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Saving


It’s easy for me to look back in time and analyze the faults of my twenty-two year-old self. If only I had started saving and investing sooner, I’d be in a better financial situation. My younger self would assume I had forgotten what it was like for me during that time period, when I had barely enough money to make rent, I was still looking for the perfect job, and I managed to avoid many bills for at least a short period of time before borrowing more money from somewhere.

As luck would have it, the older self would be wrong. Had I been in a better financial situation when I was twenty-two, I may have never considered writing publicly about my money situation, which would never have led to my side business, which would never have allowed me to quit my job at age thirty-four, work full-time for myself, sell my business, and become somewhat financially independent. Had I been smarter about money — or at least found a way to be solvent — I might still be teaching or working for a non-profit. There’s nothing wrong with that, and I would probably be enjoying it, but my life would have progressed differently.

Part of the typical financial advice delivered to new college graduates is to start investing in an IRA (Individual Retirement Account) right away. But I remember what life was like living on Ramen noodles. The thought of having cash to invest was completely foreign. I would have ignored any advice to set aside one percent of my income in a savings account, saving up until I hit had the minimum for investing ready to go. It would have been a mistake, but it’s incredibly difficult to get past that mindset.

Financial preaching of this type often falls on deaf ears, and that’s one reason that there are employers who initiate automated savings; young employees don’t have to think about how to come up with the money because they never see it in the first place.

But once you decide that your retirement is important to you, an IRA is a perfect vehicle because it shelters at least part of your income from tax, either today or when you retire. If your employer offers a 401(k) retirement plan with a match, that might be the priority, but otherwise an IRA comes first.

An IRA isn’t an investment in itself. It’s just a bucket for other investments. You can invest in mutual funds, stocks, bonds, and even some other non-traditional assets, but you don’t have to. You can also leave the cash you designate for your retirement uninvested. Cash is much less volatile than investments, in fact it’s not volatile at all if you’re staying in the same country, but it’s not completely risk free. If you have more of your wealth in cash than you need, you could end up missing opportunities for growth, and the real value of your money will erode over time thanks to inflation.

Despite the opportunity cost, many people do keep cash, cash investments, or cash-like investments in their IRAs. Because of this flexibility, investment banks and broker-dealers are not the only financial institutions allowed to offer IRAs. You can get an IRA at your regular retail bank if you just want to keep that money out of the stock market. In fact, because of the close proximity to your savings accounts, and everything will be in the same institution, banks can make it easier to open and maintain IRAs.

When you compare banks, you will see that many advertise IRAs alongside savings, checking, and certificates of deposit (CDs). Your IRA at a bank is covered under the same FDIC insurance as the other cash you keep there. That means that these accounts will never lose money, and if there’s any sort of problem, the government steps in and covers your deposit up to the insurance limit. In the 80 years of the FDIC’s existence, no retail banking customer has ever lost money due to a bank failure.

On the other hand, money invested in an IRA at a brokerage is different. Investments are protected with SIPC, which is a non-profit organization, not a government agency. SIPC doesn’t protect investors against losses; investments frequently lose money. SIPC exists so that if an investment bank fails, customers can still retrieve the value of their investments up to the protected amount. Investment banks might offer a money market fund as an investment option for IRAs, and that’s as close to cash as you will probably be able to get. Money market funds (unlike money market accounts) can lose money, and SIPC doesn’t protect against that loss.

For this reason, if you want to invest in cash for retirement, particularly if you are close to the age at which you want to begin withdrawing your retirement funds, you may want to consider an IRA at your retail bank rather than your investment bank. It also removes some temptation to use the money to invest in riskier assets like stocks.

Before you invest in an IRA at your bank, compare rates and fees. Certificates of deposit can often provide higher rates than savings or money market accounts, but you might have to pay a penalty or lose some accrued interest if you withdraw before the term of the CD is expired. You shouldn’t need to choose an account that requires ongoing maintenance fees; there are enough banks that offer free IRAs that you don’t need to waste your time on anything else.

Some accounts offer bonuses to new customers, too. Account opening bonuses help boost your interest income from your cash in a short time frame, and I’ve used account opening bonuses to increase my effective annual interest rates significantly.

One such bonus is currently being offered by Ally Bank. Ally Bank is a favorite among financial experts; the bank recently won Plutus Awards for best savings account and best checking account. I had an account with Ally Bank for a couple of years before closing it in a financial simplification process that I haven’t yet completed.

Ally Bank is offering a $250 bonus to new and existing customers.

This year through May 31, new and existing customers can receive a $250 bonus for depositing $50,000 into an IRA at Ally Bank. The deposit has to come from an external source, so you can’t just transfer the money from an Ally savings account to the All IRA and expect to receive the bonus. Banks offer incentives like these as an attempt to attract new customers and to increase cash on hand.

You can’t normally just contribute $50,000 to a traditional or Roth IRA. Tax-advantaged retirement accounts have annual limits that are much lower than $50,000. You may be able to contribute $50,000 to a SEP IRA, but that account type pertains only to self-employed individuals and their employer contributions. Ally expects that most people searching for this bonus have retirement investments elsewhere that can be transferred directly into an IRA at Ally, a process that’s called a rollover.

The $250 bonus on a $50,000 investment works out to almost a 0.5% interest increase, assuming the money stays investment in the account for the entire year. But because the $250 bonus is being paid in July, the funds must only remain in the account that long, making the effective annual interest rate increase closer to 1%, assuming you take the money and run after the bonus. I am not recommending this tactic; I’m just describing the mathematical consequence. Whether you leave your IRA at Ally until July, until the end of the year, or until the end of your retirement, the bonus is still $250.

When you open an IRA at Ally Bank, you choose among the bank’s savings products, including High Yield CDs, Raise Your Rate CDs which have the option of adjusting interest rates once or twice throughout the term to take advantage of raising market rates (assuming rates will continue to increase), and the Online Savings Account. The Raise Your Rate CDs offer the highest interest rates now, but your money is locked in the account for a longer period of time than it is with the other cash-like options.

Today’s rates, especially those for the CDs that are locked in for a longer period of time, reflect the assumption that interest rates will rise in the future. The Raise Your Rate CD is probably the best bet today, but if rates increase too quickly, Ally could cease offering the product. That’s not necessarily bad, but it does mean that when your CD matures you would have to choose a different investment type. That could be either a standard CD, a savings account, or a new cash-like product developed by the bank.

Because you can invest in cash in an IRA at a bank, and you can make certain withdrawals from a Roth IRA without any tax consequences and penalties, the combination is ideal for at least part of an emergency fund. When cash flow is tight, an account like this can perform a double duty. It’s your retirement fun on one hand, while it can serve as a short-term emergency fund. If you never have to withdraw your money for an emergency, you’ve saved for retirement, and if you do have an emergency, you have an incentive to replenish the account quickly to avoid the missed opportunity of investing in an IRA that year.

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As a child with an inquisitive mind, I was fascinated by calendars and how we organize and measure time. I tried to learn why, throughout history, culture accepted new calendars to replace the old. Much remained — and still remains — a mystery to me in this topic; my interest in calendars waned as I began to use them for business purposes rather than satisfying my curiosity and appetite for learning about interesting things.

Even I, a calendar geek, couldn’t get the hang of using a calendar to increase my own productivity. Part of the problem is with a decade of experience in the corporate or non-profit world — that is, working for some sort of employer — the concept of personal development through productivity has always been transparent to me.

The concept of “employee productivity” is simply a way for a corporation to get more from its employees with less. There’s no real personal development involved with productivity.

My perspective shifted slightly when I began working for myself. Suddenly, my level of productivity had a direct effect on my personal success, however that could be measured. I wanted to be more productive, but because I didn’t take to heart the tools and skills of typical corporate productivity, I was at a disadvantage. I know how to be super productive, and I can be at times, but I don’t often choose to motivate myself to achieve high levels of productivity.

The concept of productivity is only one benefit of using a calendar as more than just a date-keeping tool. A calendar, especially modern calendars like the Google Calendar application unlike your typical wall calendar with a photograph of a moose for each month (I love this calendar; thanks Donna Freedman!), can save money and build your wealth when used efficiently.

I can’t continue without a reminder about the concept of building wealth. This isn’t about a number on a bottom line, and it’s not about competition. Money is not a goal. The only reason to seek to build wealth is to achieve financial freedom — or at least financial flexibility.

I want to live my life the way I want to live it without being encumbered by financial roadblocks. My goal is simply the highest level in the pyramid visualization of Maslow’s Hierarchy of Needs, self-actualization. You can only reach that point when other needs, like food, shelter, safety, and recognition are met.

I have big things I’d like to do with my life, and some of those might require money. Even those that don’t might require me to be free of financial constraints like debt. And to achieve that condition on the path to my goals, financial systems can push progress forward.

I’ve written about the system of automatic savings and the system of food planning; this system of using a calendar is just as important.

I’m calling the best use of a tool like Google Calendar “extreme calendaring.” Using a schedule to this extent goes far beyond the typical use of online calendars: to remember birthdays and anniversaries, to track when you’ll be on vacation, and scheduling meetings. These are all important, but to get to the point where a calendar becomes useful for long-term wealth, there has to be more.

Throughout this article I’ll use Google Calendar as the example. There may be other services that offer the same features, but I’m not as familiar with them as I am with this feature from Google I’ve been using since it was launched.

Schedule your bill payments on your calendar.

Even if you’ve already automated your bill payments, you should add your bill payment dates to your calendar. The more you progress through life, the more services you will likely take advantage of that require monthly payments. The calendar can help you keep track of all of it, reducing the likelihood of facing late fees or other penalties, like interest charges.

One trick is to not use the bill’s due date but the date you need to send the check in the mail or initiate the online transfer. In Google Calendar, you can configure an alert for each item you add to your schedule. For example, you can add a reminder a day in advance, to be delivered to you via email, so you have time to write the check and get to a mailbox.

If it helps, you can add your paydays to your calendar. This in combination with your bills can give you a visualization of your financial inflows and outflows and alert you to any future problems, such as a month where your paycheck doesn’t arrive until after your bills are due.

Because your list of bills tends to get longer rather than shorter, you can increase your organization factor, and thus maintain a lower risk of missing something important, by creating a calendar category for your bills and income (and categories for your other types of entries).

Google Calendar calls these categories separate calendars, but you can use them as categories and use the color coding to its best effect.

A note about calendar fatigue.

Whenever you take any type of activity to the extreme, there is a danger of growing immune to the activity’s effects. If you are bombarded with ten reminders in the form of alerts on your mobile phone each day, you will soon learn to ignore these alerts or give in to frustration by turning them off entirely.

I recommend using reminders sparingly and creatively.

If you have a smartphone, your calendar will always be with you. This can be good or bad; the calendar should not be a distraction but should be available at any instant you might need to remember something in the future.

Use your calendar in conjunction with your coupons or discounts.

I have a habit of forgetting that I have coupons for a certain product I’d be buying anyway until they’ve expired. You have a Bills calendar already; add a Savings calendar to track savings opportunities you don’t want to miss.

Keep in mind that it’s only saving money if you’re buying something you would be buying anyway. For example, if you’ve been planning a trip across the country that involves a flight, put a reminder on your calendar to search for the best prices Tuesday and Wednesday; studies show these are the best days of the week for finding deals on airline tickets.

If you have a coupon for Macy’s and you know you need to buy items that Macy’s has available, put an entry for the expiration date on your calendar. When you view the coming month, you’ll see this date and will be able to find time to go shopping before the coupon’s expiration.

If you’re very price-conscious in terms of shopping, you may be aware that certain months of the year offer, on average, better prices for specific products. If there’s something you know you’ll need but it is not a pressing need, put a reminder on your calendar in the month that is best for shopping for that type of product.

For me, this strategy may not pay off much, but if you do a lot of shopping for a large family, the small seasonal price adjustments can end up having a large effect on your household wealth.

Remind yourself to follow up with others.

The activity of networking is often overwhelming for me. I may be quite capable in front of large crowds, but when I’m in the midst of a large group, my introversion tendencies kick in. I’m more comfortable in small groups.

Last night I attended a dinner (well, drinks and tapas) in New York City sponsored by Ramit Sethi (of I Will Teach You to Be Rich and Michael Fishman (a consultant). There were about 40 entrepreneurs in attendance, and I only knew a few from previous meetings.

I managed to talk one-on-one to about a dozen of these participants while partaking in the beverages and food. Several of the discussions offered some kind of a personal connection, with a possibility for developing further in some sort of business relationship.

I took a number of business cards, but now comes the process of remaining in touch. I can use my calendar to note who I plan to reach out to when, in order to keep myself from being overwhelmed by the extraverted nature of outward communication.

The reason why I, as someone who is taking charge of my financial life through my own business endeavors, would find this important is that some of these individuals might be able to provide great insight on the future of my businesses; thus, keeping myself focused in these personal/business relationships can lead to long-term growth of wealth.

Besides the above, there are several more specific types of events that are enhanced by the use of your calendar.

  • Use your calendar to track family events.
  • Use Google Calendar’s sharing feature to create schedules for items that affect other members of your household.
  • Create reminders to obtain your free credit report from AnnualCreditReport.com three times a year, once from each reporting bureau.
  • Set a quarterly reminder to rebalance your investment portfolio.

How do you use your calendar to save money and grow your wealth?

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The diner is a New Jersey staple of the restaurant industry. Once you sit down at a diner, you are presented with a thick menu, enumerating more dining options than you could possibly handle. If there’s any indication that having more choices makes the selection process more difficult, it’s the diner menu.

The story of the man who drives to work and spends too much money on lunch.

Although I generally don’t listen to the conversations at adjacent tables, when the topic turns to financial issues, my ears perk up.

While I was enjoying a nutritionally dangerous Reuben sandwich at the local dinner this weekend, I overheard two women discussing their male acquaintance — possibly the son of one of the women.

The particular individual, the topic of this discussion, was saddled with a $400 car payment each month and a monthly charge of $400 for his transportation costs. This is New Jersey, where commuting to the office is a common pastime.

More damaging to this man’s financial situation, according to these women, however, was his habit of buying lunch every day. This man’s story was my story for many years. I remember my days working in an office, commuting to work. My company’s building included a cafeteria, where I could enjoy large portions for a large price.

I wasted so much money, and I would like to say I learned from these mistakes, but I never get the hang of it.

One of my biggest financial failures.

The convenience of the cafeteria prevented me from putting a serious effort into saving money by making my own lunch.

As I was no fan of cooking in general, I just didn’t want to be bothered with what I perceived as extra work. As my side business thrived, the money saved by brown-bagging my lunch seemed decreasingly relevant.

Although I didn’t experience personal success saving money by bringing in self-made meals rather than buying expensive cafeteria meals or visiting local restaurants for lunch, it’s still a good idea, and I wholeheartedly recommend it to anyone, from single men and women to families.

At the time, I was aware of a system that would have helped. Putting this financial system into action, the plan I will describe below, makes wealth growth easier to achieve, especially when starting from a vulnerable position with money. If you’re spending more than you earn, even on necessary expenses like food and housing, successful money systems are more imperative.

A successful system becomes a habit. Once you’ve established a routine, these tasks should seem natural. Although I didn’t quite get to that point on my own, had I remained in a bad financial place, I would have had no choice but to figure it out.

The system anyone can put in place to cover up the financial hole this poor gentlemen lets his friends or relatives discuss with disdain at the diner comes in two parts.

Part one: buy groceries on a schedule.

When I wrote last week about automating your savings, I described several other systems. In one of these examples, I described a potential system for shopping for groceries.

There are several options or features included in a grocery shopping system.

I keep a pad on the refrigerator, noting the items that are running low or that have run out. If I don’t make a note, I’ve found that I have trouble recalling what I need in the next shopping trip. This way, in addition to my regular food order, I know that I need to pick up garbage bags the next time I visit the store or place my order online.

In terms of food, I generally order the same items each time I shop. If I’m shopping online and having the groceries delivered, this is easy. The Peapod website keeps a record of my orders, and I can choose from any previous order when starting the next online shopping trip.

This saves me time, and when it comes to chores like food shopping, I want to save as much time as possible. Ordering from the same list every week (or two weeks) keeps me focused and offers less of an opportunity to browse or spend money on items I don’t need.

Alternative option: packaged meals and meal plans.

When I expressed my laziness in cooking, many people have suggested that I try ordering pre-made frozen meals such as those offered by online meal planners like eMeals or eDiets. eDiets no longer offers meal delivery; they seem to work with another company, ChefsDiet.

It’s unclear whether ChefsDiet provides enough food for a family or whether the meal portions are designed for one person. The price does not exactly make this the frugal choice, if it is in fact for one person as it appears to be. The daily prices range from $30 to $60. Shopping for ingredients and cooking is the much more frugal option, but for someone who doesn’t have time or has no desire to cook, perhaps it’s an expense worth dealing with.

But don’t forget the goal here is to save money habitually in order to achieve financial independence faster, but prioritization is a personal matter. If you’re willing to sacrifice wealth for personal convenience, you’re an adult, and you’re free to make that choice as long as it’s an informed decision and you weigh the consequences.

The plans from eMeals and eDiets no longer include delivery, but for the price of a subscription, you can have these companies take care of the system. They will provide you with meal planning guides for every day and a shopping list to make sure you’re getting everything you need.

It can take the guesswork out of planning meals, but at an expense. Even still, it is possible to save money over the long term because if you can’t stick to a system on your own and revert to dining out frequently, your finances will not improve.

Part two: cook one day, freeze your meals.

This is the advice I’ve heard the most as others observed the sorry state of my food spending and health and were concerned enough about my well-being to offer suggestions.

  • Cook healthy meals on Sunday, when you have fewer time constraints and less stress.
  • Freeze the meals to be thawed and eaten throughout the week.
  • Buy a small soft cooler with a lock to package your lunch to take into the office if you work outside your home.

This can be a winning strategy for saving money regardless of the size of your household. The bigger the household, the bigger the savings, and the more money you’ll have free for the future or for other pressing needs.

The key is turning this process into a habit. And that might mean making it more enjoyable. I’ve never been a big fan of cooking, and so I’ve avoided it as much as possible. But I have discovered that when I put my mind to the process, it can be a somewhat creative outlet for me.

For example, the geekiness in my personality can be satisfied by experimenting with different taste combinations. I have the opportunity to consider other recipes and add my own potential improvements. Even when I’m not feeling creative with culinary, knowing my way around a kitchen and its various gadgets in order to complete the chore of cooking can be somewhat fulfilling.

So how much money can you save? For me, lunch in the cafeteria used to cost between $8 and $10. Eating out for dinner or ordering delivery could cost anywhere from $10 to $20 a meal. Had I done more to cook healthy dinners and eat leftovers for lunch, or made better use of sandwich meats, I could have saved $10 a day or more. That’s about $250 a month just taking weekdays into account; dining out less over the weekends could save another $100 a month.

$4,200 a year might not sound like a lot, but at a time, it was one tenth of my income. That’s significant enough to make a big difference over the long-term. Instead of saving 10% of my income for future financial freedom, I was wasting it.

How closer will this get you to financial freedom? It’s hard to say. As you get into habits where you make better financial decisions in one area, you have an effect on the decisions you make in other areas. With better systems in place, you create your own micro-culture of better financial living, and that helps bring financial independence significantly closer.

The key to successfully building wealth is finding the systems that work for you and sticking with them. Meal planning is perfect for such a system.

Forming a habit takes some time and motivation. Even if you’ve failed before, like I have, continuing to put some effort into designing your approach to food can save you money fairly quickly when you’re used to dining out frequently.

Do you have a system put in place for food shopping and preparation?

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Last month, I wrote about the opinions of Scott Adams on his eventual success as the creator of the comic strip Dilbert. I focused on the failure aspect of the article he wrote for the Wall Street Journal, and I only touched lightly on the success factors. A system, a methodical way of approaching any particular effort, is one of the core components of success.

A household uses systems all the time. You may have a system for effective grocery shopping: Perhaps you keep a notepad and pen on the refrigerator, write down anything you need to purchase when stocks are low, take the list with you on your shopping day, and, for the most part, prevent yourself from veering from the list too much when you shop.

You might have a different system for grocery shopping: you may have an automatic shipment of groceries delivered to you from Amazon.com every two weeks, each time the same order.

If you read Consumerism Commentary regularly, it’s likely you have at least one system in place to improve your savings over the long-term. It’s a concept I’ve discussed many times over the past decade, and it’s such a basic piece of financial advice that you’ve no doubt heard of it even if you haven’t been reading my writing for long.

You must make your savings automatic.

By creating a system that handles your savings automatically, you eliminate or greatly reduce the chance of not reaching your goals. It’s a technique that someone at any income level can put into practice. Having a bank account (or an account at a credit union) makes it easier because financial institutions have technology that assists in this approach to money management.

Every once in a while, if you read about money management, you might come across a rule of thumb. “You should save 10 percent of your income” is one such common refrain. You can look at this either as a position to start or as a goal that might take some time to accomplish due to other factors. Even starting a savings system with 1 or 2 percent of your income is better than haphazardly setting money aside.

Direct deposit of your pay. The fewer hands that touch your money from the moment you receive it to the moment it is used, the better. Most modern employers offer direct deposit. Rather than receiving a paper check, you provide your banking information to the employer and the company sends an electronic payment directly to your bank. In most cases, you receive your pay as much as a business day sooner, so you have the opportunity to pay bills or collect interest faster.

More companies are offering employee pay in the form of debit cards. For employees without bank accounts, this may be slightly better than having those employees use expensive check-cashing storefronts to access cash. But when compared to direct deposit, this is a horrible idea that will likely have adverse effects on the employee’s ability to build savings from their income over the long-term.

Sign up for direct deposit, and if your employer doesn’t offer it, encourage your boss to consider it. Direct deposit is the best system for keeping more of your income.

Automatic bank transfers. Almost every bank with which I’ve had an account — and that number is likely around forty — has some method of creating automatic transfers.

Here’s an example from Wells Fargo. When you sign in, the option to schedule an automatic transfer is one of the primary options in the menu. With your income directly deposited into your checking account, and with a savings account earning at least a little bit of interest, you can create a savings system that you set once and forget about. After a few weeks of regular transfers completed behind the scenes by the bank’s software, you won’t even notice the money isn’t in your checking account.

But a brick-and-mortar bank might not be the best option for savings. Sometimes your checking and savings accounts will be at two separate banks. In fact, often it’s better to separate these accounts so you can keep your savings in a bank that you’re not tempted to visit every day, like an online bank. Online banks often offer better interest rates, anyway. Over the last few years, the lines between online banks and brick and mortar banks have blurred. More traditional financial institutions are offering accounts you can only use online, for example. Here are some of my recommendations for savings accounts with the highest interest rates.

With Capital One 360, you can link your profile to an external bank account, like the Wells Fargo account I used in the example. This is my actual set-up, although my income is in a business account, not a personal account. Just like with Wells Fargo, you can use Capital One 360 to schedule a transfer; in this case, it would be an automatic transfer between the Wells Fargo checking account that is used for direct deposit and the savings account at Capital One 360 with the higher interest rate than the Wells Fargo savings account.

Value-added services. A few years ago, Bank of America introduced a “Keep The Change” program to its customers. Here’s how this worked. Every time you made a purchase with your debit card, Bank of America would round the transaction up to the nearest dollar and transfer the remainder into your Bank of America savings account.

Now the bank’s savings account earned paltry interest compared to some other banks, but this systematic savings could be substantial. It’s like the coin jar at home. At the end of the day, when you take the change out of your pocket and place it in your coin jar, you’re saving your remainders. As more people moved away from cash transactions towards plastic — credit cards and debit cards — the coin jar doesn’t receive as much attention as it used to.

This, despite all the problems with Bank of America, was a clever extension of the coin jar metaphor into the digital age. Keep in mind, though, any interest you earn on savings in a bank account can be easily negated by account maintenance fees. You need access to free banking, especially if your savings isn’t large enough to produce interest that outweighs those fees.

Third-party services. Last month, I was introduced to a start-up company in the financial industry called SavedPlus. This is a service that can help automate your savings based on your spending rather than your income. With SavedPlus, you link your primary spending, checking and savings accounts to the service. It’s a read-only connection; SavedPlus can’t change or otherwise affect the linked accounts. Every time you spend money, SavedPlus will initiate a transfer from your checking account to your savings account. It works across any combination of banks.

The amount of the transfer is based on the savings rate you determine. Mine is set at 10%.

I have my primary credit card linked to SavedPlus, so for each transaction that falls within a certain range, SavedPlus will transfer 10% of that transaction to my savings. The service has some protections; SavedPlus will not initiate a transfer if your account balance is too low or if your purchase is too high, based on parameters you determine.

The service is still new, and I am finding myself with a few questions, but it might be worth some experimentation.

There’s a drawback to automatic savings.

The advantage of creating this system for saving money can also create a money management problem. Once you stop actively making one particular decision with your income each pay period, it’s easy to forget what you’re doing and why you’re doing it. You need to continue to look at your financial status on a regular basis, just like we do on Consumerism Commentary with Naked With Cash. Frequently evaluate whether the choices you made and set into motion with an automatic system continue to be the best options for you.

If you start saving 2% of your income but your situation changes, have you increased your savings rate? Can you get to 10% two years after starting your system? If you have been saving 10% and don’t feel any stress, is it safe to move to a 20% rate of savings? Once your system is a natural piece of your process, so much so that it is invisible to you, you could be giving up some control or awareness of your financial situation.

Personal finance is about making conscious choices with your money. That includes not using money without considering the circumstances. The present scenario changes over time, and a system does not relieve you of the need to see every pay check as a money-saving opportunity.

Automatic saving leads to success.

A study from 2009 (Gordon, Romich, & Waithaka) determined that customers who created systems in the form of automatic savings transfers had more success accumulating savings. The accumulation savings is an intermediate goal, meaning it’s part of a path towards something else. With more savings, you can avoid expensive debt, and you can reach financial independence sooner. This gives you the ability to have more control over your life, to spend your time doing what makes you happy without having to be concerned about negative financial consequences for every decision you make.

Systems like automatic savings will help get you there.

How do you automate your savings?

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Does an Emergency Fund Invite Emergencies?

by Luke Landes
Emergency

I was reading comments on older Consumerism Commentary articles and I came across an interesting statement. A reader, who had otherwise good advice to provide another reader who was pondering whether to use an unexpected $100,000 inheritance to pay off a mortgage or invest in the stock market, said the money or a portion of ... Continue reading this article…

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What Is Your Motivation for Saving Money?

by Luke Landes
Cash

This week has been dubbed American Saves Week by the Consumer Federation of America, a non-profit organization founded in 1968 “to advance the consumer interest through research, advocacy, and education,” according to the organization’s website. All this week, the group and many partners in the non-profit world, in the financial industry, and among publishers will ... Continue reading this article…

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Declining Interest Rates, Declining Common Sense

by Jason Larkins

This is a guest article by Jason Larkins. Jason is the Director of Financial Education at Wise Wealth, LLC in Lee’s Summit, Missouri and the author of the website WorkSaveLive. For years I had my personal struggles with money: spending more than I made, following the status quo, and living life like I’d die tomorrow. ... Continue reading this article…

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How Do You Preserve Your Money?

by Luke Landes
Money Bags

Preservation of capital is an important aspect of any financial plan, but in today’s economy, this is impossible without taking on some risk. At one time, you could confidently place any money you might need within one year in a high-yield savings account and be relatively confident that your money could buy at least as ... Continue reading this article…

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Saving $300,000 By Age Eighteen

by Luke Landes
Eighteen

CNN Money is featuring stories from six young Americans, all of whom have managed to save substantial amounts of money as kids. When I was a teenager, saving money was never a priority for me. I understood the concepts, but I was more concerned with other things in my life: my hobbies, activities, school, and ... Continue reading this article…

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The Unemployment Cycle

by Luke Landes

The dangerous thing about advocating more saving and less spending, a responsible approach to personal finances, is that when the public applies this approach, the economy doesn’t move forward. The Commerce Department released consumer data from June today showing that personal spending dropped 0.2 percent during that month, the biggest decline since September 2009. It took ... Continue reading this article…

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Upromise Review

by Luke Landes

Upromise takes the concept of earning cash back on everyday purchases and aligns this benefit with saving for college or paying off student loan debt. You buy groceries anyway; Upromise helps you earn cash back on what you buy and use that money for your education expenses, the education of a relative, or for any ... Continue reading this article…

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ING Direct Kids Savings Account

by Luke Landes

ING Direct unveiled a new savings product designed to help encourage kids to learn the benefits of better financial habits early on. The Kids Savings Account isn’t much different from ING Direct’s standard Orange Savings Account for adults. Even today, Orange Savings Accounts be jointly owned by a minor if the joint owner is over ... Continue reading this article…

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Yahoo Finance Looking for Savers: Be On TV!

by Luke Landes

Yahoo Finance is producing an ongoing series of videos for their Financially Fit column. Each video focuses on an individual’s story. For example, they follow a New York City resident who saved $14,000 throughout the past year by downsizing his apartment and by choosing staycations rather than traveling. Personally, I don’t really consider “not spending” ... Continue reading this article…

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Silent Inflation Is Destroying Your Net Worth

by Luke Landes

According to the government’s figures, inflation was a modest 2.7 percent over the twelve months ending in March. The Consumer Price Index (CPI) is the Bureau of Labor Statistics’ popular measure of economic changes affecting typical consumers in the United States. It’s a figure we often compare to after-tax savings interest rates, reminding us that our ... Continue reading this article…

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The Saver’s Dilemma

by Luke Landes

At Consumerism Commentary, I’ve been writing about putting money into high-yield savings accounts for as long as this website has been around. Just as people started getting the message, banks pulled the rug out from under their customers. The Federal Reserve made cash easy and cheap from banks to access, and since the low federal ... Continue reading this article…

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Low Savings Interest Rates: Good or Bad?

by Luke Landes

No one’s happy with savings account interest rates these days. Even so-called high-yield savings accounts are closer to zero than they have been in a long time. For me, they heyday of savings accounts was when they were earning 5 percent to 6 percent APY several years ago. Some people remember when savings accounts earned interest rates ... Continue reading this article…

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Sell Your Unwanted Gift Cards at Plastic Jungle

by Luke Landes

Whether you’re giving or receiving gift cards, it’s usually a pretty positive experience. Both the giver and receiver are often satisfied because most gift cards allow the receiver to spend money in the way they want, as long as the giver has taken the receiver’s interests into account. Sometimes a gift card can miss the ... Continue reading this article…

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Recent Changes in My Personal Finance Plan

by Luke Landes

It’s easy to fall into financial habits. Even people who consider themselves inflexible can grow accustomed to a financial change after time. That’s the beauty of automation — an automatic 10 percent transfer to a high-yield savings account every time you receive a paycheck eventually becomes painless. Habits aren’t always perfect; just as you adjust ... Continue reading this article…

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Curb Your Consumerism

by Kelly Whalen

This article is presented by Kelly Whalen, Consumerism Commentary staff writer. The temptation to spend money is everywhere, especially during the holidays. There is something magical about lights glowing, soft Christmas music playing everywhere, and the hustle and bustle of the holiday season that seems to make money fly right out of everyone’s wallet. Whether ... Continue reading this article…

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ING Direct Offers “Added Value” Certificate of Deposit

by Luke Landes

In an effort to attract more new deposits, ING Direct is offering a new savings product with a high interest rate, the “Added Value” certificate of deposit (CD). If you are willing to deposit new money to ING Direct and let the bank hold that money for one year without any withdrawals, ING Direct will ... Continue reading this article…

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