By Patricia L. Fitzgerald 2015-01-05 19:46:16
Saving your pennies will help you get what you want, what you need— and a little peace of mind, too. WISE MEN (and the Rolling Stones) declare that “you can’t always get what you want.” True? Well, School Nutrition won’t get deep into philosophical ruminations; suffice it to say that when it comes to affording the cost of the things you want, if you have a goal, an array of strategic tactics and some tenacity in hand, there’s every reason you can expect to prove those naysayers wrong. But each of those factors is essential to successfully saving up for the things you want and will need. A Spendthrift Society “Americans Still Aren’t Saving Enough.” “Shocking Number of Americans Have No Retirement Savings.” “More Than One-Third of Americans Have No Savings.” These headlines from the past six months tell the tale. A 2014 Bankrate.com survey found that more than 25% of Americans have no emergency savings; of those who do, two-thirds have less than six months’ worth of expenses put aside. Flat wage growth, high household expenses and student loan debt are factors, but so is, “Americans’ proclivity for buying stuff,” asserted Greg McBride, a Bankrate analyst, in a USA Today article. “I’ve had people stand in front of me with a $5 latte and a $500 iPad and say they couldn’t possibly save more than they are now.” A Fall 2014 video series produced by The Atlantic notes that the United States has one of the developed world’s lowest savings rates. As author Derek Thompson points out, “Americans love to obsess about wealth, but we’re less mindful of the small act of discretion that makes wealth possible: not spending that dollar we just earned.” We’re “addicted,” he says, to spending all the money we take home. In the 1970s, the average American household saved roughly 12% of earned income, while today, families save slightly less than 5%. Acknowledging that top earners save quite a bit and those struggling at the poverty line save even less than average, Thompson contends there are more elemental problems in play for those who can afford to save, but don’t. It’s a matter of psychology, he asserts: We are bad at planning for the future, and we tend to give in to satisfying cravings and seeking instant gratification. Plus, “There’s some evidence that the wealth gap encourages low-income families to spend more on status items, like jewelry and nice shoes, instead of saving. It’s harder to keep up with the Joneses when the Joneses always make us feel poor,” notes Thompson. Additional excuses for not saving can be found online as part of School Nutrition’s bonus web content. Visit www.schoolnutrition.org/snmagazinebonuscontent to review and strategize ways to redirect your thinking. But read on to discover how to get started saving. Unconventional Savings Strategies Looking for suggestions on ways to streamline your budget and allocate more money to your savings account? You probably already know many of the tried-and-true tactics, including, but hardly limited to: organizing social events at home instead of out, creating handmade gifts or gifts of service, brown-bagging your lunch, switching to generic or store brands, bulk buying staples on sale, giving up expensive habits like smoking, doing holiday shopping right after the holidays, hiding your credit cards, canceling magazine subscriptions when you fall behind in your reading and so on. You can find literally hundreds more in a simple web browser search. But following are four somewhat less-conventional ideas that might pique your interest and attention. 1. TURN OFF THE TELEVISION. Sure, you’d save (a miniscule amount) on your electric bill, but the real motivation is that when you step away from this energy-draining addiction, you also step away from other unhealthy—and sometimes costly—habits, while potentially stepping toward more positive and nurturing activities. Have you ever totaled the sedentary hours you’ve spent each week, sunk into the couch cushions, mindlessly eating less-than-nutritious snacks or drinking or smoking too much? While a moderate amount of TV can be an escapist recharge, too much is mind-numbing and energy-sapping, keeping us from setting new goals and taking the steps to get there—including goals that require a nest egg. Plus, some experts contend that the endless barrage of advertisements creates an “I-want-that” mindset that pushes us to spend more now and save less for the future. 2. WAIT. If you did a little analysis of your spending, you’d likely be surprised by just how much you spend on impulse purchases. These happen all the time, from the new snack item that caught your eye in the supermarket to the pair of sunglasses you picked up while waiting for the pharmacist to the second (or third) pair of shoes you bought for yourself when you intended simply to replace your son’s worn-out sneakers. Break this habit by employing a 15-second review. Before heading to the checkout, take another look at what’s in your cart or shopping basket. Take 15 seconds to review each item that wasn’t on the original shopping list. Ask yourself why you’re buying this. Do you need it? Do you need it now? Can it wait? Can you put it on a list and get it another day when it’s on sale? Actually pick up the item and hold it in your hand—this will make it easier to put it back on the shelf and walk away. Taking those 15 seconds won’t make you late for dinner—even if it’s really a full minute spent contemplating four potential impulse buys—but you’d be surprised at how much thinking you can do in that time and how your pragmatism and/or self-discipline can prevail over the initial urge. A related tactic is to establish a 30-day waiting period for those items that fall between casual impulse and a “want-it-now” mentality. Maybe it’s the cute new smartphone cover that you don’t need—yours is perfectly serviceable—but it caught your eye and made you smile. If you still want it after 30 days, go ahead and indulge—especially if you spent that time putting aside the money to cover its cost! Are you talking yourself into the impulse purchase now, because you’re worried you will “forget” about it over time? Maintain a 30-day list in a notebook or use the memo feature on your smartphone. 3. VISUALIZE YOUR MOTIVATION. Sure, you know all the reasons you want to save money, but it can be easy to forget these when you’re stressed or bored or seeking a little “retail therapy” as a distraction from negative thoughts and emotions. A visual reminder of your financial goal can help to keep you on track in the face of temptation. This can take different forms; perhaps it’s simply an advertisement of a particular new car or a vacation destination that you rip out from a magazine and post in your bathroom or keep clipped to your credit card or folded into your checkbook. Or consider the old-fashioned thermometer image, establishing your target for a college fund or expensive leather jacket. It’s easy to draw and set the benchmarks, filling in the image as you reach each one. Is your savings goal about something a little less tangible, like retirement? Create a vision board collage of images and words cut from magazines that emphasize the life you want to lead when you stop working full-time. For example, it might emphasize health, strength, security, travel, peace of mind, relaxation and so on. Simply glue these onto a piece of cardboard and place in your home office, near your computer or wherever you pay bills. 4. VISIT THE LIBRARY. Your public library is a treasure trove of resources that can help you meet your savings goals! First, it has books. Find titles about personal finance, money management, budgeting, getting out of debt and so on. Similarly, borrow instead of buying books related to various projects, such as researching a travel destination, learning a language (say, the one spoken at that travel destination), maintaining your car, researching a new appliance purchase and more. Free movie and music rentals, along with many free lectures, readings and other community-based events, can help you manage your entertainment expenses. If you’re cutting back on newspaper and magazine subscriptions, you can read many of your favorites at the library—with a bonus clutter-reduction benefit. Go for the Goal Let’s face the music and concede that most of us are bad at saving—but we want to be better. A good place to start is to reflect on our immediate, short-term and long-term wants and needs. LITTLE LUXURIES. When you schedule a hair weave, indulge in a monthly pedicure, buy tickets to next weekend’s big game or join friends at a spontaneous happy hour, where does the money come from? Are these expenses that you’ve allocated in a “personal,” “entertainment” or “miscellaneous” category in your budget? If not, they should be. If doing so would make your budget go bust, then you need to save for these types of little luxuries, rather than paying for them on your credit card and incurring debt. LARGER LUXURIES. How about pricier indulgences? It’s hard to imagine that you’ve accommodated the cost of the new iPhone, Xbox or Kindle upgrade you intend to buy into your monthly budget, and yet wasn’t that you in line the day the new product launched? Don’t forget your son’s must-have-or-I-will-be-a-social-pariah brand-name sneakers or your decision to get your kids their own laptops to facilitate homework projects. These are just a few examples of bigger-ticket “wants” that somehow get translated in our brains as “needs” that must be satisfied immediately. SHORT-TERM EMERGENCIES. You got rear-ended on the interstate. A gigantic tree limb fell and smashed your fence. Your daughter lost her glasses on the school field trip. Presuming that you have insurance for such incidents, it’s likely you still will incur various out-of-pocket costs. And what about the unexpected emergencies not covered by insurance, such as the need to replace an appliance, get new brakes installed or fix a broken tooth? LONGER-TERM EMERGENCIES. Will you be able to pay your bills if you lose your job? How about if you get sick and go on long-term disability, and only a portion of your salary is covered during this period? What if you need to provide some kind of financial assistance to aging parents who are living on a fixed income and facing their own emergency? No one wants to imagine the worst, but it comes—and it comes without warning. Being prepared financially can help lessen the impact of the blow. EDUCATION. Do you intend to help support your children in pursuit of their education goals after high school? For many professions today, college is not an option, but a requirement, and the skyrocketing costs of higher education are the subject of regular news reports. How will you ensure your child’s future without saddling him or her with crippling debt? RETIREMENT. Have you researched how much you will need to live comfortably—without medical issues—for 10, 20 or even 30 years after you intend to stop working? Are you presuming that Social Security and any pension or retirement plan income will be sufficient or have you actually done the math? If not, you might be in for a rude awakening. LONG-TERM CARE. If you or a loved one develops dementia, you could require round-the-clock medical/attendant care for years—especially if you are physically healthy—at an exorbitant cost not typically covered by Medicare. Are you prepared for this possibility? Other physical and mental ailments may make it impossible or unsafe to live independently and the best options come at the highest cost. Invest in Good Strategies With any luck, the preceding list now has you thinking seriously about making the creation of a mix of different savings strategies to underwrite a mix of different goals a top priority for 2015. What next? Start with your budget. (Don’t have a budget? Turn to page 38 for details on getting one together.) How much is available for, say, “general operations” that could and should be set aside for savings? What can you do to increase this amount? Some suggestions appear in the box on pages 29 and 30, as well as in many of the accompanying articles in this issue. Start simple. A low-interest bank savings account won’t accrue very much interest, but it will help to get you in the habit of taking money out of your checking account and putting it “elsewhere.” Even if the funds are still easily accessible and require continued vigilance against spending, simply designating a separate account is a good psychological tactic. Make contributions, even a few dollars, from every paycheck. If you get a bonus, an award, a gift—designate at least a portion of that unexpected income to go to your savings, as well. As your budget allows and you are ready to explore options that allow greater earnings on the money you are setting aside, consider various investment opportunities, such as a CD, a money market account, an employer-sponsored retirement plan, a 529 savings plan for college and so on. Many of these terms are defined in the article beginning on page 34. Seek expert advice and make informed decisions. Don’t blindly trust the casual recommendation of a coworker or neighbor—make sure you research thoroughly any investment option under consideration. What are the hidden costs, such as maintenance fees? What are the too-good-to-be-trues? What are the risks? Start with your bank or credit union and ask a representative to review its available savings options. Don’t be pressured to commit to any of them right away. Make time to think through the pros and cons, following up with your own research. As appropriate, you can graduate to working with a certified financial planner or other expert for more sophisticated savings options. Be Tenacious The most worthy goals and the smartest strategies take you only so far. You have to have the willpower, the self-restraint, the discipline—whatever you want to call it—to stick with the plan. It’s gonna hurt at times. It will mean compromises and delayed gratification. Also, you can count on there being some setbacks, such as when you must raid your little luxuries account in order to compensate for insufficient funds available in your emergencies account to replace the broken water heater. Hang in there. Keep the faith that the day will come when you can plan the big vacation without dreading the subsequent credit card bill or breathe a little more easily in the face of an emergency. Don’t wait any longer to get started; let savings be your saving grace for financial security. Patricia Fitzgerald is editor of School Nutrition. Her savings strategies include contributing something from every paycheck to three separate savings accounts: one for emergencies, one for vacations and one for her car. Photography by iStock/jiunlimited.com. BONUS WEB CONTENT Why aren’t you taking purposeful steps to saving your pennies? Visit www.schoolnutrition.org/snmagazinebonuscontent to review some of the top excuses. Understanding the reasons you are getting in your own way will help you to develop effective strategies for going forward.
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