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Show notes

Many thanks to Anne-Julie for this week’s episode.

We discuss financial set points or as the originator of this concept calls them “the one hidden number that shapes your life”. The idea comes from Dr Joanna Martin, a coach and founder of two women’s networks.

It can roughly be described as the amount of money it feels normal and comfortable for you to have as your net worth (money saved minus money owed). If your set point is too low, you will tend to overspend to return to your low set point. This is true even if you have a genuine intention to save. If your set point is too high, you will constantly be anxious because you can never save enough to reach it.

Be especially wary of percentage set points e.g. negative 5% of current income. They grow as income grows and so the misery that they cause grows too.

N.B. Some people don’t have a set point. They are able to make a financial plan based on their income, outgoings and goals and then stick to it. If you’re one of those people be grateful! If you haven’t been until now, then learning about your set point should help you get there.

Our tips:

Try to work out your set point. Here’s Joanna’s method:
- Write down a rough guess at how much money you earned in the last twelve months.
- And then, think about how much money you have left.
- If you can, repeat this process for the past 5 years – or as far back as you’re able to with ease. How much did you earn, and how much did you have left, roughly, at the end of each year?
Write a journal about your set point, why you think it exists and what the advantages and disadvantages are of having such a high/low set point.
Being mindful about your money is key. Get as much clarity as possible about what you are saving towards. This will motivate you if your set point is low and if it is very high you can check whether it’s really realistic on your budget.