Investing For Your Future

The table can be used to find out how long it will take to reach your financial goals. It shows the growth of monthly $10 deposits invested at various interest rates. Put aside $10 a month for five years at 10%, for example, and you’ll have $781- the figure at the intersection of the year five and 10% interest columns. If you can invest $50 each month, you will have five times $781, or $3,905.

Save Bonus Money

Saving "bonus" money is also an easy strategy. Bonus money is money earned or received that was not expected, such as tax refunds, gift money, overtime pay, rebates, and refunds. Saving this money over time will boost your saving dollars and provide a larger balance on which to earn interest for the future. (Note: if you consistently receive a large tax refund, you may want to adjust your withholding. A tax refund means that the government has had your money interest-free during the year; you were losing the use of the money to fund your financial goals.)

Save Coupon Money

Another strategy to boost your savings is to save coupon money. Many people use coupons to reduce their grocery and personal care bills, but few think of actually saving the money they saved! To make this strategy a reality, put aside the amount you "saved" by using coupons at the grocery store or drugstore. The amount saved is probably printed on each receipt. Put the "savings" (the money you did not spend) in a special "coupon saving jar." Every month or so add this cash to your savings account. Saving just $2 a week for 52 weeks gives you a savings total of $104 which could be your "seed" money to open an investment account. However, remember that you aren’t saving if you buy something that you don’t need or that costs more than a comparable product even with the coupon.

Continue Installment Loan Repayments

Most of us have one or more installment loans that we are repaying. Once you pay off an installment loan (assuming other loans are not overdue), continue to make "payments" to your savings account. For example, when you pay off your car loan, continue writing a check for the same amount, but make the check payable to your savings account. You were able to get along without this money for the duration of the car loan, so continue to live at the same level and save the "car payment." This is a good way to save for the down payment on your next car when the old car needs to be replaced. It also adds a substantial amount of money to your savings account on a regular basis. This same strategy can be used when other household expenses end (e.g., childcare).

Collect Loose Change

Another painless strategy is to collect loose change. At the end of each day, empty out your pockets and wallet and put the change in a special container. Every other week or once a month, deposit the change in your savings account. Don’t cheat on yourself by "stealing" change that has been collected. Take it all to the bank. Some people even go so far as to keep all their change. They only pay for cash purchases with bills and save all their coins. Develop a plan that works for you and stick to it.

Save Lunch Money

Saving lunch money is another way you and your family can save money. Get up 10 minutes earlier and make your own lunch. Save the money you would have spent on lunch. If all family members do this, the family can realize a nice sum that they can add to their savings. Working together to reach a family goal, such as a new TV or a summer vacation, can be an excellent family activity.

Shop for Sale Prices

Another strategy that can work for all family members on a wide variety of purchases is to save the money you "save" when you buy items on sale. When you buy an item on sale, save the difference between the sale price you paid and the "full" price you would have paid if the item had not been on sale. Put this money in a safe place and on a regular basis deposit it into your savings or investment account. Using this strategy can add large amounts to your savings program. The key is that you actually save this difference and apply it to your savings or investment program.

Plan a "Nothing Week"

Once in a while, have a "Nothing Week," an entire week when you and your family agree not to spend any more money than is absolutely necessary. You would not go to the movies, out to eat, bowling, etc. Plan to do special activities, but save the money instead of spending it. Add this money to your savings program. Another similar strategy is to use a crash budget approach. A crash budget works like a crash diet  --   you try to cut out all unnecessary spending and save as much as possible in a given period of time, say two weeks or a month. Add all the savings to your savings or investment program.  If the "Crash Budget" sounds unbearable, consider a "Cut-Back Week." During this week, do what the family would normally do, but think of ways to make it less expensive and save the difference. For example, rent a movie instead of going to the theater, make long-distance phone calls on the weekend when the rates are lower, write a letter or send an e-mail instead of calling, drink mix-your-own lemonade instead of soft drinks, etc.

Avoid Paying Credit Charges

A critical savings strategy to consider is avoiding the use of credit. Unless credit purchases are paid off in full each month, interest consumes dollars that could be spent funding your saving and investing goals. Suppose that you have a balance of $1,000 on a credit card that carries a 19.8% interest rate and a full grace period. If you make no more charges against the account and only pay the minimum payment of 3% per month, you will pay approximately $165 in interest over one year. If you continue making only minimum monthly payments for the rest of the $1,000 with no additional charges, you will take eight years and three months to pay it off, and you will have paid $843 in interest.

Carefully evaluate all spending decisions, especially those being paid with credit. Make every spending decision on the basis of how it will satisfy your goals. Eliminate spending for items that have little or no value relative to your goals. Also be aware of your needs and wants as you make purchases.

Breaking Habits Can Yield Dollars to Invest

Some of the items we buy are needs, items that are necessary for survival. Other purchases are wants, all the things we think we need, but could do without. Buying items to satisfy our wants can become a habit; before we know it, we are spending lots of money on these items. Find money to improve your financial situation by identifying some of your money habits. Then break those habits or at least reduce the number of times you enjoy the habit each day, week, or month. Review Table 2 for specific examples.

Going further, if your family drinks iced tea instead of a 2-liter soda for the evening meal, you can probably save at least $5 a week or $260 ($5x52=$260) a year. By drinking tap water instead of other beverages, you can save $7 a week or $364 ($7x52=$364) a year.

Let’s look at those who feed the soda machines at work. By bringing soda from home ($.30 each) instead of feeding the machine ($.75 each), a person who drinks two sodas per day could save $234 over the course of a year ($.75-$.30 = $.45 x 2/day = $.90 x 5 days/week = $4.50 x 52 weeks = $234).  Changing or adjusting a few habits can result in big savings for you and your family. To see how easy this can be, use the following steps to help you identify and change habits.

Steps to Breaking Money Habits

By following these six easy steps, you can gain better control of your financial resources and increase the money available for investing. Put this six-step plan to work for you and your family.

Using Worksheet 1, "So Where’s The Money?," think of some habits you might be able to adjust. Select from the products or services listed or add your own choices to the list. Then determine how often you purchase the product or service. Next, calculate the total cost of enjoying the product or service for one year. Armed with this information, you are ready to advance to Step 2 in your quest to break habits and collect funds for investing.

Worksheet 1. So Where’s the Money?

Calculate your total monthly and yearly costs.  Are you happy with where your money is going? If you aren't, now is the time to learn about ways to break habits and begin a savings program for you and your family.

The second step to breaking habits involves looking for alternatives and choosing a different way of spending your money. This action step demands that you take control of the situation. One way to do this is to review your money habits and where you spend money, then identify how you can make changes. For example, have you ever stopped to consider how much you and other family members are spending for hair and nail care? If you spend $15.00 per week each month for hair care, that’s $60.00 per month or $720.00 per year. Add a nail care bill of $15.00 per month or $180.00 per year. That is a lot of money.

What can you do? It is important for you and other family members to look good and feel good about yourselves. You can take control and make changes that will help you capture some of the money going to these expenditures and redirect its use toward other family goals and still be well-groomed. "How can I do that?" you ask. Learn how to do these tasks yourself, or barter with a friend or neighbor who has these skills. You do something for them that they can’t do, and they do your hair and nails. Every once in awhile, you might treat yourself or other family members to a special makeover. Otherwise, save the money you would be spending on hair and nail care, and put this money toward your family goals.

Once you get into the swing of breaking habits, you and your family can come up with ideas on how to change and adjust spending.

Be specific and honest as you review expenditures. Come up with creative ways to save money, and share these ideas with others. Here is an example from the clothing area to get you started.

By adopting these strategies, you will see your clothing budget shrink. Add the money you no longer spend on clothing to your investment plan.  With these budget reduction ideas for clothing in mind, brainstorm ways to save money in other budget categories with family, friends, neighbors, and co-workers. Develop money saving lists for:

For more information on saving money, access a copy of 66 Ways to Save Money from the Internet at <www.pueblo.gsa.gov/money.htm>.

Some habits are very hard to break even when they are dangerous to our health and physical well being as well as financial well-being. Examples that quickly come to mind are smoking, overeating, drinking alcohol, and gambling. These activities can be life threatening and/or result in financial ruin. If you smoke a pack of cigarettes a day, what is the cost for a year? A pack-a-day habit adds up fast:

   $6.00/pack/day = $42.00/week  = a whopping $2,184.00/year.

Remember, if you believe in yourself, you can kick any habit.  Once you get into the swing of breaking habits, you and your family can come up with numerous ideas on how to change and adjust spending. Perhaps together the family could turn the task of saving into a friendly competition for the "Saver of the Year Award." The winner would be the person who saved the most dollars or the largest percentage of their income in a given period of time. By making the decision to change, you are ready to advance to Step 3 in breaking habits and finding money to invest.

Now that you have all these great ideas to keep more of your money, how will you keep yourself motivated? Writing down your new desired behavior is one strategy. By recording the change, you are committing yourself to a new behavior. It is necessary to start your new behavior immediately. For best results, begin within 24 hours after making the decision to change or adjust spending. The sooner you begin a new behavior, the sooner the new behavior will become a habit. Step 4 will further assist you in adopting new behaviors.

To further establish a new behavior, share your plan with others. Tell family, friends, and co-workers about your plan. By giving others the opportunity to support you, you boost your determination to succeed. If your behavior change involves the entire family, all family members must work together for the family to succeed.  Refer back to the worksheet, "So Where’s The Money?" Go over the chart with the entire family. Together, decide ways the family can break habits and develop a savings plan. Now is also a good time to make a family "piggy bank."  The "bank" can be an empty jar or a small box. Once the family decides on their family financial goal, they can put a picture identifying the goal on the "bank." 

Examples of goals include paying off a bill, buying something for the house, visiting family in another state, or accumulating money for school shoes. The "bank" needs to be kept where all can see it and all can help by adding money. After accumulating a sum of money, the family might want to open a savings account at a local bank or credit union. Once this account has grown to cover emergencies, additional savings may then be invested so the family will realize a larger return on their money.

Even with the best of intentions, sometimes staying focused on your savings plan is hard. The next step of the action plan will help you move forward.

Step 5 is a critical step toward breaking habits and increasing family savings. You and family members must always look for new ways to reduce spending and increase savings. It is important to reinforce the fact that you can change your attitudes and break habits. Stay focused on your goal. It takes about 30 days for a new behavior to become a habit.   Here are some specific activities for you and your family that will help you gain control of your finances, but still have fun as a family. By engaging in activities such as these, we are changing our attitudes and choosing activities that are more "money friendly." Changing attitudes and lifelong habits will serve you well immediately and over a lifetime and set an example for your children by instilling the value of saving.

Yes, you can do it -- you can change your attitude. You can break habits and save for things that are really important to you and your family. You just have to stick with your plan. If you are successful, you will reach Step 6 of our action plan.

The last step to breaking habits is to celebrate your success. Once you have reached your initial goals, let others know of your success. Enjoy the fruits of your savings. Then continue with your new behaviors that are now habits. You have the tools necessary to be successful. Remember to trim all unnecessary expenses and keep your needs and wants in perspective. Watch the pennies you save grow into dollars which can be used to fund your saving and investment programs.

Be a Comparison Shopper

Comparison shopping is the customer’s best, but least used, technique when spending regardless of the type of expenditure. Comparing prices and products can save as much as 50% off a price you might have paid without making the comparison. Comparison shopping makes good sense. It is important to remember that an over-spender isn’t just someone who spends more than he earns. An over-spender is also anyone who pays too much for things, especially when items or services purchased are conveniently available for less.

Internet shoppers can find comparison shopping resources at "shopping bot" (short for robot) Web sites such as <www.mysimon.com> and <www.bestbuys.com>. The benefits of comparison shopping are more than the money saved. Comparison shopping puts you in control of your finances. It helps you learn more about the products and services you are interested in buying. As a more informed consumer, you are able to make better spending decisions. Additionally, each success will reinforce your resolve to comparison shop again. By making wise consumer decisions and getting a good value for less, shoppers are able to save and/or invest the money saved.

Untapped Strategies: Potential Money Sources to
Fund Your Investment Program

Do you know that sometimes you can collect dollars instead of pennies by becoming a more knowledgeable consumer? By using the strategies that follow, you may be able to add large sums of money to your family’s savings and investment program. Throughout the country, billions of dollars remain in accounts that have been abandoned or forgotten. These accounts include checking and saving accounts, pension benefits, and insurance benefits. How could anyone possibly forget about something of value? Well, maybe.... You neglected to retrieve a security deposit after moving out of an apartment. Perhaps dividends on a stock or mutual fund have been going to the wrong address. Maybe you switched banks and failed to close out all your old accounts. Or you changed jobs frequently and previous employers don’t know where to send pension benefits. Perhaps you are entitled to benefits of a life insurance policy or cash left by a relative who has died. In any event, you might be entitled to unclaimed property held by your state or the Pension Benefit Guaranty Corporation. Or you might be the beneficiary of a long-lost insurance policy. Fortunately, receiving your just rewards is not extremely difficult if you know how to proceed.

To locate missing bank accounts and other unclaimed cash, contact your state’s unclaimed property office or visit the Web site www.missingmoney.com.  In most states, owners can recover their cash whenever they learn about it, no matter how long it has been in the state fund. About half of the states pay interest on money left in interest-bearing accounts. Instead of waiting for a state to find you, which is unlikely, you can contact the state’s unclaimed property office.

When you write or call about abandoned property, give your name (maiden or former names, if necessary), Social Security number, current address, and all previous addresses while you lived in the state. If you are applying for property that was held in someone else’s name, provide his or her Social Security number and former addresses. States normally take 2 to 3 weeks to write back saying whether there is property waiting for you. If you are due a windfall, they will send you an abandoned-property claim form to complete.

Return the completed form with proof that the cash belongs to you. If it’s in your name, you will need to supply only a current ID, such as a copy of your driver’s license, and any document that links you to the money (e.g., a pay stub, savings passbook, or utility bill). For property that belonged to you when you lived at an earlier address, you must provide proof that you lived there. A copy of a tax return will do. Expect to get your check in about two months.

From time to time, you may see advertisements of asset finders, people who offer to find lost property for you. Beware of such ads. If you decide to hire such a firm, pay no more than 10% of the assets recovered and check out the firm with the Better Business Bureau. According to one state property fund director, "If you ever get a card or letter from a company offering to find your money, take that as a tip that the firm knows you have money waiting. So call or write to the state fund yourself. Then you’ll get all the money you’re due."

According to the Pension Benefit Guaranty Corporation (PBGC), more than 7,000 people in the United States are owed uncollected pension benefits. The PBGC, a federal agency, has launched a nationwide search on the Internet to find workers who are owed benefits and who could not be located when pension plans closed. To check if your name is on the list of hard-to-find beneficiaries, log onto the Pension Search Directory at <http://pbgc.gov/search>. The directory identifies about 1,000 companies mainly in the transportation, machinery, retail trade, apparel, and financial services industries. If you do not have a computer, check for availability at a public library or libraries at high schools, community colleges, or universities. If you are not able to access a computer and you feel you are owed benefits, write to the Pension Benefit Guaranty Corporation, Missing Participant Program, 1200 K Street, NW, Suite 930, Washington, DC 20005. Include the participant’s or beneficiary’s name, address, daytime telephone number, Social Security number, date of birth, and the name and location of the employer.

Another place to look for lost cash is the Internal Revenue Service. Yes, the IRS has more than $68 million in unclaimed tax-refund checks that were returned because of an incorrect address or other delivery problems. The average check amount is $690. If you think you are owed a tax refund, but have not received it, call the IRS at 1-800-829-1040.

The last place where you might look for ready cash is lost insurance policies, yours or those of relatives where you might be the beneficiary. If you think there is a lost policy in your family, send a stamped, self-addressed business envelope to the Missing Policy Service, American Council of Life Insurance, 1001 Pennsylvania Avenue, NW, Washington, DC 20004-2599. The Council will send you a tracer form to complete and return. The Council will then circulate copies to about 100 large life insurance companies. The service is free and takes from 3 to 6 months.

Strategies to Stretch Your Money

Whether you save pennies to make dollars, break habits and bank the savings, or find that you are the beneficiary of a long-lost life insurance policy, you are the one who has to manage your funds to best meet your individual and/or family goals. Remember that saving money does not make one a tightwad. On the contrary, saving money often allows you to have more of what is important to you and your family. As you continue on your path to saving money, you may find that the following ideas will serve you well as road marks on your journey.

Adopt the Two-Week Rule

If you think you really want something, wait two weeks to get it. The purpose of this habit is to make you an impulse saver, not an impulse spender. The two-week rule does not mean losing out on a once-in-a-lifetime opportunity. How many items, such as expensive clothing, a new piece of furniture, a boat or recreational vehicle, or a new car, would not be there in two weeks? If you wait two weeks to buy big-ticket items, two good things can happen. You may find the same item less expensive somewhere else. Or you may discover that you really did not want the item once the initial excitement wore off.

Avoid Unnecessary Waste

Another principle to practice is keeping items that are still good. You can avoid waste, which translates into savings or more money for other activities. You don’t have to keep using items that need to be replaced, but do continue using those that still have value. The money that you would use for premature replacements can fund your savings and investment programs or purchase other goods and services for you and your family.

In a similar vein, don’t waste goods and services. Don’t leave the television on when nobody is watching it or operate the air conditioner when nobody is going to be in the house for hours. Don’t throw away a tube of toothpaste that is good for a few more brushes. These actions are related to the conservation of resources, not money; but in the end you save money, too.

Another related principle is to develop a positive philosophy regarding care and maintenance of goods. By taking proper care of products, using them in the intended manner, and maintaining them according to manufacturer’s instructions, you can greatly extend the useful life of an item. Instead of buying a new item, use the well-cared-for item and invest the money you would have spent. Let it be earning interest for you and contributing to your long-term financial security.

Become a Coupon Clipper

Would you think it was crazy to take a few dollar bills out of your wallet each week and throw them into the garbage can? That is exactly what you are doing by not using coupons for items that you normally buy or taking advantage of dozens of money-saving opportunities each day. If you spent five minutes a week cutting out coupons for your grocery shopping and saved at least $6.00 a week, that is the same as getting paid $72.00 an hour after taxes. In a year, you would save a minimum of $300.00. You would need to deposit $5,000.00 and get a 6% yield tax-free to make that much money. Remember, pennies do make dollars.

And finally, practice treating yourself. Having saved money by not buying things you don’t need allows you to spend money for the things you want and that make your life enjoyable. Learn to truly enjoy the fruits of your labor.

Summary

If you are able to provide the desire and self-discipline, you will be able to "find" the money necessary to fund your saving and investment programs. Improving your financial health through increased savings is not a matter of luck, rather it reflects planning, defined goals, wise decisions, and a desire for personal success. The various savings strategies included in this unit offer you the groundwork needed to initiate a saving and investment program for you and your family. To help you stay on target, see Table 4 for reinforcement and additional strategies.

Compiled by: Joyce H. Christenbury, Clemson University Cooperative Extension Service, May 1996.

  Action Steps - Check each action step as it is completed

References

Bruce, L. Negative personal savings rate: What does it mean? , <www.bankrate.com/brm/news/sav/20060308a1.asp>.

Consumer Literacy Consortium. (1998, April). 66 ways to save money. Consumer Federation of America.

Chatzky, J.S. (1998, May 29-31). Save your change -- it could grow to thousands of dollars. USA Weekend, 11.

Cruz, H. (1996, April 15). Saving money does not make one a tightwad. The Greenville News, D1.

Detweiler,Gerri. (1993). The ultimate credit handbook. New York: Penguin Group.

Folsom, David. (1997, September 15). Finding money made easy. Bottom Line Personal, 8.

Kiplinger Washington Editors, Inc. (1998, September). $13 million in missing pensions. Kiplinger’s Retirement Report 5 (9), 6.

NCFE. (1997). Do without a little now...gain a lot more later on. The NCFE Motivator Newsletter, 3.

O’Neill, B. (1997). Public policy: Creating an environment for increased U.S. savings, U.S. savings rates: An overview. AAFCS Family Economics and Resource Management Biennial, 1-4.

Razzi, E. (1998, September). 33 ways to save at home. Kiplinger’s Personal Finance Magazine, 111-116.

Sheets, K. & Spears, G. (1996, May). 101 ways to keep more cash. Kiplinger’s Personal Finance Magazine, 32-39.

Author Profile

Joyce H. Christenbury, M.Ed., CFCS, is a Professor Emerita of Family and Youth Development Department with the Clemson University Cooperative Extension Service. As an Extension family resource management specialist, she provided leadership in the area of family resource management with an emphasis on helping individuals and families develop skills needed to cope with today’s complex marketplace. Professor Christenbury received her undergraduate degree in Home Economics Education from Winthrop University, Rock Hill, SC and her masters from the University of North Carolina at Greensboro in housing, management, and equipment. Prior to joining the Clemson faculty in 1973, Christenbury taught in the College of Home Economics at the University of Delaware in Newark, Delaware.