Budgeting is cool. A doctor says.

Five minutes with…behavioural economist, Dr Nick Southgate

1. Can being sensible with money ever be cool?

Yes, absolutely it can. I used to teach a class called How To Be Cool?, and the coolest people are those who can stay in control. So even if being a spendthrift in the moment seems exciting, we’re confusing that with the genuine achievement of being in control of your life in a way that feels effortless and calm. If you’re not in control of your money, and your money’s in control of you, that’s inherently uncool.

2. Why is it easy to get in to debt and hard to save?

We have an easy debt culture and the opposite saving and planning culture. But I think that’s just because the financial sector has created easy ways to borrow and spend almost without thinking, and not anything similar for saving and planning our money. Part of the FinTech revolution must include products that make it as easy, rewarding and intuitive to manage our money as it is to spend and accumulate debt.  Apps and the data they collect can illuminate our spending and saving habits and this should help us to become the financially competent individuals we want to be, rather than being buffeted by impulses and half instincts about how much money we have and how much we’ll have in the future.

3. Are some of us just smarter with money than others?

Of course, we’re not all the same and some of us are more impulsive than others, but our behaviour isn’t just driven by what we want to do – it’s driven by what we can do. This relates to the earlier point, that the dominant features of most FinTech innovation is fast spending and credit. But I’m genuinely optimistic that if we create opportunities to plan our money, to put money in the place in our lives where it ought to be, that many personality types will be drawn to this new opportunity. I really think it’s the opportunity that creates more positive behaviour, and not just how people want to behave. Personality isn't destiny - opportunity is.

4. Any tips on getting better at managing our money?

We all know we should put some money aside but it’s a broad, generic and badly defined habit. When we can start saving up for a certain thing, it’s much more effective: we find it easier to save for a holiday if we put money in a jar marked ‘holiday’, and are more likely to pay our tax bill if we put it in an account marked 'tax'. Being specific about tasks for money is very motivating, and you can see how planning like this can change the amount of money you have saved.