By Beth Kobliner, REDBOOK
How can you truly fix your bad money habits? By faking out your inner spender. But you have to know the tricks. Just like eating a handful of raw almonds to curb a cupcake craving, or slapping on some nasty-tasting polish to keep from biting your nails, there are behavioral ploys that can help you build up a solid nest egg in spite of yourself. Here are some of my favorites.
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1. Stop trying to save: Promising yourself that you'll be "good" and simply try harder may not be enough. Instead, put your savings on automatic. Research shows that the less effort it takes, the more likely people are to contribute to savings. A classic study from a professor at the University of Chicago showed that having employees automatically enrolled in a 401(k) retirement savings plan almost doubled participation rates. Not saving (by opting out) was what required an effort here-and apparently it was too much work!
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You can also tell your bank to automatically transfer a set amount of cash-usually as little as $25-on a regular basis. Take Gina Gallo, a 30-year-old from Lacombe, LA. "I used to be a lousy saver, because I would spend everything," she admits. "And I'd still be that way if I didn't have $50 withdrawn monthly out of my checking account into my credit union's savings account." This automatic savings has helped Gallo build a nest egg of nearly $1,000 so far. If you find yourself thinking, I can't afford $50, ask yourself this: If you had to, could you save $1.75 a day? If the answer is yes, then you can save $50 a month.
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2. Spend your cash: This trick sounds suspiciously fun. The idea is that if you use cash instead of a credit card, you'll spend more carefully. A study by MIT researchers found that people were willing to pay up to twice as much for baseball tickets, for example, when paying with plastic compared with cash. Some researchers have dubbed this phenomenon the "Monopoly money" effect, meaning that because you're not playing with "real" money, spending doesn't feel as consequential. So use a card for convenience (and membership rewards) on major purchases-but only if you can pay off the bill in full that month. For everyday purchases, stick to cash.
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3. Feeling blue? Stay home! We all have our down days. To lift our spirits, some of us turn to friends, others to Ben & Jerry's. And some of us hit the mall. In a fascinating study, researchers from Harvard and Carnegie Mellon confirmed that people are willing to spend more when they're sad. Participants viewed two movies- one a tearjerker about a dying father, the other a yawner about the Great Barrier Reef. The findings: Those who watched the sad film were willing to spend an average of $2.11 for a water bottle, versus the others who paid an average of 56 cents. So avoid retail therapy and divert your inner spender with a walk around the block instead. Just don't let her walk you to the mall!
Beth Kobliner is the author of the New York Times best seller Get a Financial Life. She can also be heard each week on the nationally syndicated public radio show The Takeaway. Visit her at bethkobliner.com.
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Reprinted with permission of Hearst Communications, Inc.