A Quick and Easy Way (Finally!) to Maximize Your Cash Stash

It’s tough sometimes to face harsh realities, and even tougher to adjust old habits.  This is never more true than in the financial realm, once you have become used to frittering away cash – and then realize suddenly you need to change, pronto.

As a financial advisor, I can’t tell you how many thirty- and fortysomethings I meet who are earning great salaries, yet don’t have much to show for it.   They come into my office, sit down, and are genuinely puzzled, asking, “Where is all my money going?”

So if this describes you, know that you are not alone.  Spending is going back to all-time highs,  with 35% of Americans being chased by debt collectors, according to a recent study by the Urban Institute. Meanwhile, the Employee Benefit Research Institute 2014 Retirement Confidence Survey reports that half of workers age 55 and older have less than $50,000 in savings.  This is not to be taken lightly.   After all, without any savings, you lose the advantage of compound interest, and therefore the possibility of creating an investment engine that continually churns  out money for you – with the simple result that you  get richer, faster.

Plus, you may have to say goodbye to other things you may want: paying down your debt; sending offspring to college with substantial tuition help;  having the flexibility to walk away from a job with an obnoxious boss; being able to do what you want all the time (aka retirement); enjoying vacations without racking up huge credit card bills; or having your Sex and the City moment of buying those Carrie Bradshaw look-alike heels without guilt.

The truth is that you will not attain any of this without some effort.  However, the idea that your hard-earned money is disappearing due to a lack of financial education and healthy economizing habits should be a wake-up call.  And you can,  after all, change your tendency to “spend without saving”  — even if it feels difficult at first to go on a budget.

So you know what to do – it’s the how that is so difficult.  (It’s like losing weight:  we know we should eat less, and work out more, but it’s the next step that is hard.).  Similarly, when it comes to saving, we know we should spend less and save more.  So how do we walk the walk (while in our Sharp Heels)?

Here are five steps to help you strut more confidently:

• Make your success automatic. Why does automated online bill pay work so well?  It’s automatic.  Why do 401K plans work so well for people?  They’re automatic.  You get the idea.
  • • So give yourself a better chance for financial success by having a set amount of money automatically withdrawn from your paycheck.  You won’t miss the money you don’t see, and it’s much less painful than manually transferring money.
    • Depending on your situation, consider starting off with 5% per month and gradually increasing this amount.
• Choose a bank out in the boonies.  Well,  not literally. But, it’s smart to select a bank you do not pass on your regular commute.  The further away this bank is from you, the better, to keep the temptation away.
• No debit card allowed. Again, don’t make it easier to get access to your money with an ATM on every corner. You want your money to accrue – so keep it out of sight, out of mind, and out of your pocket.
• No online access. Banks and credit card companies know what they are doing providing easy access to your money with transfer capabilities online and on your phone. That benefits them, but probably not you.
• Pay credit cards in full at the end of each month.  It’s no good to cork one hole and not the other.  You should control your future spending.
  • • So work on getting yourself down to one or two credit cards (max), and cut up the others.
    • Strive to make it a rule to never pay credit card companies their high interest rates ever again, and pay your bill in FULL each month.
    • Revert back to how your grandparents financed their expenses: If you don’t have the money, don’t spend it.  That is what your savings are for – to borrow from yourself.
    • Also consider using a charge card, as opposed to a credit card, that only gives the option to pay your bill in full each month.  This is a great way to change your habits and get in the right mindset.

You can do this. You have no doubt probably tackled harder challenges in your life.  Don’t overcomplicate these steps; they are simple to follow but will require some work.  The payoff is that you’re giving yourself a gift: the relief of building toward your future.

And if that doesn’t sound too, well, glamorous, take a pointer from a supermodel, Kate Moss.  To tweak a quote of hers, this is how you should think about it: “Nothing tastes as good as financial security feels.”