's possible to get apps that do a kind of rounding up. What I mean by that is they link to your cart. And when you spend money... So, say, if you spent £1.49, they would round up to £2.00, take the £0.51 and put that into a savings account for you. If you want to automate saving more in ways that you won't necessarily really notice a few pennies at a time. It's amazing how that stuff can add up and provide you with an extra little cushion that you weren't even aware you were growing. So as an automation that can be really helpful. I think those I hear a lot of really good feedback for those.

As a way of bringing in more awareness in a way that that doesn't feel so weighty. Or that kind of individual oh god I'm gonna do my financial admin kind of something that some people find useful is like a money date. I used to do a let's do our taxes date with another freelancer. I have to say it made the whole process a lot less grim. I, you know, now leave that detect scouts. Thank you so much tech scouts. But I still have to do a level of admin first. Right? So yeah, when I'm doing my own accounts, it's quite nice to do that and her in a co working way with somebody else. Misery loves company, frankly. And then I actually just ship the actual, the actual tax return aspects of to my lovely person at TaxScouts who does that for me for a nice, flat fee. You can get 10% off with them taxscouts.com/squanderlust. Seriously, go do it. They're great. Yeah, and and also support the show, please, thank you. So yes, money dates, check your bank statements, check your credit card statements, and potentially do your other aspects of financial admin in company, it does make that go a lot easier.

And if you are somebody who struggles to remember to set a money date for yourself, you can automate the reminders to pay attention. So there can be like a next level of automation involved. So calendar reminders, things like putting a note in your diary to start shopping around for that insurance product, six weeks or so ahead of when the the current one expires.

You can use apps things like my Starling app pings when I spend. I get that, you know, those notifications to say what I've just spent, which means that if I've tapped without being aware. I've just tapped to my card and not really paid attention to how much I was spending... you know, again, my phone has just pops a notification up and reminds me and tells me and I go "okay, yeah, that was actually more than I was expecting for, you know, a couple of bars of chocolate and a notepad. Hmm, let's not use this shop again. This is an expensive place", for example.

But I will say, don't overly rely on technology. There are times when old school paper and pencil will make you more mindful. And if that is something you want to dive into. If getting really mindful with your money is something that you feel you need. Then carrying a notebook with you and writing down manually every time you spend will really focus your mind on what's going on, with your money in and your money out. And you can do that with other aspects of your finances as well. Being really conscious by being really, like I said, like old school paper and pencil about it all can help you to get a more in depth awareness that is very useful.

But be deliberate, be realistic about how much awareness and attention you personally can manage. It's super personal. This is not something where there's a one size fits all solution. You need to work out what is sustainable for you. And what you're not going to be beating yourself up about getting wrong or not being consistent enough with.

One other thing I want to bring some awareness to because people often aren't super aware of it, but it can really trip you up is that your finances are seasonal. Even if you're not technically a seasonal worker, your finances are almost certainly seasonal. And it might be that like me, you do have an income that fluctuates at different times of year, I'm not going to get any kind of corporate training, or, you know, employee training during the summer, because who's going to book training when half their employees are on holiday. That's not going to happen. And your work similarly might have bonus time, or you might have times when there are more hours available, whatever it might be. So being aware of the seasonality of your income is really important, and we tend to be more aware of that.

But also be aware of the seasonality of your outgoings as well. So do you have kids so their school uniform time becomes an issue? When are people's birthdays around the year? My immediate family, the birthdays are all clustered at two particular times of the year and so there are two times in the year when I need to have money for gifts. And if I'm not paying attention in the run-up to those times, they can trip me up and suddenly I have to find money from somewhere for those... for those expenses. And I will look like, like a bad sister, daughter, wife, etc, if I don't sort those things out. So - seasonality - what is the picture of your money over time each year? Understanding that will help you a lot.

And finally, I just want to say, you know, if you are somebody who finds paying attention easy and who actually gets super motivated by monthly net worth figures, and watching the debts fall and the investments rise and getting really nitty gritty about everything all of the time, congratulations, good for you. Well done. It's not me. And I can't do that. But I admire you. I think that's fantastic. And I hope that you are proud of yourselves, and I'm glad you have a system that works for you. But if that's not you, and you're like me, then be realistic. Don't beat yourself up about it. Think a little bit, stepping back, think a little bit laterally. What systems can I put in place? Where can I automate and where can I pay attention? So that I am not making admin my hobby, if it's gonna make me miserable and make me beat myself up. Because getting this balance right, can be really powerful, both for having more money and being in a better financial place, and also for feeling better about your money, and how you manage it.