Not saving? Strategies to help you start.
Americans have been spending more than they save for nearly two years. To turn it around, experts say, know your weaknesses.
from the March 5, 2007 edition
Page 2 of 3
"You have to decide which life goal is more important to you: Twinkies on your break or sending your kid to college," Mr. Filangeri says. "It does require a certain bit of emotional fortitude, and no financial planner is going to give it to you."
Sometimes a person can accomplish the personality analysis by reviewing what he or she has done in the past with unexpected income, Wishnasky says. If a person tends to spend tax refunds at the mall or expand living expenses after receiving a raise, then those point to habitual weaknesses that require preventive safeguards.
In some cases, he says, the most helpful professional won't be a financial planner but a psychologist who can help wean people of the costly emotional rushes they get from routinely buying new gadgets or handbags. He also worries that credit cards play an unhealthy role by fostering the illusion that saving is unnecessary because one can always charge expenses in an emergency.
Once dangerous thought patterns and personal weaknesses come to light, experts suggest building firewalls accordingly. If money in the bank is an invitation to spend, then move it to a certificate of deposit or individual retirement account (IRA) where withdrawal penalties are steep. And steer clear of certain stimuli, from television advertising to free-spending friends, if they tend to loosen the purse strings.
"Consider not carrying your credit cards with you if you tend to be an impulse buyer," says Adele Brady Bolson, a certified public accountant in Bellevue, Wash. "It's good just to leave that temptation at home and only use them thoughtfully after you've planned out your purchase."
Once safeguards are in place, financial advisers differ on where to find significant savings. Ted Sarenski, a certified public accountant in Syracuse, N.Y., says the best results come from relatively painless measures. He suggests carrying higher deductibles on insurance policies, getting books and movies from a library, and laundering shirts at home instead of sending them out.
"It's very hard to make major changes to your lifestyle," Mr. Sarenski says. "Small things do add up, and they don't change your lifestyle all that much," which makes them likely to endure long enough to make a difference.
But Ms. Bolson says lifestyle needs to be on the table for those serious about making long-term gains. Not only should families refrain from buying new cars on a regular basis, she says, but they should also investigate carpooling, downsizing from two cars to one when possible, and not buying cars for teenagers. She also urges clients to weigh the merits of relocating to a smaller home.
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