9 ways to make saving automatic

Creative Commons License photo credit: Derek Farr ( DetroitDerek )

As anyone who has started to learn about personal finance knows, one of the fundamental ideas is “pay yourself first.” Paying yourself first is an easy concept (supposedly), but many people find it hard at first to make putting money into savings a priority. Saving money sounds like a good idea, but there is always a chair that needs to be replaced, new shoes for that special occasion or just one more iTune to add to the collection. So how can you make saving a habit? It’s a trick question – you don’t have to make it a habit, you have to make it automatic. If you make your savings automatic, you never have to work on developing the habit. The habit will grow naturally once you see how easy it is.

So how do you make savings automatic? Here are 9 painless ways to do it.

  1. 401(k): If you work for a company, chances are they offer a 401(k); if you work for an educational institution, a hospital, a church, or a non-profit they probably offer a 403(b), and state and local government workers can invest in 457 plans. All of these plans generally offer the worker a chance to invest their wages, pre-tax, into their choice of a selection of investment options – usually mutual funds. Most plans ask the employee to set an amount or a percentage to be withdrawn every month. A 401(k) or similar plan is the single best way to make savings automatic. The contribution is not taxed and taxes are never paid on any amounts in the account. In fact, until you retire you will never pay taxes. The money is taken out before you ever even see it – so there is no temptation to cheat ‘just this once.’ Best of all, many employers match some of your contribution with a contribution of their own into your account!
  2. Automatically withdraw money to a savings fund: After you have contributed enough to your 401(k) plan to meet your employer’s matching limit (and more, if you can afford it) you should set up an automatic withdrawal from your checking account to a savings account. Popular options for savings accounts are high-yield accounts at ING and HSBC: even though their rates are terrible, they are better than nothing. Both will allow you to set up automatic withdrawals from your checking account directly into your savings account, where it can earn interest. You can set up the withdrawal date to be the day after your paycheck arrives, so you will not be tempted to spend that money on something else. Once the money is in a high interest savings account, it’s out of sight…, it’s out of sight, out of mind and growing rapidly thanks to the miracle of compound interest! Best of all, you can use this as an emergency fund – but only for true emergencies.
  3. Direct deposit your paycheck to separate accounts: If your employer allows you to have direct deposit for your paycheck, take advantage of it. Most banks will still waive monthly fees if you set up direct deposit, and if you can directly deposit to multiple accounts automatic savings become even easier. Set up two checking accounts – one for monthly expenses and one for irregular expenses. Those irregular expenses can be for any of those expenses that come up on a monthly basis that were unexpected but not really a true emergency. Maybe the tires on the car were worn, or junior broke a window playing ball. If you estimate your regular monthly expenses and have just enough money going in your ‘main’ checking account, you can take money out of the irregular expenses account without having to worry about paying the electric bill.
  4. Drop a penny (or a quarter) in your change jar: Keep a change jar right by the front door. Every day when you come home, throw any loose change in here. Once it fills up, take it to your local bank and deposit it in your savings. If that is too much trouble, take it to a CoinStar machine (usually at your local supermarket) and get an amazon.com gift certificate and use it to buy something useful – amazon sells many household items like CFLs and dishwashing detergent.
  5. Always use a credit card with rewards: This is a little more controversial, but if you have a good cash back rewards card, use exactly one credit card for every purchase you make, but pay it off in full each month! If you are the type of person who lets their credit card slip out of their wallet and into the department store’s credit card swiper by accident, I suggest you skip this step! However, if you charge $500 a month on a 1% cash back card, you can earn another $60 a year – for nothing!
  6. Pre-pay your mortgage: If you own a house, even adding a tiny extra principal payment can shave months or years off the length of the mortgage and save you thousands of dollars in interest. Do not let small amounts discourage you – even an extra $25 per month can save thousands in interest over the life of your mortgage.
  7. Reinvest dividends: If you own mutual funds or stocks you can request that dividends be reinvested. That means that whenever a dividend is issued, it is immediately used to buy more shares of that fund/stock. You never touch the money so the temptation to spend your “windfall” dividend is taken away!
  8. Adjust your withholding: You may enjoy getting a big tax refund every year, but if you do you have lent Uncle Sam that money for the year, interest-free. Adjust your withholding to ensure that you have as small a refund as possible. If you get a refund, the IRS gives you the option to have it direct deposited – send it to your high-yield savings account, not your checking account!
  9. Take advantage of FSAs: Some companies offer flexible spending accounts. A Flexible Spending Account, or FSA, is a tax-advantaged account that allows individuals to set aside portions of their earned income for public transportation, parking, dependent care and the most common type, health care expenses. Simply put, you set aside an amount you choose, pre-tax, each month in a pre-funded account and then withdraw it when you need it. You save money by taking the amount out pre-tax and putting it in an account where it can only be used for a set purpose like health care expenses. Once it is in the account, there is no way to get it back out and use it for an iPhone!

Remember: make your savings automatic and paying yourself first will become second nature!

the questions you need to succeed in business

These are not my original thoughts, but they are a great list of questions if you’re interested in providing a service (a blog, a business, consulting – basically any service you can think of):

  • What needs do people have that I can fulfill?
  • What trend or trends are present here?
  • What opportunities do they present?
  • What are the current gaps in the marketplace?
  • What is the insight that can lead me to create greater value in this segment?
  • How can I leverage what I know about this category or industry that makes sense for my [work] and my brand name?
  • How can I test the efficacy of my idea?

These ideas came from Thomas Edison, inventor of a couple things (!), and they are remarkably applicable 100 years after he said them. I am trying to apply these ideas to my thought process about future work after my current career winds down.

What really kills me – and this happens more and more often – is how much inspirational and quite frankly useful stuff has already been written. So much of what’s written about inspiration, getting rich, etc. has already been covered better and earlier. Even what I’m trying to write about has probably been covered better by people like Ben Franklin already. It’s amazing how “The Secret” is not really a secret – it’s there and it’s available, we (and I include myself) just don’t take advantage of it.

The simplest, most straightforward ideas are right there. They are public domain works. You don’t need to buy anything. You don’t need to attend a seminar. It’s all free already – the concepts behind wealth and health and happiness. Don’t buy another self-help book, just hit the Internet. In 10 years it will all be monetized and privatized, but right now it’s the biggest treasure trove of free information the world has ever seen…

(photo credit by ishrona)

6 Ways to Salvage your New Years Resolutions



We’re less than a full month into the new year. Did you make any resolutions? If so, how’re they doing?

If you’ve already broken your New Year’s resolution, don’t be too hard on yourself. It turns out that the odds were stacked against you. A study in 2007 by Richard Wisemen from the University of Bristol showed that 88% of people who make New Year resolutions fail to keep them.

Those are pretty dismal numbers when you consider it. A lot of people break their resolutions and feel depressed. But as the Japanese proverb says “Fall 7 times, stand up 8”. So, how can you salvage your new year’s resolutions?

  1. Remember why you made the resolution: It came from somewhere. So take a moment and try to reconnect with the original impulse. Life distracts us, so try to focus past the distractions and find what you had desired.
  2. Discard the resolutions that don’t come from you: Too often we resolve to do the things we think we should do, rather than the things we want to do. When you have no personal attachment to your resolutions, it’s a lot easier to break them.
  3. Reschedule your New Year: January is actually a bad time to start many resolutions. If we take weight loss as our example: gyms are more crowded than ever before, and the weather isn’t always friendly towards going outside and exercising. If any of these things are impacting your resolutions, why not wait until the spring? Good resolutions are a challenge, but there’s no reason that you shouldn’t stack the odds in your favor.
  4. Redefine your resolution: Try taking your goal and breaking it into smaller increments. For example, if you want to lose 36 pounds in the year, instead set yourself a more achievable goal of 3 pounds per month. This gives you a number of smaller goals that you can achieve and celebrate, helping you build momentum and retain your focus, even as you move towards achieving your larger overall resolution.
  5. Make use of your support network: We live in a world more connected than ever before. This means that supportive friends are as close as the smart phone in your pocket or the nearest computer. By sharing your resolutions with your support network, you gain people to help you when you’re struggling and who can celebrate with you while you succeed.
  6. If at first you don’t succeed…: We get too focused on failure. If you could change your behaviour without any problems then you wouldn’t need to make resolutions in the first place. If we learn from our mistakes, then we give ourselves a far better toolkit for long-term success than we would if we had succeeded without any problems or challenges.

Guest post by Alex Conde of Searching for Happy, a blog about the simple search for happiness we all face. His series of Happiness Experiments study some of the popular theories on finding happiness.

Photo Attribution Some rights reserved by Koshyk

a bird in hand, or two in the bush…

bird in hand

bird in hand

OK, think fast: two jobs. One pays $50,000 this year; it will have a steady raise keeping pace with inflation (more or less) for the next 20 years, but there will be no spectacular bumps up. The other job pays $15,000 this year. In 10 years it might give you the experience to make $100,000 per year – or, if you haven’t done that well, it might pay you $15,000.

What do you do?

I would argue this is at the core of your personality for many reasons. If I told you that I would give you $5 straight out, or we could flip a coin and heads you’d get $10 or tails you’d get $0, what would you choose? Investing works the same way: conventional thinking tells us that index fund investing is the way to go. You can’t beat the market! Hang in there – there has never been a 15 year period where the market didn’t go up! Be average – hope for the swelling tide to lift you along with the rest of humanity! Bet on the sure thing – take the $5!

So what does that tell you? Do you want to make money now or make money later? Would you take a job for free today with the promise of making more tomorrow? Or do you want cash in hand, thank you very much? Honestly, both are legitimate arguments. I’ve turned down two jobs in investment banking because they were bonus-based compensation and I knew that even though they might be worth 150% of what I was making from contracting, they also might be worth 70% of what I was making. You know what? That’s weak thinking.

Risk taking is fundamental for wealth building. I’m sure Warren Buffet would argue that he doesn’t take any risks: he studies exhaustively and then invests without concern because he’s done his homework. My grandfather did awfully well (until 2000) in the stock market, too, although he certainly didn’t have access to the type of research that WB does. It’s possible to take some measured risks and achieve success as long as your definition of success doesn’t mean being the wealthiest man (or woman) in the world.

I want to make money in the future. I’ve set up my lifestyle to make money in the future. I claim to want money in the present so I can retire now, but I spend a lot of time talking about making it now and coasting along on a decent contracting income without building my investments aggressively or a business or even my own knowledge (which deteriorates every day).

Here is the question: what’s the main thing you need to do? Invest better? Build a business? Or just continue to slowly build income and plow your increasing income – through maintaining your standard of living and putting the excess into savings – into slowly building wealth? One of my favorite reads is was Get Rich Slowly (I don’t feel it’s worth reading anymore), but do I want to get rich slowly? Depends on how slowly you mean…

Photo Attribution Some rights reserved by “G” jewels g is for grandma

Control Your Financial Destiny – Be Your Own Boss



Most people are concerned about money. If you aren’t a millionaire, you are most likely part of this group. Money – we never seem to have enough of it and are always looking at ways to spend less of it.

For the average person, the concept of taking control of their financial destiny consists of little more than having a 401(k) at a job they most likely don’t care too much for. Few people take true control of their financial destiny.

One way to have greater control over how much money you have is to be an entrepreneur. While not the right option for many (if not most) people, being your own boss has been the key to financial security for a large group of people. If you are looking for a way out of the grind of your 9-to-5, you might consider being your own boss. While the risks involved are many, the potential payout is exponentially greater than anything most people will ever see working for the man.

Below are some pros and cons of being an entrepreneur:

Pros to Being Your Own Boss

  • It is easier to get a raise when you are in control versus being an employee.
  • Your entrepreneurial success is generally tied to how hard you work. When working as an employee, most times your hard work is not recognized. Employees that work hard are rewarded the same as those that do the bare minimum to get by.
  • There is no greater freedom from being your own boss, having the ability to do what you want, when you want, without someone telling you what to do.
  • The upside has a huge potential. If you are a successful entrepreneur, you can have huge financial gains that are beyond the imagination of the typical employee.

Cons to Being Your Own Boss

  • No certainty that you will succeed. As a matter of fact, most small businesses fail in the first 5 years.
  • Uncertain income can lead to a great deal of stress.
  • Most likely, you will have to put in a lot of time and effort before you see any results. A successful outcome is never guaranteed, even if you put in the time and effort.
  • You deal with everything, good and bad, which is something most employees don’t have to worry about.
  • You never really get away from your business. Even when you are on vacation, you are the person in charge.


Never As Easy As It Seems

Being a successful business owner is a lot of hard work. Period. Don’t believe anybody who tells you otherwise. There is no such a thing as getting rich overnight as your own boss.

Most people are not cut out to work for themselves. Most people should be employees, working for someone else. But, for the fortunate few that take the risks and become a successful entrepreneur, the potential payoffs are worth the pain it took to get there.

Take Control of Your Financial Destiny

While you are clipping your coupons and shopping for the best deal to try to stretch your dollars, just keep in mind that there may be another answer for you. Maybe you should take some time and consider if being an entrepreneur might be something that would be a good fit for you. Fortunately, you can explore your options while you keep your day job. You can even get your feet wet while you continue to work for the man, though doing so will be equivalent to working two full-time jobs, at the very least.

Entrepreneurs control their financial destiny. They don’t spend their time clipping coupons or shopping for a deal. They spend their time building a business that will give them the financial freedom they yearn for and deserve.

You have the choice if you want to be an employee or if you want to be the boss. Choose wisely, as the decision you make will greatly impact your financial future.

About the Author:

Guest post by Marshall Davis of Business Service Reviews, a website that reviews products and services that help entrepreneurs start, grow and maintain successful small businesses. His new interview series, Talking Small Biz, will shed some light on how different entrepreneurs are finding success in their chosen field.

Photo Attribution Some rights reserved by buddawiggi

the itch that never ends

Imagine your wrist is itching right now. It’s the kind of itch that just has to be scratched – it doesn’t matter what you are doing, because the urge to scratch rises up and blocks your ability to concentrate on almost anything else. I am sure you know this feeling – the sudden intensity of the itch narrows your vision to a tunnel. You stop, you scratch, you resume whatever it was you were doing.

Now imagine that keeps happening.
Again and again. You itch at random all over. Your nose itches, you stop and scratch and take ten steps before your knee itches. The aggravation becomes unbearable – every few minutes another urge to scratch, another pulsating itch.

But after a while, a funny thing happens – you are so consumed with scratching and itching that you realize that you can ignore some of the milder itches.
Your mind blocks them out, because otherwise you’re just in a haze, waiting for the next tickle on your shoulder or your ear. You realize, hey, I can block these itches out.

Before long, you are blocking out more and more of these urges to itch.
After a while, you can ignore almost all of them. Your mind learns how to block bigger and bigger urges, until only the most pressing itches needs scratching. One day, you realize that although you still itch all over, you don’t need to scratch anymore. You have conquered the urge and no longer have a knee-jerk reaction when it strikes.

This is more or less the way you need to approach spending if you’re in debt, or eating if you’re trying to lose weight, or getting over a bad habit of any kind. It may seem like an oversimplification but that’s what it is. Your mind is an amazing tool (but also a dangerous one) but you are its master.

Creative Commons License photo credit: Sugar Pond

Budget Challenged Heal Thy Self

George Washington Eyes

George Washington Eyes

The following is a guest post from Neal Frankle. He is a Certified Financial Planner in Los Angeles and owner of Wealth Pilgrim, one of my all-time favorite personal finance blogs.

You may not have grown up with good financial habits being modeled all around you. Most people I know didn’t. I know I didin’t.

To make matters worse, financial advisors, for the most part, aren’t going to help you in this arena either. Even though your budgeting is the foundation of your financial security, there is no money in it for advisors to help you here so very few do.

The good news is, you can be the master of your budget without much education or training. And you don’t even need sophisticated software to do a good job. Here are the basics of budget coaching that you can do for yourself.

1. Intel

The first thing you need is information. You need to know how much it costs you to live. Or, let me put it another way. You need to know how much money you spend, on average, each month.

One way to do this is by writing everything down. When I was a young financial advisor, that’s what I asked clients to do. The weird thing is…nobody did it. After about 5 years of being disappointed by non-compliance I came up with another suggestion.

Look at your bank statements. This idea, if I must say so myself, is genius. If you pay all your bills from one checking account (and if you aren’t doing this, why not?) you can simply look at the total monthly distributions. Every checking account monthly statement summarizes those distributions so that, in effect, is what you spend.

Of course, if your credit card bills (or other debts) rise or fall, that will mean you either spend more or less. But for most of us, the total withdrawals from our checking accounts tells us what we spend on average each month. Go get your bank account statements from each of the last 24 months and tally up your average monthly spending. It’s a powerful number to know. I encourage everyone to use this method (in addition to the method below) because it gives you a big picture view. You will know very quickly if you are spending too much compared to your income. It’s staring you right in the face.

The third method is to use a budget tracking software package program. If you go this route, you can download your transactions right into your software without doing much work yourself. This will give you the details you’ll need to make the decisions about what to cut and by how much.

2. Values and Goals.

The next step is to evaluate whether or not your spending is in line with what you value most. For example, if your dream is to travel to a third-world country and help cure disease, it would be appropriate to budget in an aggressive saving plan for travel. But if that’s your goal and you spend your savings on trips to Vegas every other month, it won’t be difficult to see which financial behaviors need to change.

Likewise, if your goals are to create financial security for your family, it will be important for you to be clear on that and keep that goal in mind when you examine your spending. If you spend more than you earn, clearly your behaviors are out of synch with your goals and values.

3. Pow Wow

The third step towards financial health is to get total commitment from everyone in your family. The way I figure it, everyone is involved in spending so they have to buy in to the new approach. Talk about what’s changing and why. Explain the benefits of making these changes and talk about the changes the family (collectively and individually) are considering. Don’t make it an edict. Get everyone’s input and commitment.

Finally, have monthly meetings to discuss progress. Don’t expect perfection because it doesn’t exist. Make allowances for people going over budget. Just gather the family together every month and discuss what went right and what could have gone better. Get input from everyone to determine how they see things.

Using these 3 steps, you’ll be able to transform your financial situation dramatically and rather quickly. At least that’s been my experience.

What about you? Have you ever had to make big changes in your spending? How did you handle the situation?

Photo Attribution Some rights reserved by peasap

the movement of content


One of the problems I have with writing here at brip blap tends to be the question of “what to write?” I’ve never made this a blog that covers the subjects that many personal finance blogs cover: what credit card should I get? Should I invest in an IRA or a Roth IRA? I don’t think anyone who reads this blog is looking for the answer to this type of question. You’ve probably already formed your own opinions on that and there’s no need for me to add to that internal discussion. There are many other, better blogs looking at the details of picking the best high yield savings account. I wish I was one of them – those are lucrative subjects – but it’s not to my interest and I don’t really want to write about those topics. Not that there’s anything wrong with writing on those subjects – there’s a place in this world for writing for money, just like there is a place for working for money. People who can write well AND write for money are blessed (I’m looking at you, Stephen King and John Grisham).

So when I think of what to write, I think “what should I write that (a) entertains me and (b) entertains others and (c) might be profitable.” C is a distant consideration. I leave C to guest writers and sponsored posts. B is much more important. I do like it when people enjoy my writing and comment on it. I wouldn’t be human if I didn’t, I think. So I do write to that. But I’ve realized over the last year that A is the most important by far, especially in combination with B. Why? Because of Facebook and various other social media.

Many bloggers like the “sense of community” and “feedback” they get while writing, but I felt this sense and this feed much more back in 2007 before Facebook and Twitter took hold. I don’t feel it much today.  Today real conversation doesn’t take place on blogs, or on websites – it takes place on Facebook or Twitter or a few other key social media sites. I used to share links heavily on this blog, but whereas a few years ago this was the first place I’d share them, now I’m more likely to share those links on Facebook or Twitter or LinkedIn or other networks. I’m more likely to engage with commentators on Facebook than I am even on my own site, because of course I spend time on Facebook, not here on brip blap. I participate in forums rather than on individual blogs. I’d argue that even the huge blogs – the Lifehackers, the Consumerists, etc. – aren’t really able to hold onto “regulars” anymore. I read many blogs, but I seldom comment on them. I might share links from them, and comment on them – but it’s going to be on a social network.

So the movement of content has created a question: where should content live? I like having brip blap as its own independent website. But is that the future of sites like mine? Or will they eventually move to Facebook, or some other social platform, where most of the readers and “likers” are already engaged and focused? I think they will. My blog exists in Facebook already, for example. You can read it in Facebook, comment on it in Facebook and never leave Facebook. That’s fine. If I integrate my personal account with my brip blap page at some point, you’ll see a wild flood of extra content – my “brain dump,” so to speak – appear. A lot of my content has moved to social networking. I’m posting my thoughts bit by bit rather than in long drawn-out posts like this one. It’s probably the future. There will be long-form writers forever, of course, but many people are transitioning to a short-form style of reading that won’t want to read 700+ word articles.

I’ve shifted my reading over the past 5 years. I still read books – but on a Kindle, that promotes “disposable reading” (I give up on books rapidly if I don’t like them). I don’t read blogs as much as I used to (my RSS reader accumulates them for search if necessary). I don’t write as much here because I spend a lot of time writing elsewhere – emails, Facebook, Twitter, forums, etc. Content is constantly being produced by people like me and you, but it’s shifting and changing. After a brief “golden age” of people scattering across the web looking for content we’re again reconsolidating. It’s neither good nor bad – it just is. Content is moving to where the readers are.

Photo Attribution Some rights reserved by MR photography.