30-Day Economic Stability Challenge: Creating a personal savings marketing plan

Yesterday, I shared a few ideas of how to save. But I've noticed a resistance to saving in myself. That resistance is, frankly, that I'd rather spend the money on stuff I can have now than just have money laying around.

I don't feel as good viscerally about saving as I do about spending. Even though I know intellectually it's better for me, it's more satisfying to spend. I'm working on changing that perception.

How? I'm creating a personal marketing campaign for myself. The great blog Take Back Your Brain! is all about creating these kind of marketing campaigns, to get yourself to do things that are more satisfying than simply buying whatever they're selling today. Their approach goes something like this:

Fifth Avenue spends millions--maybe even billions--every year to convince you that you need the new iPhone, the new Wii, that new handbag or this new dress. If you saw as many ads for the things that would bring you real happiness and serenity, you might be as likely to do them.

A recent post at TBYB! talked about just this kind of saving personal marketing campain. Here's the way they recommended you pursue it:

• Save the money FOR something. You probably don’t want to save money for its own sake, but because of something else it can secure for you. What is that?
• Find an emotional hook. Why do you want that thing? What is it about it that motivates you? Remind yourself about that.
• Help yourself visualize the outcome. Bombard yourself with images of yourself already having it (ideally with fun, attractive friends…).
• Be relentlessly aggressive. Use multiple modalities and repeat often. Adapt the campaign as you go along.

I can relate to this. Recently I got the surprise gift of $50 unlimited calling on my cell phone. All of a sudden, I was struck by the uncontrollable desire to have a Google phone. Oh, sweet Google phone, I long for your constant internet connectivity, your maps and full keyboard. Right now, I have just a phone phone--no internet, barely any texting, not even bluetooth. But it's, you know, a phone. It works fine. Still, as soon as I got that new plan, I started fantasizing: I could imagine myself with it, how much happier I'd feel, how much more efficient and effective I'd be in my business.

Saving money never gives me that feeling. I am, as a friend likes to say of herself, a seive for money. I can't hold it. There's always something I want more, something way more exciting than just having financial stability.

But now I'm realizing I need it--more than I need a Google phone, an iPhone, or a new pair of boots. The problem is, I can imagine myself with those things. Since I've never been good at saving, I can't imagine myself doing that. So I need to train my brain differently.

The way I'm doing that is by creating a vision board for myself. I know, hippie dippy. I'm not a fan of the Secret--the law of attraction is nothing without a plan and regular action toward that plan--but I find vision boards help retrain my brain the way TBYB! describes. I have two already: One for my life in general and one on how I want to feel about my work. I'm creating a vision board for how I will feel when I have 6 months income in savings.

The primary image I have in my head, which I haven't yet found, is of a thick glass bowl filled with money. To me, it's the antidote to being a seive for money. I love the idea. Holding it, keeping it, seeing the money overflowing. That's an image I can get behind. It makes me feel secure and confident. I imagine how much more sturdy I'll be when I have it. Words like "independence" and "control" come to mind.

I'm cutting those words out of magazines now to put on the board. I'm also looking for images of people enjoying retirement, because I want to save for that, too. I want that feeling of having enough, which often eludes me.

One thing that all of this cutting out old magazines is teaching me is that I read the wrong magazines. It became clear to me early on in the magazine-cutting process that almost none of my magazines were good for this. All my women's magazines, in fact, were all about spending--all about divesting myself of money in exchange for the short lived confidence of looking hip and cute and in the club.

I'm preparing to subscribe to my first financial magazine, because I want to fill my brain with that stuff on a regular basis.

What money magazine do you recommend?

Photo by tao_zhyn.

30-Day Economic Stability Challenge: Ways to save

Janine Adams, who was kind enough to write some guest posts during last year's organizing challenge and whose blog is quickly becoming one of my favorites, had a great post last week emotional reasons people don't declutter. As someone who used to be allergic to saving money, I'd say they apply to saving, as well.

Here are the bugaboos Janine lists:

• I don’t know what I’m going to find in there. What if there’s bad news? Fear
• I don’t know where to start. Overwhelm
• Why do I have to be the one who has to do this. Why doesn’t my husband [partner, child, roommate] help me? Resentment
• I don’t want the process to dredge up old emotions. Avoidance
• I might need this thing some day. Fear of regret
• I spent good money on this item, I’d better keep it. Guilt
• What if the organizing system I set up doesn’t work? Perfectionism

OK so maybe not all apply, but I'd say most do. Fear, overwhelm, avoidance, guilt, fear of regret, perfectionism are all a part of saving problem in my experience. And I don't think I'm alone. Let's face it: we are not a country of savers. In 2005, American savings rates went into the red for the first time since the Great Depression. Cumulative American Consumer debt rose to $904 billion in 2007--an increase of 6 percent over just the year before, according to the Federal Reserve. The savings rate has gone up recently, but it's still at a measly 3.6 percent.

So how do we now buck that trend? How do we start saving?

Katrina offered one idea last week when she suggested we send a third of all our income into an untouchable savings account. But there are a few other ways I want to share, just to give you options and ways to start saving, even if you aren't doing it perfectly.

The 10 percent trick
In this method, you take the first 10 percent of every dollar that comes in and put it automatically into a savings account. You can do this by automating a withdrawal from your checking account to a high-interest online savings account, or you can transfer money every time a check comes in.

Add it to your spending plan
Recently I lamented to a self-employed friend that I have a hard time saving money. What she told me really stuck with me. She said, "I started out putting aside just $5 a month. I know it seems like nothing, but now I have $35,000 in savings." My spending plan includes a line for $20 in savings every month. It's not $5, and it's not 30 percent of my income, but it's something, and that's the whole point.

Do 50/40/10
For the past two years, one of the ways that's helped me save is to look at the money I earn above and beyond my monthly spending plan and divide it this way:

• 50 percent goes to savings;
• 40 percent goes to accruals;
• 10 percent goes to fun.

This has worked incredibly well for me because it really encourages me to earn more than I need to live on. Not only does money go into savings, but I also get to spend some of it right away--and that rewards me for increasing my income in a tangible way.

Designate a check for savings
I'm an impatient type. Saving $20 is the responsible thing to do, but when I've wanted something right away, it's worked better for me to just designate one incoming check toward an accrual category. Over that past year, that's allowed me to take three trips and pay for holiday presents. Of course, this assumes a decent income, but if you're making plenty of money without having much savings to speak of, this is a way to jump-start your new savings habit.

How do you fit savings into your spending plan?

Photo by nieve44/La Luz.

30-Day Economic Stability Challenge: Budget vs. spending plan

In my experience personally and with other writers, one of the hardest things to do is keep track of our spending--which makes all the other tools useless. After all, we can't work toward putting 30 percent of out income toward cashflow or savings if we don't know how much we're making.

I know. I spent years drafting budgets in Excel, only to abandon them almost immediately. For me, a budget is like a diet--all about what you should be cutting out instead of what you get to eat. So a key to my financial solvency is to draft and follow a spending plan every month.

I'm not the first to talk about this. Lots of other bloggers and financial minds have covered this topic. And clearly I don't know what will work for you. But for me, a spending plan is the answer because I'll do it--and I won't do a budget. I've been keeping a spending plan and tracking my spending for about two and a half years now, and it's contributed greatly to my serenity by showing me where I'm spending my money and what I value. Plus, knowing how much I need to make based on spending gives me the motivation to earn more because I know what I'm getting for the money.

Here's what I love about a spending plan:

• It acknowledges that money is emotional. If I just look at a budget, I can see where I should spend my money--what would get me to one goal the fastest--but my experience with money is that I never have just one goal. Each financial decision is a juggling of a lot of wants, needs and guilt and desire. A budget doesn't have room for that. A spending plan gives me breathing room.
  
• It lets you have the things you love. A budget might tell you that the $4 frapaccino you buy every week on the way to a specific meeting is frivolous. But maybe that $4 coffee drink fills you with such joy and happiness, it's one of the bright spots of your week. If so, a spending plan lets you keep it while a budget would tell you to forgo it for some other, greater end. I do that with expensive hair products. I could get $4 shampoo at the grocery store, but my spending plan includes a considerable amount of money for the salon version because it's my one big splurge a month. I don't get my nails done, I don't shop at Bloomingdales. I treat my hair to a spa every time I wash it. It's worth it to me.
• It stops you from having a power struggle with yourself. I don't know about you, but a budget always made me feel like I was doing something wrong. If I were budgeting, I'd spend that money where I was supposed to (that diet thing again), but feel mad, resentful and guilty about not getting to have the fancy conditioner. Now that energy is freed up to earn the extra money I need to afford the fancy conditioner.
  
• It lets you want things. My spending plan also includes a number of so-called accruals--that is, things I can't afford now but that I want. Before using a spending plan, I always treated those things as luxuries, not realizing that some were literally necessary and others brought me joy. Now I can have accruals for things like a new computer as well as new boots. I don't have to do it right. I can just do it.
  
• It helps me prioritize. The great truism of money is that you can have anything you want but you can't have everything you want--at least not all at once. So I've had to sit down and figure out which thing I want first, or most. If it's a matter of saving for a computer or an ergonomic chair, a spending plan lets me put both on the list but then helps me see that I get to have one first. Which do I prefer?

Obviously, your mileage may vary. For those without such an emotional connection to money, a budget I'm sure would be fine.

Recently I sat down with a writer friend and helped him create a spending plan. He'd never had one because he thought he first had to increase his income. While increasing income is a noble goal, creating the spending plan actually gave him joy. He got to see that even on his small income, he could put a little away for reserves and even have some things he really wanted but didn't think he could afford, like accessories for his bike. It was great to watch the spending plan create some space and breathing room in him.

Tomorrow, I'll share how to create a spending plan.

Photo by Jeff Keen.

30-Day Economic Stability Challenge: Creating order with financial plans

You get a lot of advice on financial planning, but with our erratic pay schedules and so many unknowns, how do you apply it? I asked Katrina Ramser how she deals with it. Katrina, you may recall, wrote a bit about business plans in a previous challenge and has written about finance on the fab financial blog Get Rich Slowly.

Katrina divides her time between teaching swimming to kids and adults, writing about automotive, outdoors, swimming and personal finance topics for magazines and Web sites, and writing her own blog, SquidKid.

Perhaps your finger is on the financial pulse of the best: Orman, Warren, and Ramsey, along with grassroots money marvels like J.D. Roth of Get Rich Slowly and Trent Hamm of Simple Dollar. Maybe you're wondering if the advice still works for your self-employed status. As a freelance writer I was there once with tons of too much good financial advice and not sure how to customize my long-term financial plan.

Here's how I did it:

First Earn and Divide Your Money.

Be honest with what you're making or realistically will make by divvying up what you'll earn by client or service this year:

• The first 30% of non-taxed income goes into an untouchable savings account.
• Realize 50% of your take-home pay, no matter how it flucuates, goes to Must-Haves (rent, food, house bills).
• Another 30% goes to Wants (cabel, clothes) and 20% to Save/Invest -- unless you are in debt.

Remove All Debt.

Yes, it hurts, and it might take years. If you cannot pay anything you own off in 20 months, get rid of it (omit a morgage). Your IRA or cable TV dreams -- meaning Wants and Save/Invest balances will suffer because you'll need to throw every available dollar at the past. But nothing improves your self-employed life for the better than getting out of debt.

Have the Necessary Insurance & Wills.

Have Health (and Car if you need it) right now, buying higher deductibles to lower your premiums. Pass on Life unless someone counts on your income; but having a Will and a Living Revocable Trust with an incapacity clause (handles your retirement/savings, loans) will be be a relief to your surviving loved ones.

Now You Are Ready to Save & Invest.

When the debt is gone and you're affording insurance, Save/Invest 20% -- broken down by putting:

• 10% in a Roth IRA or SEP; and
• 10% in an on-line savings account you'll call Emergency Fund, which accumulates to reach 4-8 months of income in case you lose a client.

Automatic deposit means commitment. Think about stowing a portion of your 30% Wants into another account for "unexpected-expecteds" like new technology, insurance dues, professional organization fees so the bills don't disrupt your monthly budget.

Funding Big Dreams Comes Last.

When the Emergency Fund gets maxed out, you'll put that 10% into an account for a home, vacations, or organizations you can get behind. Maybe beef up your Freedom Fund more.

That the above is easier said than done is an understatement. Regardless, the advice still rings of truth, no matter how you scoff, grumble or worry about it. Learning the new realities in order to financially successful -- whether self-employed or not -- is about prioritizing, focusing and developing better money habits.

Photo by cupcakes for clara.