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: Having your day in (small claims) court

I couldn't say this any better, so I'll just let freelancer Lorelei Laird speak for herself. Laird is a freelance writer specializing in writing about the law for businesses, marketing and publications.

Unfortunately, some clients just don’t want to honor their commitments. After you’ve tried Kristine Hansen’s collections suggestions with no luck and you’re pretty sure the client has no intention of paying, it may be time for small claims court. Heather asked me to write this post because I had good luck when I filed a small claims case of my own, and perhaps also because I am a freelancer who specializes in writing about legal issues. However, please note that I’m not a lawyer myself and none of this is intended as legal advice!

Luckily, you don’t need a lawyer for small claims court, because it’s specifically designed for people representing themselves. (In fact, here in California, you’re not allowed to have a lawyer in small claims.) The courts usually provide information to help people without much legal experience figure out what to do. I strongly recommend that you follow that advice -- I actually prolonged my own case by not bothering to read their advice on finding the defendant (the person being sued).

The following tips are based on my own experience in Los Angeles Superior Court, but I’ve tried to keep them general enough to apply to any case.

What Do I Need to Sue?
For starters, the amount you need to collect must be less than the maximum for your state -- $7,500 in California. You will also need:

• Proof that the client owes you money. Your contract should be enough proof, but if you don’t have a contract, don’t worry -- you should still be able to collect if you have other evidence that an agreement between you and the client exists.
• All of the written documentation of any kind -- including email. Print it out or make photocopies. This is the evidence for your case.

To generate more evidence, consider sending a certified letter demanding your money, so you can show that they definitely received the demand and failed to pay up.

Filing fees are typically low -- I think I paid $25. If you’re not doing well financially, you may be able to get the fee waived.

If you, like me, are not very detail-oriented, suck it up and become detail-oriented for this. It’s very important to follow all the rules when you’re dealing with courts, because one little mistake can get your case dismissed. You’re welcome to re-file, but it’s more time and money that you probably don’t want to spend. So make sure you meet deadlines, use the right legal name for the business, choose the right court, etc. The small claims documentation and any legal advisors the court offers should be able to help you with this.

Where Do I Sue?
If your contract doesn’t specify where disputes will be heard, check with your local court. Los Angeles Superior Court says the right place to sue is the place where the defendant’s business is, or the place where the contract is signed or carried out. I had to go to a courthouse across town because the client was in LA, but in a different part of LA from me.

If your client is out of state, I’m sorry to say that you may be stuck suing there, depending on your state’s rules and the circumstances. If your contract locks you into out-of-state courts, but that contract was clearly violated, you might be able to argue that the whole thing is now void. If you have lots of time, it might be worth filing at home just to see if you can argue that that venue is proper -- but it might be an uphill battle. And if you have to go out of state, you can try to file from a distance and see if they settle before you make plans to fly there.

How Do I Sue?
In short: You go to the courthouse to get the small claims forms, fill them out, attach any relevant documents, and file the forms. In downtown Los Angeles, this involved a lot of waiting in line, sometimes with crazy people. Don’t park at a meter if you can help it and bring a book! Once you’re filed, they’ll give you a court date.

By the way, I strongly recommend that you add the cost of your time and the case itself to your claim. That is, if they owe you $1,000, sue them for $1,000 plus:

• Court fee;
• Any process server fees (see below); and
• Your hourly rate for the time it took you to do all this.

You would never have incurred any of these costs if they had just honored their commitment to you, right?

But that’s the first half. Once everything is filed -- correctly -- you still have to serve the small claims documents on the person you’re suing. The deadline for this in California is 15 to 30 days before your court date, depending on where the defendant is. To serve the claim in California, you can pay a professional process server or a sheriff to do it; pay the clerk of the court to do it by certified mail; or ask a friend who’s not involved in the case and over 18 to do it for free. I used my boyfriend, who, miraculously, did not break up with me over the multiple late-night trips across town.

Tracking down the defendant so we could serve them was by far the most arduous part of my case (well, after parking downtown). The business had closed and the owners had moved across town. Finally, I thought to read the advice in the small claims documents and looked up the owners in county property records. There they were! Use your reporter skills to do public records searches -- business filings, property records, prior court cases. This will help you locate the defendant and learn the proper legal name of the business. And it made me feel like Nancy Drew.

Going to Court
Good news: You may not even have to go to court! In my case, the defendant paid up as soon as we managed to serve it. That’s typical for large-claims lawsuits as well, the vast majority of which settle before trial. However, if you do go to court, take it seriously. Show up on time, dress appropriately (think job interview or religious services), bring all of your documentation and turn off your phone -- judges hate being interrupted by phone calls. Expect to wait a long time for your turn, at least here in LA. When it’s your turn, treat the judge and other court employees respectfully and answer everything you’re asked. You’re welcome to bring someone for moral support, but that person can’t speak for you.

If the other side doesn’t show up, that’s great for you -- the judge may penalize them by deciding for you. I am told that small claims judges are very accustomed to seeing freelancers suing their ex-clients, especially in New York City, home of many freelancers. So if your case is solid, your chances are fairly good.

For More Help
Here in California, we have a Small Claims Advisors program providing advice to people with small claims cases. The number for Los Angeles County is (213) 974-9759, and in San Francisco, it’s (415) 292-2124. New York City seems to have a similar in-person program. Of course, you can also draw on a friend or relative who’s a lawyer for general advice and scary demand letters on law firm letterhead.

Above all, please do not feel guilty about this. If you are legally owed this money and the client has repeatedly refused to pay you, you are not abusing the system or being unkind -- you are enforcing your rights.

30-Day Economic Stability Challenge: Creating a spending plan

Yesterday, I shared why I use a spending plan instead of a budget. But now that you know why you should have one doesn't mean you know how to create one.

I regularly send clients my own template for a spending plan, but here, I'll share how to make one of your own:

Step 1: Gather the tools.
You don't have to use a fancy budgeting program; you don't have to even know how to use Excel. What you do need is a little notebook like one you can get from Walgreens or another drug store and a pen.
Step 2: Track your spending for one month.
Here's the trick of tracking spending: Unless you have an encyclopedic brain--on which many of us in our busy lives can't afford to rely--you'll forget what you spend unless you bring that little notebook with you. Stash it in your purse or keep it in your pocket. Whatever you do, just try to remember to write down everything you spend and on what: lunch with an editor, toiletries, shoes, groceries. Who cares whether you used a credit card or cash for it. The important thing is to know how much you spent and on what.

Step 3: Trust that you won't be punished.
The biggest barrier to starting this process--which I've now done for two and a half years--was the fear that someone would see it and tell me I was spending my money wrong. I was afraid that what I wanted to spend money on was frivolous or that I should buy any luxury items until I was making more money. Turns out, I wasn't spending enough money on basic needs like household supplies and entertainment ($10 a month, I think many will agree, is not enough). Until I got that keeping track for a spending plan was different than keeping track for a budget, I wasn't willing to do it. I had too much shame.

Step 4: Do a tally.
At the end of the month, make a list of everything you spend your money on, and then start correlating things that go together. Everyone's line items will be different, but mine include:

• Food in
• Food out
• Entertainment
• Clothes
• Personal care
• Rent
• Health insurance
• Gym
• Web maintenance
• Printer ink
• Office supplies
• Taxes
• Internet

I also separate these categories out: one list for personal expenses and a second for business. Here's a hint: This kind of record keeping will make tax time hugely easier for you. When preparing my taxes this year, it only took me a few hours because everything was laid out in easy-to-understand categories.

Congratulations. You now have a spending plan. Those categories, whatever they are, are your spending categories. Don't worry if some of them were surprise expenses that aren't monthly--just create a "Surprise Expenses" category and stock it with that money. You'll be surprised as you keep this up how often you have surprise expenses--and how unsurprising they become after a while. You can add and change them at will, but this will give you a framework and help you see what you love spending money on.

Step 5: Round off.
Now that you know what you actually spend, round the numbers to whole numbers. I try to round off to the nearest five or 0. Remember that this is just an estimate, and you'll refine it as you use it more.

Step 6: Add it up.
You'll probably want to add this number up, and please feel free. But remember, the analogy between a budget and a diet holds true for this final number, too. Just like you aren't a numbe on a scale, you aren't a number in a spreadsheet, either. You may find that you spent less than you brought in last month, or you may find that you spent more. Just remember that it's just a number and it doesn't mean you're a bad person or bad business person if everything doesn't add up perfectly or if you're spending more than you're bringing in. Join the club. Many of us do that.

An income plan is quite different from a spending plan. Just stick with the spending plan for now.

Step 7: Share it with friends.
I know that sounds crazy. Who wants to share their financial state of the union with a friend? Many of us have a hard enough time talking about money with our loved ones and family. But it's important. How does it feel? Now's a good time to rally your support people and talk to them about your spending, what scares you about it and how you want to proceed. Whatever it brings up, be sure to share it. Keeping it in will make it that much harder to stick with the plan.

How do you track your spending?

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.

30-Day Economic Stability Challenge: Proving you're worth more money

After this week's post on increasing income, I realized I'd left off a few obvious ones that require you to put on your business cap.

They're all about negotiating with your clients.

So, here are some bonus short-term income tips:

Tip #1: Have regular clients? Ask for a raise.
Freelancer Laurie Pawlik-Kienlen responded to this weeks post with her own experience:

"Another possibility is asking your low-paying gigs to up the ante a bit," she wrote. "I did that once, and it went over like a dream! Perfectly."

It can seem insane to suggest such a thing in this economy, but I suggest that it's not. If you're going to do it, however, you'll also have to convince your client you're worth it. Look at your track record with them:

• Have you turned in every story on time?
• Have you turned them in early?
• Have you met word count and story specifications regularly?
  
• Has your editor sent you emails of praise?
  

Show your editor that you are the perfect person for the job and that you deserve it. In biz parlance, that's called "added value." Linda Formichelli at The Renegade Writer Blog had a fabulous post on added value this week. I highly suggest you check it out. In it, she shares five ways you can add value, including working quickly, knowing your stuff, bringing expert or "real person" sources to the table or thinking graphically.

But those aren't the only ways to add value. This is an opportunity for you to assess your strengths for your client. It will definitely build your relationship and you may get a raise in the bargain.

Tip #2: Ask for checks early.

Again, sounds crazy, right? Right now we're getting checks later and later--not sooner. But I'll tell you something: I did it in February and my client sent me a check a week early. Easy peasy.

There are rules to this, however:

Use this infrequently. If you come to your client every month or every time you have a check coming and plead for a rush order, you'll look like a bad financial manager, not a professional writer. Save this for when you think you absolutely need it.

Ask the right person. As Kristine Hansen mentioned in her guest post on collections, your editor doesn't handle your checks; the Accounts Payable person does. So don't hassle your editor. Instead, ask for the Accounts Payable department. You don't even have to get your editor involved. I've just called the main number and asked for the AP department directly.

Don't take it personally. Asking for your money early can feel like begging for money, but it's not. It's just that--your money. When I first started managing the financial side of the business, I was terrified to call accounts payable, in part because I thought as a writer, I shouldn't care about money. Now when I make those calls, I don't do it as a writer; I do it as a business person. AP gets calls all day long about checks. That's what they do. It's normal for them. Don't make it harder than it has to be.

Have you tried either of these techniques? How have they worked for you?

Photo by Daquella manera.