Friday, November 17, 2006

Financial Planning 101: Motivate yourself to save and invest

Attitude can go a long way toward spending money smarter. And a defeatist attitude will almost certainly mean you end up underachieving with money.

Advertisers reinforce easy-but-insidious ideas to get you to spend your money now. It seems to be working, considering consumers' credit card debt levels — averaging nearly $9,200 per household with credit cards last year, according to — and pitiful savings rates.

Below are excuses people use every day for doing dumb things with their money and suggestions for an attitude adjustment:

  • ''I could die tomorrow, so I'll live for today.'' This the primary excuse for not saving money. The solution is to develop a few financial goals. ''It's very hard to get yourself to not spend money on something today, unless you've thought about what you might want more tomorrow,'' says Jean Chatzky, author of the new book ''Make Money, Not Excuses: Wake Up, Take Charge, and Overcome Your Financial Fears Forever. Only then will you have the willpower to reject spending temptations you face daily.

  • ''I work hard, I deserve it.'' Yes, you have to treat yourself occasionally. After all, enjoying money is one of the few things you can do with it. "You have to realize you can't just be treating yourself well today; you have to be treating yourself well when you're 70,'' Chatzky says, referring to having adequate retirement savings.

  • ''I'm not good at math.'' Chatzky believes anxiety about numbers is real for some people, but managing money doesn't require complicated mathematics. ''We have so many online tools these days to help you, that you really can get a grip on what you've got coming in and going out,'' she says. ''Sometimes, just slowing down and paying attention to where your money is going is enough to get you to change.'' A slew of financial calculators is available at .

  • ''I'm too busy to compare prices or manage money.'' How many people who claim they have no time to manage money know which television housewife is most desperate, who's ''Lost'' on the island and which beau is studying ''Grey's Anatomy'' this week? With easy-to-use personal finance software, the Internet to compare prices, and automatic savings and bill paying, it takes less time than ever to manage money. ''You've got these tools,'' Chatzky said. ''Set them up so it doesn't take you so much time.''

  • ''It's an investment.'' Most consumer purchases are not investments. Investments are supposed to have a chance at being worth more in the future than they are today. Most consumer purchases go down in value, a guaranteed loser of an investment. So you don't ''invest'' in a car, a plasma TV or a new pair of shoes unless somehow they'll make you money. Pacifying your spending guilt by calling them an investment is self-delusion.

  • ''I don't earn enough to save money.'' Saving is not about what you earn, it's about what you keep. Pay yourself first by setting aside a little money, preferably automatically with a paycheck or bank account withdrawal, before you start paying your bills. "In the first month, you'll miss it badly, but by the third month, you'll start to forget about it,'' says Dan Peel, an Itasca, Ill., middle-school teacher and author of ''Greenstuff: The Money Book.", adding that starting with just 5 percent savings is fine, until you can work your way toward 10 percent and higher. ''The bottom line is to put something away, even if it's a tiny bit.''

  • ''People who think about money are greedy.'' Outrageous college costs, and sole responsibility for managing retirement savings is a huge money-management burden. You had better be thinking about money — a lot. ''We have a responsibility to pay for our futures the way no previous generation ever has,'' Chatzky said. ''I don't agree it's greedy. I think it's self-caring and responsible. If we weren't thinking about money and trying to accumulate more of it so that we could handle all of these things, we're being irresponsible.''
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