How to Trick Yourself into Saving
ELAM: So many folks struggling to cope with tight budgets. My next guest is here to help us trick ourselves -- trick ourselves into saving a few bucks. Janet Bodnar is the editor of "Kiplinger's Personal Finance" in Washington. And Janet, thanks so much for joining us today. I got to say, though, tricking yourself to save money. It seems like almost like setting the clock five minutes early. You still know it's early, right?</s>JANET BODNAR, KIPLINGER'S PERSONAL FINANCE: Well, but it works. I do that. The clock trick works. It really is very much, I think -- saving is a question of mind over money, because I hear this all the time from people who say if only I had more money, I'm living paycheck to paycheck. But the truth of the matter is no matter how much you make you're always living paycheck to paycheck and you'll never change unless you have change that mindset. And sometimes it takes a few tricks to do it.</s>ELAM: You say it's really important to know what kind of person you are, to know your plastic personality. Explain that to you.</s>BODNAR: Oh, gee. We got into this huge debate on -- with our users -- our viewers at kiplinger.com, debit cards versus credit cards. You've got to know your plastic personality. If you're a credit card user, then you tend to charge everything on your credit card or put everything on the credit card. But pay the bill in full every month so you're not paying fees, you're not paying annual fees, you're not paying interest rates and you're getting rewards. Some people say -- and told us very frequently at kiplinger.com, no, no, no you don't want to get into credit difficulties, you want to go with the debit card, you want to pay on a cash basis. So, if that's the way you want to go because you need that self discipline and you need to be stopped after you've spent a certain amount, then that's the way to go. In either case you can use the bill, the statement that you get every month to track what you're spending.</s>ELAM: Track what you're doing. All right, but you're also saying you shouldn't be up to your own devices. Most aren't good at savings if left up to their devices. So, what kind of resources are out there to help people save?</s>BODNAR: Instead of paying yourself first, which is a wonderful rule, get someone else to pay you first. So, you know, sign up for your employer's retirement plan, sign up with a bank to take money out for your next year's vacation. Even the IRS will deposit your tax refund in an IRA, so you can jumpstart your retirement plan. But you can get that help from somebody else instead of depending on you.</s>ELAM: All right, and then another trick, you say when you get your paycheck don't have half it deposit it into your checking account, put it into your savings account. Again, it seems to me you can still access the money. How does this trick work?</s>BODNAR: Hey listen, this is -- my 21-year-old college student son thought this one up. He keeps his money in his savings account and then he transfers money when he needs it. And it's, again, it's psychological because he says, you know, when you move the money from your saving to your checking, that really hurts. It's in there and now you've got to spend it. And again, it's a great tip for everyone and I would give it to any adult, but my son actually thought it up on his own.</s>ELAM: Yeah, that is a pretty good one. Maybe he's got a career in this one.</s>BODNAR: I think so.</s>ELAM: The last one I want to ask you, though, is the whole idea of rounding up a check. How does that work?</s>BODNAR: Well, you know, when you're subtracting a check in your checking account, you know, you can round up the amount that you're subtracting so you're actually, again psychologically, you're taking out a little more than -- than really is there. So you're creating a little slush fund, a little cushion for yourself. And banks will do this for you. You have seen this advertised on TV. A lot of banks will advertise this and you think, oh, this is just pennies, it's really not a lot of money. But you know, I was talking to someone when I did a TV appearance a few weeks ago and she said, you know, I do this on my own and every couple of months it adds up to a hundred bucks or so and that's really money, over the corps of a year, that's over a thousand dollars. You can do a lot with a thousand dollars.</s>ELAM: Yeah, you really could, just like you could toss that extra change into a jar and it works as well. Janet Bodnar, thanks so much for all of your tips. Janet Bodnar, the editor of "Kiplinger's Personal Finance." Up next, buyer beware. We have the biggest rookie home buyer mistakes. We'll tell you what not to do if you're in the market for your first home.