Financial Tricks & Treats
Stop trying to save
This may sound counterproductive, but here’s the thing: If it’s taking too much effort to save and you feel like you’re just spinning your wheels, you need a solution. And it’s an easy one — put your savings on automatic! After all, research shows that the less effort it takes, the more likely you are to contribute to savings. Consider this: Companies that utilize auto-enrollment have average participation rates of more than 85 percent in their 401(k) plans, compared with 67 percent for plans without auto-enrollment. And families with some kind of retirement plan have nearly four times the average net worth of families without one.
Use cash for everyday purchases
Yes, that’s right — spend your cash! Why? Because you’ll spend more carefully. One MIT study found that people were willing to spend up to twice as much for baseball tickets, for example, when paying with plastic compared with cash. Some researchers call this the “monopoly money” effect, meaning that because you’re not playing with “real” money, spending doesn’t feel as consequential.
Personalize your accounts
Research from one nonprofit organization shows that those who label their savings accounts with specific goals put away 31 percent more money than those who don’t. These results suggest that assigning meaningful names — such as “anniversary trip” or “retirement fund” — makes your goals seem tangible.
Round up your mortgage payments
No doubt, your mortgage payment is likely your biggest household expense. And if you’ve already refinanced or don’t qualify for a refinance, you may feel stuck. But have you considered rounding up your payments? This may seem inconsequential, but every little bit helps, even if it’s just $10 or $50 a month. For example, say you have a monthly mortgage payment of $954.83. If you round up your payments to $1,000 by putting in an extra $45.17, you’ll pay off your debt 29 months early. For further inspiration, run your own numbers using the Zillow Mortgage Calculator.
Picture your future self
Ever wonder what your life is going to look like at age 55? 60? What will you be? Where will you live? What will you need/want? You likely have no idea because you can’t possibly envision yourself in five years, let alone 20 or 30 years. But not being able to picture yourself at retirement age is one of the biggest obstacles to saving. According to a Stanford University study, when you see what you’ll look like (to see an aged picture of yourself, go to a site like age-me.com) it becomes real, as does the need to protect yourself/your finances, and stash away more.
Vera Gibbons is a financial journalist based in New York City and is a contributor to Zillow Blog. Connect with her at http://veragibbons.com/.
Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.