Frugal Times: Why and How to Save More.

You’ve probably heard this a hundred times over the past year: Spend less and save more money. Obviously, that’s great advice. But just how do you do it? M.P. Dunleavey’s brief article in the January 9, 2009 edition of The New York Times, Making Frugality a Habit, answers that not-so-simple question, first, though, giving some useful context.

Actually saving some money — let alone the thousands you might need to weather a crisis — results from a chain of habits and choices that does not, for many people, come naturally.

Among the families surveyed for the study, 75 percent “couldn’t survive for three months, if they had to do it on savings alone.”

My husband and I could easily be one of those families. Every time our emergency fund hits the one-month mark some crisis strolls along and gobbles up our funds. Then we start over. Now, I am determined to save the $15,000 that would cover our family’s most basic needs for at least three months.

A few tricks that might help. Start by finding a specific chunk you can save — perhaps cutting back cable, quitting smoking, renting out the garage or limiting spending on restaurant meals.
THEN do an end-run around your own inertia and use automatic transfers to deposit a set amount — $100, $200 or $300 — every month into an account not linked to your checking and definitely not accessible by PIN or with any piece of plastic. The first time I tried this, I saved $3,000 so fast it made my wallet spin.

So take care of yourself in this rocky economy. Fear can be a powerful motivator, but so is the lure of knowing that you have created some peace of mind.

25 Ways I Save Money, an older blog post at Cash Money Life, lists 25 very specific (and quite useful) ideas on how to cut expenses – some so basic, you’ll wonder why you didn’t think of it first!

Conclusion

We all know that having an emergency fund makes sense. Creating that emergency fund is another matter entirely. What doesn’t make sense, though, is to set yourself up to fail from the onset. What I mean by that is you should set an obtainable, realistic, end goal and make regular, realistic, contributions to get there. Hopefully, these articles will be enough to get you motivated.

Making Better Financial Choices, Part 1

New Year’s Resolutions are often included as a part of every individual’s holiday tradition. My own resolution – not new, because it’s the same every single year – is to get more exercise. In general, though, resolutions don’t have a good record of success. Even as you’re reading this now, it’s likely that many of your own resolutions have already been abandoned.

But, if your resolution was and is to make better financial decisions in 2009, I applaud you. It’s an honorable and worthy goal, and one that can be achieved with relatively little pain. Helping individuals to make better financial decisions, so that they maximize their chance of achieving their goals: That’s my professional objective; it’s also another of my perennial resolutions, but one I faithfully keep.

Rather than writing my own killer “Top Ten Things to do to Get a Grip on your Finances,” I did a Google search on what has already been written. There’s an amazing amount of stuff out there on the net, some of which is quite basic – spend less, save more, have an emergency fund – but still apropos. There is one standout among the crowd, The Best Financial Advice Ever by Liz Pulliam Weston.

Assuming you already know the basics, here is an excellent article: 10 Resolutions to Fix Your Finances by Allan Townsend.

Although the last update was more than a year ago, this Money Central article is still a keeper. It definitely goes beyond the basics.

No. 1: Set up a system.
No. 2: Bank online.
No. 3: Take stock of what you own.
No. 4: Get out of debt.
No. 5: Create a budget.
No. 6: Review your 401(k) plan.
No. 7: Check your insurance coverage.
No. 8: Check your estate plan.
No. 9: Don’t give your money to Uncle Sam.
No. 10: Make new goals.

You’ll either find this list “old hat” or quite intimidating. There are links to further information on the various suggestions, and if you’re at all confused by what you’ve read, I urge you to read on.

Conclusion

For most people, developing a financial plan is well worth their time. Just as you plan a vacation, by carefully selecting a destination based on your needs, wants and desires, and determine the best way to get there given your individual situation, your financial decisions should involve the same type of strategic thinking.

After reading Townsend’s article, you may decide that you need help in analyzing your current situation, your required savings, and in developing a long term strategy. Thinking strategically and monitoring your results regularly will let you know if you are on track to reach your goals.  It will also indicate when you need to adjust your existing financial plan to match your new or changing financial situation.

It may not be easy to set up a financial plan by yourself, but you needn’t do it alone. A good financial planner will help you analyze where you are and what you need to do to achieve your goals. For most people, having an experienced financial advisor prepare a comprehensive financial plan is well worth the time and money.

Although you may be very successful in your own field of expertise, you may not have the time or inclination to keep up with changing tax laws and new investment products. There is no shame in delegating these tasks to someone who does them full time. You may also not have the discipline to manage your own investments, and there’s no shame in that, either.

The key is to start immediately. You need to harness your motivation now, create a plan and then begin to take the steps to implement it. A good planner will outline all of the steps required to reach your goals.