Managing Money – How to Make a Start

Money coach, Dennis Harhalakis, talked to us about why managing money can be such a struggle, and how to make a start by controlling our daily finances. He explains the basics of budgeting and how to balance spending and saving.



Why do people struggle with managing finances?

There are many reasons why managing money is challenging. 
Fundamentally, our brains are not wired for financial planning; 200 million years of evolution means we’re wired for short term gratification and immediate response to danger. If I really want or need something, the best time to have it is NOW. Why wait? We’re not geared up to address potential future challenges. Consequently, people usually think if they can afford monthly payments for something, then it’s affordable. They focus on the upfront payment and don’t take account of potential setbacks like losing their job or the cost-of-living crisis. They don’t really think about where their money is going and how they could spend less. And there will always be unexpected expenses (car repairs, housing costs, pet bills etc.) or even fun things like weddings or anniversaries. So, if you have no safety net, living on the edge is stressful.
In addition, finance itself has become really complex. Cash has practically disappeared, and credit has become ubiquitous, to the point where we can even buy a pizza on credit. And that’s problematic, because a cash transaction is a physical process where we experience a micro-loss moment: we hand over cash and get something back in return, even if it’s just a pizza.  Whereas when we use a credit card, a debit card, our phone, or we buy online, there is no such micro-loss moment.
Everything is ‘buy now, pay later’. If we don’t have the money to buy something, there will be some offer of credit to help us pay for it. There are free returns, so we can send back the item if we don’t like it; or we can order several versions to try.  Frictionless spending, frictionless credit, frictionless returns. It makes it hard to resist!
In terms of monitoring our spending, we rarely get any bills anymore.  We pay by direct debit, and just get an email with a link to our account. Unless we bother to log in, we won’t know what we’re being charged, or even whether the rate has gone up.
We have credit cards, debit cards, store cards and Klarna, pensions and SIPPs, direct debits and standing orders, ISAs and LISAs. Finance has become very complicated, and nobody explains or teaches us how to manage it. We kind of stumble through it. This uncertainty and lack of control makes us anxious. And the brain is wired to keep us away from things that make us feel bad, so engaging with our finances can be difficult. We struggle because it is hard. But we shouldn’t feel shame or guilt when we don’t understand, or we make mistakes. To draw an analogy, you wouldn’t be embarrassed if you couldn’t repair a boiler, if nobody had taught you how.

How should we make a start with managing money? 

Accept that it’s not easy, start with self-compassion. And learn how to engage with your discomfort around money, don’t run away from it.  One of the first steps in taking control of your finances is to realise that you can, and that you need to. Managing money is an important life skill, and it takes time and effort to educate yourself.  Don’t be afraid to ask for help from someone you trust, who won’t judge you.
Whatever your situation, everyone can have some control, by learning how the financial system works, how to avoid high-interest debt, how to build options for yourself. And that comes from developing a positive relationship with money. Commit to engaging with your finances. Think about what might make your situation worse, and what you need to do to make the future better.

Start with the practical aspects of managing your everyday finances.

Work out what you can control, then learn how to make good decisions around those things.
You can’t control inflation or interest rates or energy bills.  But you can control your spending habits.
And you can make a budget, to ensure you set aside a sensible portion of your income to rent, food and essential bills. You can also plan what to do with any spare money – balancing enjoyment now with saving towards your future.

Be Better at Budgeting

At the heart of all this, is to know where your money goes. Whether you have one bank account, or several accounts plus credit cards, find yourself a tool that allows you to track where every pound ends up, e.g. an aggregator app such as Money Hub or Money Dashboard. When you understand your spending, you can see where you may need to make adjustments.

Do you have any recommendations for controlling spending?

We spend because of emotions; emotions drive all our behaviour. Try to approach it from the perspective of how can I make good decisions?

Learn to practise social indifference

By that I mean, don’t be influenced by other people’s spending behaviours or possessions. Don’t be swayed by the endless media messages to buy this, wear this, drive that. Of course you should enjoy life, but recognise the danger signals. Most importantly, don’t believe that you’re not good enough without all these things, or that it’s the next purchase which will make you happy.

H.A.L.T. & W.A.I.T.

One of the best ways to control our spending is the H.A.L.T. method.
Hunger, Anger and Anxiety, Loneliness and Tiredness are emotions that impact our ability to think rationally, meaning we’re more likely to make poor judgements. If we’re Hungry or Tired, we don’t have enough energy to run the thinking brain. If we’re Anxious, Angry or Lonely, we have cortisol going around our body making us feel bad, and we look for ways to make ourselves feel better. So, H.A.L.T. and check for those feelings before making impulse purchases that you don’t need or can’t afford.  Think what you could do instead to make yourself feel better.
Slowing down the thinking and spending process using H.A.L.T., or my other favourite acronym W.A.I.T. (What Am I Thinking?), allows you to engage more of your conscious, cognitive processes and less of the emotionally driven reactive brain.

Use friction

If you want to reduce spending, make it more difficult – add friction.
This involves simple actions: turn off auto-reload on your debit card, disable Amazon OneClick, and don’t store your credit card details online. Companies use these automated payment systems to enable you to spend effortlessly – you don’t get distracted; you just click and it’s done.  But we want to slow down the spending process. If you don’t store your credit card details online, you’ll have to type them in every time; adding friction gives you space to consider whether you really want to make this purchase. Even better, leave it in the cart for 24h and then come back to it.
Set up alerts on your bank account and credit card. So, if you’re approaching your overdraft or credit limits, you have a chance to stop and think, and do something about it, and therefore avoid paying penalty charges.
We spend around 20-30% more when we use credit rather than cash. That’s important to bear in mind, because as cash is disappearing, every transaction becomes frictionless, whether that’s online, in the pub, or at a shop. You wave your card or your phone, and you’ve bought the thing, your money has gone. So, if you want to limit your spending on a night out, take cash and leave your credit cards at home – you won’t make sensible decisions in party mode!

How can we get into the habit of saving?

If your family didn’t save, and that behaviour wasn’t modelled for you as you were growing up, then you won’t do it naturally. You probably won’t understand why or how to save.
It’s not just a question of saving towards a specific thing or event; nowadays we need to save because we live in an uncertain world. First, you should put some money away as a financial buffer in case you lose your job, or the car needs a major repair, or the cost-of-living rockets unexpectedly. Building an emergency fund is important; don’t worry about the interest rate you earn, just put your savings somewhere safe where you can get instant access. Then you can begin saving towards something specific, or to build long-term financial security for yourself.

So how can we get into the savings habit? Make it easier, reduce friction for savings.
Don’t spend first and then try and save. Saving comes before spending in the dictionary, and in life. Of course, if you’re in a situation where you genuinely don’t have enough money to save, that’s different. But once you can afford to, set up a direct debit for the beginning of the month or whenever you get paid, to transfer a regular amount into your savings account or ISA. That’s frictionless saving.

How should people balance spending & saving? 

A lot of people – the FIRE crowd (Financial Independence Retire Early) – will tell you that “you just have to give up your lattes and your avocado toast and then you can retire millionaires”.  But it’s not just about deferring everything pleasurable into the future – it’s important to weigh up what makes sense for you to do right now. And that’s a personal decision.
As I mentioned before, the core of this is to really understand where your money is going.
When we did a spending analysis, a client of mine realised he was spending £30/week at Subway. It’s not a question of whether that’s a good or a bad thing, it’s just important to be aware, so you can then make a conscious decision around it. For him, once he had analysed his spending, the choice was simple: He wanted to increase his savings, so he opted to reduce his Subway spend to £10/week and save the other £20.
For another client, in a worse financial situation, we discussed ways of saving money on rent, taking a flask of coffee into work, and several other potential cost-savings. She said: “I work hard, I’m a single parent and I buy myself a coffee every day because that’s important to me – it’s the only time someone ever does anything for me.” And that decision is absolutely fine.
You don’t have to give everything up, otherwise you’ll wonder what it’s all for. It’s not a matter of whether or not you buy the lattes or avocado toast; what is important is whether it’s just a daily habit and you have no clue how much it costs over time, or whether you are making a conscious decision about it. Obviously, if you get into debt, then the lattes might need to be put on hold for a while. If you’re paying 30-40% interest on your credit card to fund your coffee habit, that is not taking you to a happy place.

Money is a mindset. The key to managing your finances is to really understand where your money goes, so you can make conscious decisions about your spending.



About Dennis HarhalakisDennis Harhalakis

Dennis founded Cambridge Money Coaching to help people change the way they think about money. He helps them tackle their financial issues to reduce the stress and enable them to make better decisions. In recognition of his work, Dennis was awarded the 2023 IFW Award for Financial Wellbeing Educator.

To find out more or contact Dennis about money coaching:

Cambridge Money Coaching
LinkedIn – Dennis Harhalakis


More from Dennis:

Grad Bites: Money & Me – Understanding our Relationship with Money

Grad Bites: Developing Positive Financial Behaviours


 Find out more about Budgeting:

How to Plan a Budget
Tools & guidelines for setting up a budget

How to Balance Spending and Saving
Are you struggling to juggle essential bills, spending on treats & still put a bit away for rainy days or holidays? Financial experts share their tips on how to make a money management plan to balance spending & saving