Household Budget: 8 Sneaky Saving Strategies
Here’s a timely question that came to Kiplinger’s Personal Finance magazine deputy editor Janet Bodnar… and her response.
“I’m in my 20s, and I’m shocked at how many of my friends don’t seem to understand how to save money now in order to use it for other things in the future. How can I get them to understand this?”
You may have your work cut out for you. A study by Wachovia and the Consumer Federation of America found that among all age groups, young adults ages 18 to 24 are the most likely to say they’re not saving adequately (62 percent versus 52 percent for all Americans).
Asked about what keeps them from saving, they’re more likely than the general public to cite psychological factors: spending to feel good (54 percent versus 29 percent); social pressure from friends or family (38 percent versus 20 percent); trips to the mall (32 percent versus 15 percent); and impulse spending (53 percent versus 37 percent).
Looks like a little reverse psychology is in order. Here are 8 psychological tricks guaranteed to help your friends (and you) spend less and squirrel away more:
1. Save or invest automatically with a bank, a mutual fund or your retirement plan at work
So that money is taken off the top of your paycheck before you see it or spend it. The surest way to save is to have someone else do it for you. No matter how much you make, the tendency is to spend it all.
2. Deposit your paycheck directly to savings
Rather than to your checking account. You can transfer money to pay your bills, but psychologically it’s tougher to withdraw money from savings.
3. Limit yourself to one ATM withdrawal per week,
Make your cash last. That way you’ll always have a “slush fund.”
4. Give yourself a 24-hour cooling-off period
If you’re waffling on a purchase, chances are you won’t go back.
5. Buy a couple of storage bins (even a shoebox will do)
Collect credit card and ATM receipts. That will help you get organized, and give you a visual record of your spending.
6. Toss spare change (and even stray singles) into a jar
Keep it on your desk or dresser, and watch your money grow to hundreds of dollars a year.
7. Each time you resist the temptation
To buy a latte or go to a movie, put the money you would have spent into your cash jar. It’s an immediate reward for self-discipline.
8. Once you finish paying off a loan or a credit card balance
Continue depositing the payment amount in a savings or investment account.
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