The Smartest Way Blog

  • Savers work their plan

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    A person’s ability to save depends on his or her habits. Firmly ingrained habits can increase your ability to postpone the desire for “instant gratification.” Savers have developed habits that help them “plan their work and work their plan” to their savings goals.

    If you have a low tolerance for delayed gratification, here are some ways to strengthen your “savings muscles. One strategy is to find a way to make saving your money a gratifying endeavor. Another way is to make your goal very specific. Also, you can have a vivid, sensory imagine what you will experience as the result of your saving.

    While planning is essential it is only the first step. Planning without doing, won’t get you anywhere. A great idea without implementation is just an idea.  You need a roadmap to where you’re going, but then you have to get on the road and move. Remember if you goal looks too big, you won’t start working toward it. There is an old saying that “the only way to eat an elephant is one bite at a time.” It is doing that results in getting. “Without doing there is no getting.”

    Automatic savings plans can launch you toward you savings goals. Your paycheck is automatically deposited by your employer. This results in saving you time, earning you more interest (since your money goes into your account earlier), and most importantly putting you on a guaranteed road to financial success. Talk to your banker about it.

    Do not spend money on things you do not need. This is not as easy as it sounds. “Is it a want–or is it a need?” is a complicated question. Often, people think of too many of their expenses as needs. Hard times, however, require hard questions. The answers redefine one’s concepts of wants versus needs. For example, does your elementary school child really need a cell phone–with an expensive text messaging package? Does your first baby really need to be driven around in a large SUV? Does your fifteen-year-old really need a brand new car? Do you really need the very latest palm, pod, pad, or video game? You will be surprised by the number of trimmable expenses you can find. Just think of them as “trimmables” that you can cut back now, and add later if necessary.

    Which would you rather have: a high-fashion wardrobe—or your own home? Your wardrobe will inevitably go out of style. Your worn clothing has far less value than when you bought it. But property has lasting, long-term value.  While many say that they want their own home, they may not have thought through the daily choices that are required to reach that goal. A six- to twenty-four-month change in lifestyle may be all that is necessary, but it requires a dramatic adjustment in ones thinking and attitude and actions.

    Deferment of gratification, clear visualization of long-term goals, and learned patience and optimism are some of the qualities that “saving for the future” require. Combine that with honesty and wisdom about what is really necessary and what can be eliminated at least temporarily, and you have the secret sauce to how savers “plan their work and work their plan.”

     

  • Dear Saving Smarties

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    DEAR SMARTIES: My parents were children of The Depression. They taught my sisters and me to buy only what we could pay for and to not depend on credit cards. I have a friend who wants me to help her “stimulate the economy by shopping.” She wants me to go on a spending spree with her rather than to save.

    But it’s hard to feel obligated to go out and spend money just to “save” the economy. I have to save myself before I save the economy.— Stimulated by Saving in Simi Valley

    SAM: I, too, was raised by frugal parents. I was born in the middle of The Depression, so it didn’t seem unusual to me that everyone was very careful with their money. These days, there is a lot more financial information available.

    Nevertheless, people still need more experience in living frugally and keeping money safe.

    You are on the right path. Rather than spend extra money with your friend, save it and invest it to gain financial independence.

    HEIDI: Like Sam, I was raised to “pinch pennies” and not be ashamed of my circumstances.

    To make up for my childhood of hand-me-downs, at one point in my life, I was a personal shopper. I loved to help other people shop and spend their money.

    With your shopaholic friend, maybe you could compromise. Tell her that you will shop with her if she lets you help her make good choices. Then bring only a few dollars to take to buy yourself a little treat, so you can have a memento of the day. Since your friend is in such a hurry to spend her money, see if she’ll buy you lunch, too.

    DEAR SMARTIES: Many people’s savings, investments, retirement funds and college funds have tanked over the last year.

    Where do we go from here? — Caught by Surprise in Cerritos

    SAM: Back to basics. Keep your safe money safe. Don’t put the money you need at risk.

    Save as much as you can in cash, especially right now, until we see which direction the economy is going to go. Markets fluctuate. Historically, that’s what they have always done. “Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist,” said economist Kenneth Boulding .

    HEIDI: The pressure to get into the market was fierce. The assumption was that without stocks, retirees would never have enough money to retire. I am very concerned about those who became overly confident in their market-tied investments. It became very easy to trust “happy” statistics and make the assumption that past performance somehow guaranteed future results.

    DEAR SMARTIES: My husband just got laid off. I’m glad we didn’t try to keep up with Jones. Instead, I saved for a “rainy day.”

    Well, get out your umbrellas, cuz here it comes.— It’s Raining in Rosemead

    HEIDI: Umbrella, indeed. How about a tent or cabana, something you can live under for awhile? This mess took years to create, it will take years to fix. There is a term being used lately, “the New Normal.” Nothing feels normal anymore, but we will all learn to adapt.

    SAM: We’re glad you saved for a “rainy day.” Good for you! The economy may not turn around for awhile. In any case, everyone needs financial reserves.

    In good times, they can be invested to provide income. In bad times, they will help get you through until the good times return.

    Heidi Clingen is a long-time resident of Stevenson Ranch. She is the co-author of “The Smartest Way™ to Save, Why You Can’t Hang on to Money and What to Do About It,” with Samuel K. Freshman. They offer only their opinion, which does not constitute professional, financial or legal advice. To receive a copy of The Principles of Financial Independence or to submit questions, email Heidi@TheSmartestWay.com.

  • What is the lack of consumer financial literacy doing to our country?

    imageAre you someone who sometimes tries to appear affluent? Or are you really wealthy? Ever notice how the truly wealthy sometimes do not look like it? You can appear affluent when you are actually broke. You can buy the largest flat screen television, the shiniest jewelry, the latest fashions, and the snazziest cell phone. However, your bank account is the most accurate sign of true financial wealth.

    Do you take responsibility for your finances? Do you use your money? Or do you let your money use you? Do you know what your monthly expenses are? Do you have a budget? Do you talk to your family or significant other about your finances? Do you have financial priorities? Do you realize you need to spend less and save more? Consumer financial literacy is about answering some of these questions as they apply to each individual.

    Literacy starts at home. The not-so-scrupulous media and well-intentioned parents taught their children how to spend. Unfortunately, they may have neglected to teach them how to be frugal. The world is a harsh teacher, and now the economy is forcing young people to reorder their values. Young people say they are willing to accept less. They prize the virtues of simple living and autonomy. They switch jobs out of boredom and lack of loyalty. Despite their high level of education, their employment rate remains much lower than the national rate. Reports say that they are the first generation in a century to not end up better off financially than their parents. We hope that trend can be reversed with an injection of reality and common sense.

    Some will take advantage of sound financial advice. If they don’t want to learn money management from their parents, they can find other mentors. Young people need to find a mentor and ask them: What was the best thing you ever did financially? What was the worst financial decision you made? Then ask your mentor to help you translate that into today’s economic reality. If the thought of “saving for retirement” sounds like a monumental goal, start small, like saving for a new (or used) sofa or car, then move on to funding a savings account with a six-months worth of  living expenses for “just in case.” Start small, start today, set the steps that you will follow next week and next month. And tell your friends, so they will support your efforts and keep you accountable.

    Children desperately need to learn consumer financial literacy, not only at home, but at school, K-12. However, curriculum adjustments are maddeningly slow and teachers acknowledge they are unprepared. When young adults (and 21 is still very young) need to be warned that credit cards are only for real emergencies. They need to be urged to pay way more than the monthly minimum toward the balance each month. They need to understand that the choices they make today will affect the rest of their lives. They need to cherish their now-golden credit ratings as the precious key to achieving their financial dreams.

    (Source: What is the lack of consumer financial literacy doing to our country)

  • How to Develop Financial Discipline

    Sam loves quotes from authors and wise folks. As W. Somerset Maugham so sadly pointed out, “The unfortunate thing about this world is that the good habits are much easier to give up than the bad ones.” Someone else observed, “Bad habits are like a comfortable bed, easy to get into, but hard to get out of.”

    Discipline is not fun. However, discipline is required to treat your money properly. If you treat your money well, your money will be good to you. Here are some ways to treat your money well:

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    Get a good return on your money

    Everyone wants to get a good return on his or her money. How would you like to make 10% to 20% on your money? Here is an easy way: pay off your credit cards! If you do not have to pay your credit card interest rates of 10% to 20%, it is the same thing as saving or earning that money. Do not be one of the vast numbers of credit card holders who are paying interest on their balances. Be smarter than they are.

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    Verify your expenses

    Open up each bill when it arrives and analyze each bank and credit card statement to check if it is accurate. Put each bill in its own file or envelope.

    For your checking account, use check stubs that make a copy of the checks you write. This helps you keep your checkbook balanced because it provides a copy of all the checks you wrote, in case you forget to note it in your records.

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    Avoid ATMs

    Avoid automated teller machines. Sure, ATMs are convenient, but convenience costs. If you use an ATM at a bank branch that is not your own branch, many banks charge a fee for using that ATM. Some banks have been raising these fees. The fees can add up fast. The cure for ATM dependency is to plan ahead, go to your bank during bank hours, and withdraw the cash you need.

    Do not hide your spending behind “saving” with coupons or sales

    When you buy something, if it is a “want” rather than a “need,” it is not a savings, even if you used a coupon or got it on sale. You did not really “save” money; you spent money. This reminds us of the story of the spouse who proudly returns home from a shopping trip and tells his or her mate how much money all the sales at the store “saved” them. The response from the mate is, “If we saved so much, why do I feel so broke?”

    We encourage you to use coupons and shop at sales. Just do not let yourself be carried away by all the spending opportunities.

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    Earn extra money

    To reach your goal of having extra money, you may need to explore beyond your “comfort zone” and look for new ways to make more money.

    Weekend or evening jobs can supplement your earnings. You can share your home or apartment with a friend, relative, or tenant and split expenses with them. For extra spending money, you can tell friends and family that you are willing to house sit, pet sit, walk dogs, run errands, or provide other occasional services.

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    Sleep better at night

    There is an old saying, “Make good habits and they will make you.” Soon, your new savings habits will become easier and you will start to see how they make good things happen in your life. In addition, the peace of mind you will gain will help you sleep better at night.

  • Your Money and Your Financial Partner

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    Money is not the root of all evil. Money is just a tool to acquire goods and services. It’s how people use money that determines whether money is working for good or not.

    You’ve noticed that everyone thinks differently about money. How do the people in your life spend their money? This is a very important question. If you live with someone—a spouse/significant other, a relative, or a roommate—he or she to a certain degree is your financial partner and can help or hurt you financially.

    Who is your financial partner?

    If you are married, your spouse is your key financial partner. A divorce would dissolve your legally binding partnership. Even if you don’t handle any of your spouse’s money, you may still be responsible by law for every financial decision that your partner makes.

    How well do you know your spouse/significant other? How well does that person handle his or her money? Does that person desire financial independence like you do? If not, you could be headed for serious, long-term problems both in your finances and in your relationship.

    Who is the “spender” and who is the “saver” in your relationship?

    Look closely at how your spouse/significant other handles his or her own money, as well as the money you share together. Both of you may say that you want to save money, but one of you may resent the other’s desire to spend.

    In a relationship, there can be two basic attitudes toward money—the attitude of the spender and the attitude of the saver. The saver desires financial security for both of you. The spender wants a comfortable and pleasurable life for both of you. Which one are you? Which one is your spouse/significant other? Are you working against each other or together?

    Don’t be afraid to talk about it

    Plan a specific time to sit down together and discuss your money situation and your feelings about money. Decide with each other in a non-argumentative way about whether you each are spenders or savers. Explore about why you are either a spender or a saver. Was your desire to save or spend a part of your upbringing? Does your desire to save or spend mean that you care about your partner?

    Acknowledge that each of you is trying to take care of each other in your own way. Since you have formed a financial partnership together, you need to agree on your financial goals and how you can work together to achieve them. An honest, peaceful conversation will help you understand each other better and help you join together to handle your joint finances effectively.

    Don’t let money conflicts ruin your relationships

    Studies have shown that one of the greatest causes of divorce is financial stress. Money is one of the most common things for couples to argue about. It’s not surprising that disagreements over money cause more than 50% of divorces today.

    Find common ground, compromise, and meet each other in the middle. There is no question that being responsible and successful with financial matters leads to better and more meaningful relationships. Healthy relationships have enough mutual respect and commitment to adjust to each other’s needs and concerns. Talk it out peacefully and thoughtfully. This will help lower some of the emotional walls that have built up between you both.

  • Study Your Finances: Money 101

    imageIts’ time to study up on your finances. One place to find financial information is at your local public library. You also can read free online magazines about how to save money.

    Here are a few magazine websites to visit:

    America Saves is a nationwide campaign of more than a thousand non-profit, government, and corporate groups to encourage the financially vulnerable to save and build personal wealth. Go to www.americasaves.org to find out more information and suggestions. Also, you can sign up for money-saving tips to be emailed to you daily at www.dailycents.com.

    Television shows and television news segments offer financial advice and suggestions about consumer products. American Consumer TV www.americanconsumer.tv and Real Simple www.pbs.org/realsimple on your local public television station are two of many television programs you can watch.

    Your newspaper may have a column on how to save. For example, the Los Angles Times has a business section with savings tips. You can find out more at the Los Angeles Time’s website: www.latimes.com/costofliving. Also, visit libraries and bookstores for books, audio tapes and CDs with financial advice.

    As with all advice, carefully analyze financial advice that you hear or read about in the media. Remember, it is designed for the average person, not you specifically.

    Ask for advice

    When you meet people who are successful at saving and keeping a budget, ask them how they do it. You don’t have to “re-invent the wheel.”

    Ask financial consultants for their suggestions about how you should save and invest your money. Examine their suggestions carefully, and don’t rush into anything. Ask lots of questions and listen to the advisors’ answers. Do you understand their recommendations? You must decide if their advice is going to help you specifically, not just most people in general.

    Even the best advice has its advantages and disadvantages. Sometimes, in their eagerness to promote advantages of a particular financial product or strategy, advisors neglect to fully explain the disadvantages.

    One example of lack of communication is “sub-prime teaser-rate” home loans. These loans have a low “teaser” rate at the beginning, in order to help get the buyer into the loan. But the interest rate rises sharply when the loan rate “resets” and the monthly house payment can skyrocket. When home buyers heard the advantages of these loans, they sounded like a great idea. They assumed that they would be able to handle the payments when they increased later. Many homeowners claim, however, that they didn’t fully understand the huge potential disadvantages when they signed up for these loans.

    It’s your responsibility to make sure that the source of any advice you consider—whether from the media, a friend, or advisor—is reputable and qualified to give advice on that topic. No one financial product or strategy is going to fix everything. Test the advice against your “gut” instinct and your research. Does the advice help you reach your goals? (Or do they help the advisor reach his goals instead?) Consider carefully if the advice is practical for your specific circumstances and if you are really comfortable following it.

    Be prepared to adapt

    “We’ve always done it this way.” These six words are opportunity killers. Change is hard but sometimes it’s necessary and often, it’s good. Don’t be afraid to try new approaches to see if they work for you.

    The world will continue to change at an alarming rate, and your life will change along with it. If you think about it, “change” is the only guarantee in life. It is the only thing about which anyone can be sure. We all have to live with the awareness that our current situation could change suddenly at any time—either for the better or for the worse. Live by the motto, “Expect the best, but plan for the worst.”

    Proactive people plan for any possibility. They are ready to adapt. You can be, too. Build your emergency savings fund now. Then you will be able to be flexible and adjust to the changes that are bound to occur eventually.

    Strengthen your character

    The choices you make with your money show your true character. Do you feel competitive, greedy, or impatient? Are you unwilling to wait for the things you want?

    Take a look at yourself and your financial reality. Build your inner character by doing what you know is right with your finances. This is financial maturity: to accept responsibility for your financial reality and take action to improve it.

    To pay attention to your financial reality is the reasonable and mature thing to do. Start today to make some changes in the way you manage your money. It will change your life.

  • Five Credit Card Don’ts

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    Credit cards can get out of control. It’s time to take the reigns and pull your debts back on track. Learn to handle your credit in a more efficient and manageable way with these five Credit Card Do’s:

    Don’t have more than two cards active

    Have a Visa or MasterCard, since some merchants don’t accept American Express. An American Express card may be useful if you travel a lot.

    Make sure the credit cards you carry have the lowest interest rate available on the market. When possible, switch to a credit card with a lower interest rate. To comparison shop rates, go to www.cardratings.com, www.creditrate.com and www.bankrate.com.

    If you have too many credit cards, pay off the extra cards, cut them up and cancel them.

    Don’t forget to keep an eye on the calendar

    You’ve heard about “no interest, no payments for a year” credit offers with major purchases. Beware that, at the end of that first year, the interest rate can jump to a very high rate. Unless you are extremely disciplined and know that you will pay the credit debt off early, these deals can cost you lots—not save you lots—of money.

    When they say “zero interest” for a year, find out exactly when that year ends and make sure that you have paid off the entire balance long before that date. Otherwise you may have a heart attack when you see your new, high interest rate.

    Don’t get into an anxiety habit

    Overextending your debt creates stress and irritability. This can affect your health and your relationships. You may tell yourself that high levels of debt are “just a part of life.” Nevertheless, trying to keep up a wealthy appearance for neighbors, family, and friends can eventually create a heavy stress. End the charade. Face up to your feelings of inadequacy. Explore how much you value yourself. Know that the value of each person is so much more than their paycheck or their possessions.

    Here is a strategy for those of you who are very disciplined. If you have the cash on hand for the purchase, ask if you can negotiate a discount for cash. If you can’t negotiate a discount, you could take the zero interest offer and make the purchase. Then take your cash on hand and invest it in an interest bearing account. Be sure to remember to pay off the debt before the zero interest period ends.

    Don’t be afraid to ask for help

    If you are having trouble controlling your spending, you may benefit from talking to others who have had the same problem. Debtors Anonymous www.debtorsanonymous.org uses the very successful 12-Step Program format. Refuse to use your credit card just as an alcoholic refuses to use alcohol. As those in any 12-Step Program know, you can fight your demons only “one day at a time.”

    Don’t use your credit to pay for vices

    Gambling, smoking, drinking too much, and illegal drug use are vices that can throw you into out-of-control spending and credit disaster. These personal weaknesses drain tremendous costs from you, both personally and financially.

    Gambling causes financial strain, even divorce. Smoking creates health problems that result in medical expenses and a shortened lifespan. Smokers also pay higher premiums on their life insurance, health insurance, auto insurance and property insurance. Alcoholism can slowly destroy one’s health, happiness, and family life. The most vicious of all personal demons, illegal drug use, is extremely expensive and potentially deadly.

    We all know that these vices are bad for us. Even still, one or more of them may have a steel grip on your life and your finances. If so, do the most simple—but perhaps the most difficult—thing you will ever need to do in your life: admit that you are addicted and that you can’t stop by yourself. Then you will find out the good news that you are not alone.

    Help is available to reclaim your life, your health and your finances. Click onto www.nicotine-anonymous.org, www.gamblersanonymous.org, www.alcoholics-anonymous.org, www.na.org (Narcotics Anonymous) and www.ca.org (Cocaine Anonymous). Also, ask your employer or church for referrals to support groups or counselors.

  • Five Credit Card Do’s

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    These days, everyone is thinking about how to handle their credit cards in the most efficient and responsible way. Here are five Credit Card Do’s to try:

    Pay your credit cards off in full every month

    After you learn to control spending and reach your savings goals, you can start using credit cards carefully, charging only the amount that you can pay off fully each month. Surely, you’ve noticed how interest charges quickly and quietly eat up your income. Now, you will never waste money on interest again.

    How will you know what your balance will be each month on each card? Just keep a memo of the date, the amount, and the location of each purchase. That way, when the bills arrive, you will be prepared.

    Report lost or stolen credit cards immediately

    Most credit card companies have toll-free numbers and 24-hour service to report lost or stolen credit cards. Keep a copy of the front and back of your credit cards at home, so that this information is readily available. Once you have reported the loss or theft of your card, you usually have no more responsibility for unauthorized charges beyond $50 per credit card.

    Acquire credit cards carefully

    Some credit card companies offer a “fixed” interest rate. But the “fixed” rate can change without notice. Check your statement every month to see if the interest rate has been increased. If so, call the credit card company to complain. The Federal Reserve is trying to require credit card companies to commit to a specific time period before they can raise the “fixed” interest rate on their cards. However, at the time of publication, this has not been accomplished.

    Credit card “enhancements,” such as travel discounts, gift certificates and other deals are designed to lure you into obtaining and using credit cards. Face it, once you receive a card, it’s hard not to use it and dig yourself deeper in debt.

    Buff up your credit rating

    One missed payment can lower your credit rating by as much as 100 points. Overdraft charges affect your credit rating, too. A poor credit rating can prevent you from buying a home or obtaining a loan. Banks and credit card companies offer lower interest rates to consumers with good credit ratings. A lower interest rate means you save when you need a loan. What is your credit rating, as of today? One way to find out is to go to www.myfico.com.

    Get help if you need it

    You may have more debt than you can handle by yourself. More drastic measures are required, such as negotiation with your creditors for debt relief.

    Get counseling if necessary

    If you are having trouble making your monthly payments, here are some useful websites for credit card debt counseling:

  • Learn the Difference Between Have-to, Want-to and Need-to Decisions

    imageHappiness is being satisfied with what you have. Unhappiness is always wanting more. To take responsibility for your money management is to manage your wants. Every decision can be placed in one of three categories: “have-to” decisions, “want-to” decisions, or “need-to” decisions. The first step is to separate your wants and your needs.

    Understand “have-to” decisions

    Have-to” decisions“ are decisions about what someone else wants us to do, or which you think you need to do because someone else expects you to do it. Do you worry too much about what other people think about you? For example, would you say to yourself, “I ‘have to’ buy that new car or house—or I will feel embarrassed around my friends.” Sadly, it’s human nature to judge others by their possessions, rather than by their character.

    Whenever you hear yourself think, “But I have to!” stop and ask yourself, “Do I really have to?”

    News flash: other people are not thinking about you as much as you think they are. They are too busy thinking about their own problems and themselves.

    You may have heard the phrase, “He who dies with the most toys wins.” Unfortunately, there is no way to win that game. Why? There will always be someone who has more toys than you. The game that you can win is this one: save, invest, and get rich. Here is the irony: If you’re so busy competing and trying to appear wealthy, you’re actually ruining your chance to become truly wealthy.

    Understand “want-to” decisions

    The next level of money motivations is “want-to” decisions. “Want-to” decisions are choices we make to buy things personal pleasure or comfort, temporary satisfaction or to relieve some stress or disappointment. Have you ever said to yourself, “I bought it because I wanted to. I know I couldn’t afford it, but I wanted it so I bought it anyway.” Look at “want-to” decisions carefully. They are seldom rational.

    To spend needlessly on “wants” puts you behind on your investment program and derails your track to wealth.

    Don’t catch “the wants” virus

    Don’t have endless wants. Learn to want only those things that you truly need. Constant longing for something you can’t have or shouldn’t have can make you miserable. This misery can be called “the wants” virus. You have “the wants” virus when you say frequently, “If only I had [fill in the blank].”

    Even if you finally get what you think you want, you may be surprised that it isn’t what you really wanted after all. You may have heard the warning, “Be careful what you wish for—you might get it.”

    Understand “need-to” decisions

    The last and most important level of motivation is “need-to” decisions. What is necessary to meet your life goals and care for your loved ones? You need to pay for your basic need of food and shelter (appropriate in relation to your income) and to save for investment, retirement, your children’s education, and unexpected emergencies. You probably have life goals that require investment in yourself for future reward.

    Everyone has had the unpleasant surprise of broken major appliances, unplanned car repairs, costly dental work, or medical tests. Someone close to you may need long-term medical care someday. Medical expenses can crack your retirement nest egg, if your health deteriorates. Health care costs are rising all the time and people are living longer than ever. Put all these possibilities together, and you can see that saving your money wisely is a “need to” decision.

    To categorize a purchase as a real “need,” you must have a clear understanding of your own definition of “have-to”s, “want-to”s and “need-to”s. A good test is to ask yourself The, “Is this the best use of my money? Can I live without this? Do I really need it to improve my life?” Keep your real needs uppermost in your mind. This will help you resist the “have-to”s and “want-to”s, and help you focus on the “need-to”s. If you learn to tell the difference between something that you need to survive from something that you simply desire, your purchasing decisions become easier to make and they will make more sense.

    How to Develop Financial Discipline

    As W. Somerset Maugham so sadly pointed out, “The unfortunate thing about this world is that the good habits are much easier to give up than the bad ones.” Someone else observed, “Bad habits are like a comfortable bed, easy to get into, but hard to get out of.”

    We all know that it takes discipline to handle money wisely. Nevertheless, if you treat your money well, your money will be good to you. Here are some ways to treat your money well:

    Get a good return on your money

    Everyone wants to get a good return on their money. How would you like to make 10% to 20% on your money? Here’s an easy way: pay off your credit cards! If you don’t have to pay your credit card interest rates of 10% to 20%, it’s the same thing as saving or earning that money. Don’t be one of the vast numbers of credit card holders who are paying interest on their balances. Be smarter than they are.

    Verify your expenses

    Open up each bill when it arrives and analyze each bank and credit card statement to check if it’s accurate. Put each bill in its own file or envelope.

    For your checking account, use check stubs that make a copy of the checks you write. This helps you keep your checkbook balanced because it provides a copy of all the checks you wrote, in case you forget to note it in your records.

    Avoid ATMs

    Avoid automated teller machines. Sure, ATMs are convenient, but convenience costs. If you use an ATM at a bank branch that isn’t your own branch, many banks charge a fee for using that ATM. Some banks have been raising these fees. The fees can add up fast. The cure for ATM dependency is to plan ahead, go to your bank during bank hours, and withdraw the cash you need.

    Don’t hide your spending behind “saving” with coupons or sales

    When you buy something, if it is a “want” rather then a “need,” it is not a savings, even if you used a coupon or got it on sale. You didn’t really “save” money, you spent money. This reminds us of the story of the spouse who proudly returns home from a shopping trip and tells his or her mate how much money all the sales at the store “saved” them. The response from the mate is, “If we saved so much, why do I feel so broke?”

    We encourage you to use coupons and shop at sales. Just don’t let yourself get carried away by all the spending opportunities.

    Earn extra money

    To reach your goal of having extra money, you may need to explore beyond your “comfort zone” and look for new ways to make more money.

    Weekend or evening jobs can supplement your earnings. You can share your home or apartment with a friend, relative, or tenant and split expenses with them. For extra spending money, you can tell friends and family that you are willing to house sit, pet sit, walk dogs, run errands, or provide other occasional services.

    Sleep better at night

    There is an old saying, “Make good habits and they will make you. Pretty soon, your new savings habits will become easier and you will start to see how they make good things happen in your life. Plus, the peace of mind you will gain will help you sleep better at night.

    How to Fight Money Procrastination

    A law of physics states, “A body in motion tends to stay in motion; a body at rest tends to stay at rest.” When it comes to money, procrastination—doing nothing—can hurt you. You may feel indecisive, not knowing how to start saving. But choosing to do nothing is still a choice with consequences. This choice can cause you to lose out on opportunities that could change the course of your life.

    The following suggestions can help you overcome procrastination in your savings program.

    Identify your favorite excuses

    We all have our favorite excuses for why we can’t or won’t do the things that we should. For example, we all know we should “eat less and exercise more.” It’s a simple concept. Why is it so easy to find good excuses not to do it? We tell ourselves, “I’m too stressed out,” “I’m too tired,” “I’m too busy,” “I’m too upset.” We claim, “I don’t have enough confidence or energy,” “That’s just the way I am,” or “I can’t do this on my own.”

    Here’s the deal: You can pick any excuse. Each excuse works as well as any other. No matter what your reason is, you are using it to stop you from doing what you know you should be doing. You are allowing excuses to paralyze you.

    Your excuses may be true and worthy, but it doesn’t really matter. The fact is, if you want to increase your savings and improve your life, you need to figure out how to overcome these destructive self-messages.

    Think of your “Top Three” favorite excuses for not saving. Write them down and take a look at them. To help you overcome the paralysis that excuses create, here are some ways to get started.

    Use automatic savings

    Automatic savings is an automatic deduction from your payroll check or your bank account to go into a savings account. You can set aside money weekly or monthly. Once established, the program will work in your favor. Studies show that workers who are on an automatic savings plan are more likely to stick with that plan.

    Automatic savings takes only a few simple steps to set up. They work because you never see the money. Some plans can be put into an investment automatically to start earning a return. Study the 401(k) plans and savings plans offered at your place of employment.

    Use automatic deposit

    You can have your paycheck automatically deposited. This way you can’t misplace your paycheck, and your money is available to you faster than if you deposited it in the bank yourself. If you track your bank accounts online, you can see exactly what checks have been deducted and what haven’t yet been cleared from your account. Don’t forget to check your statement each month for any bank errors.

    Use automatic bill paying

    Another technique is to pay bills automatically. This is when your bill payments are deducted from your bank account or payroll check and sent directly to the vendor to pay your bills. This prevents you from misplacing your bills, forgetting to pay them, or paying them late. If you’ve ever paid a bill late, you know about late fees and penalties. With automatic bill paying, your bills are paid on time, every time.

    To make automatic bill paying work, be sure you have enough money in your bank account on the day that each bill payment transfer is put through. Otherwise, you will have overdraft charges or checks bouncing. You can protect yourself from overdraft fees by acquiring a line of credit linked to your savings account. Nevertheless, there is no reason to overdraw your account. If you are concerned about exceeding your balance limit, put as much “padding” as you can into your account. But don’t spend the padding!

    Avoid overdraft fees and late fees

    When you have several payments pending, many banks have adopted the procedure of processing the largest check you wrote before they process the smaller checks you wrote. Banks make lots of money charging overdraft fees. They are more likely to collect those fees and more of them if they deduct the larger check before the smaller amount.

    Banks and financial institutions stay in business by making money. To do this, they use your money. To achieve that goal, they need to do several things. They need to acquire as much of your money as possible, keep your money as long as possible, charge you the highest interest rate possible, and pay you the lowest interest rate possible.

    On the other hand, the banker at your local bank branch can be very helpful. Go in and create an alliance with him or her. Ask for suggestions about how you can do a better job budgeting, saving and eliminating fees.

    You may be able to spread out the payments that are deducted from your account. Ask your creditors to try to change the “due dates” on your bills so that they are not all due at the same time of the month. This will help you manage your finances and prevent overdraft fees and late fees.

  • Economic Stress Reduction

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    The massive Baby Boom generation, those born between 1946 and 1964, is becoming eligible for government benefits. In 2010, an estimated 47 million people were enrolled in Medicare, up 38% from 1990. By 2030, the number is projected to be 80 million people.

    Baby Boomers were expected to receive an estimated $41 trillion dollars in “generational wealth transfer” inheritance from their elders. An AARP study says that fewer are expecting such a windfall, and more are expecting less. The main reasons: Inflation, taxes, and health care costs. The elderly are incurring more health care costs than ever and living longer than ever. (30% of 65-year-old women and 20% of 65-year-old men are expected to live to age 95.)

    We think it’s best to live your life without expecting something that is not guaranteed. That goes for Boomers and their children, too. The best, but hardest, way to find out what to expect is to talk about it. Have that difficult discussion about financial preparation. Then have the discussion with trustworthy financial advisors, such as an attorney, accountant, or CPA, to make the necessary arrangements and reduce tax exposure. Also, if you receive an inheritance, be watchful against emotional spending. Invest the rest.

    Boomers are in their “nesting years,” building their retirement nest egg. But the economic downturn is messing with the nest. This is a game-changer for life planning. Retirement accounts have been cut in half, pension plans are disappearing, and layoffs are increasing. Would-be retirees are working longer, spending less, and re-envisioning their retirement dreams.

    It is no surprise that stress soars when the economy tanks. Even in healthy economic times, when people feel economic stress, they tend to suffer from irritableness, fatigue, and sleeplessness. Stress is an equal opportunity killer. It does not care how much money you have or do not have. It strikes in two ways, seen and unseen. It leads to overeating, over consumption of alcohol and drugs, and smoking, not to mention depression and suicidal thoughts. Please, do not even think about suicide due to seemingly impossible-to-overcome debt, job loss, and loss of one’s home.

    Invisibly, stress wears down the body’s organs in a cumulative manner, as alcohol and cigarettes do. Stress builds up cortisol in the body, leaving it vulnerable to heart attacks, strokes, and bleeding ulcers. A heart attack could cost you a great amount unless you have health insurance to pay for it (another stressful topic). Why not avoid the heart attack and free up that money for something fun, instead?

    Do your best to avoid stress. You have heard the mantra: Manage stress physically by taking care of your body. Avoid unnecessary drugs, overeating, and overindulging. Feed your body more healthy food, give it more sleep, and make it perform more exercise. Manage stress mentally and emotionally with meditation, prayer, yoga, and enjoying various physical activities, hobbies, and friends. As the father of stress research, Hans Selye once wrote, “It’s not stress that kills us; it is our reaction to it.” Here is an added bonus to getting a grip on your reaction to your economic situation: you will spend less on medical and psychological support, thus saving money. In addition, you will reduce your economic stress and enjoy your life more!


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    Your partners in savings success,
    Heidi and Sam
    Authors of: The Smartest Way to Save: Why You Can’t Hang on to Money and What to Do About It