Make Saving a Habit: Like Washing Your Hands After #2...

Why do people habitually do certain things? I stumbled upon a great article on consumer habits (or lack thereof when it comes to saving and financial planning) that I wanted to share with my readers. The simple reality is that we need to not only make saving (I also call it "paying yourself first") not only a habit, but a top priority. With pensions receding at a rapid clip and continued US government deficits (don't count on Social Security to take care of you younger folks), it is more important than ever to save and save now. It doesn't take much if you do it everyday and don't think about it (e.g. make it a habit). Dropping a couple of bucks in your savings kitty everyday is all it takes.

Buy This: Save More, Spend Less
By ROBERT POWELL
MarketWatch
August 14, 2008 4:31 p.m.

Many American companies are adept at getting people to start habits. Firms such as Procter & Gamble, Colgate-Palmolive and Unilever "have perfected the art of creating automatic behaviors," said Charles Duhigg of the New York Times. They get consumers to chew gum, spray perfumed water on their furniture, and whiten their teeth "almost without thinking, often in response to a carefully designed set of daily cues."

By contrast, companies in the financial-services sector -- specifically banks, insurers, mutual fund firms and the like -- have failed to create the cues to get Americans to develop the saving habit or break the spending habit. So the question arises: What lessons, if any, can financial firms learn from those firms so skilled at manufacturing habits? What are the cues needed to create the savings habit?

READ THE REST OF THIS EXCELLENT ARTICLE HERE...

Get Paid to Save (And Have Fun While You Are At It?)!!

I know it sounds too good to be true, but this is the real deal and I would encourage you all to take a look. The "Pay Yourself First Challenge" is a savings contest sponsored by FNBO Direct (yes, that's a bank) that gives you the opportunity to earn free cash, learn to be a habitual saver AND offers a great, HIGH interest rate on your savings. This contest was recently written up in the Wall Street Journal and is gaining in popularity (they are relying on folks like yours truly and other Bloggers to spread the word). Here's the rundown per the contest website:

Create a one-minute video about what you're saving for (visit PYF's YouTube Channel to see what your competition is doing). Maybe you're a savings superstar — or a little savings challenged. Compel us with your original and creative video. You may be selected to join us on a six-month savings journey as a challenger in the FNBO Direct Pay Yourself First Challenge!

What's up for grabs:

$10 Gift Card for each of the first 500 YouTube Submissions*
$500 Cash Prizes for each of the Top 20 YouTube Submissions*
$7,500 Luxury Spa Vacation Grand Prize*
$25,000 in Matched Savings for the Top 5 Contestants*
Upload your video by July 31. Start shooting today!
What is PYF?

Pay Yourself First (PYF) before you pay your mortgage, credit cards or any other monthly bills. It starts with a direct deposit into your Online Savings Account, transferring only what you need for monthly bills into your checking or BillPay account. This small change maximizes your earned interest and grows your savings faster.

*See Official Rules for complete details.

P2P-Loans.com is sketching out a possible submission and I will post a link to my video assuming I ever get my production act together. Good luck and spread the word on this great program!

Save More, People! Why is the US savings rate so low?

Just the other day, the government quietly reported (only because the media didn't really give it any play - maybe it has something to do with their retailer advertisers) that the savings rate in the United States hit a new ALL TIME LOW! American's are saving a whopping $2 for every $1,000 of disposable income that they earn. TWO DOLLARS! That's a savings rate of about 0.2%. In no uncertain terms, America has become a spend and consume nation that relies on credit to finance our lavish lifestyles (a special thanks goes out to our kids for agreeing to pay back the $9+ trillion national debt for us). Well, in the spirit of returning back to our roots as a country of savers and investors (just look at the above chart to see that we did used to be a nation of savers), I'm offering a few tips and suggestions on how you might increase your savings rate just a tad:

1) Use your rebate check (thanks again to our kids who are paying for this) to pay down your credit cards - AND DON'T RUN THEM BACK UP. If you pay down $600 or $900 of your credit card debt that is probably costing you 20% in interest, you'll save as much as $200 per year in interest costs! It may even improve your credit score, which could lower your interest rate on other loans you have or need in the future! That'll help cover the increased cost of gas, at least.

2) Let your money work for you by putting your newfound savings in a money market account or a CD. For example, Countrywide is offering a FDIC insured 12-month CD at 4.10%. Of course, only do this if you can't use the cash to pay down your high interest rate credit cards (after all, 20% is much bigger than 4.10%). There are some other high yield ideas at P2P-Loans.com's High Interest site.

3) Refinance your credit card debt. If you have decent credit, why not seek out a low APR (or no APR) credit card to lower your borrowing cost. If you are paying a high credit card rate, take a look at some great credit card options on our Best Credit Card site. Using the 20% interest example, you could open a new account with a 0% APR for 12 months, transfer your balances to this new card (for a fee that is usually 3% up front) and save a whopping 17%! Here's a great offer from American Express that gives you 15 months of 0% APR on purchases and a 4.99% APR on balance transfers. There are a lot of other good offer out there as well. But, don't use this low rate as an excuse to spend more (this is key!). Stay disciplined! If you want to explore other great offers, use P2P-Loans.com's Credit Card Search to find other great offers.

4) Make saving automatic. There are a lot of programs that make saving easy. For example, open a Bank of America checking and savings account and sign up for their "Keep the Change" promotion. You not only get free checking and savings, but you also get $75 of free cash to kick-start your savings plan! Then, whenever you use your Bank of America debit card, they round your purchase up to the next dollar and put the change in your savings account. The interest rate on the savings account is lousy (less than 1%), but you will be saving some money with minimal pain and effort. If you make 30 purchases per month and save an average of $0.50 per purchase from this program, that's $15 per month and $180 per year. BoA will match 5% of that AND you get the $75 sign-up bonus, so that brings you to nearly $265 in savings (plus interest). It's an easy way to get started and it's automatic.

In summary, Americans are not saving enough and it's our responsibility to take care of our own futures. At the current deficit level, our government will not be in a position to bail us out when we run out of money, so SAVE MORE, PEOPLE! Please Digg it up!