This is the year to reach your savings goals

Behavioral economists provide tips on how to improve the odds of reaching your goals. Now that the initial New Year's Resolutions  have faded, it's time to get serious about reaching your financial (and other) goals with the help from research. About half of people who make these resolutions fail to achieve their goals. Now there is research-based help.
Source: "This may be the year you reach your savings goals" by Anne Tergesen, The Wall Street Journal, 12/28-29/19.

1. Set financial goals in January or on your birthday. Research shows these are good times to initiate change. Both wipe the slate clean and mark the start of a new year.

2. Set specific, realistic goals. Example: "I will increase my 401(k) contributions by 2%/year for the next 5 years."

3. Make a detailed written plan. Break your goal into small steps and get started.

4. Stress test your plan. "Behavioral economists recommend an exercise called mental accounting, in which people think about a desired outcome and why it matters." Ex. I am saving 15%/year so I can retire by age 67.  Identify obstacles (buying frequently on Amazon) and brainstorm solutions (stop Amazon Prime subscription and disable one-click shopping).

5. Use behavioral strategies. Automate your savings!

• Make "if-then" plans.
• Reward your successes. Treat yourself when you've stuck to your plan for 6 months.
• Use temptation bundling. Listen to an audio book while exercising; enjoy your favorite beverage while Reviewing monthly spending. 
• Use behavior therapy. "Identify triggers of bad behavior and substitute alternative rewards." 
• Use mental accounting. Save for separate goals in individual accounts. Have a visual reminder of each goal. 
• Set occasional high impact goals. Set one month as a save as much as possible/spend as little as possible. This is similar to the alcohol-free January. 

Back to Basics: Compound Interest

Suppose you started with one penny on the first day of the month and then doubled it each day—to two cents, then four, then eight and so on.
After 10 days, you’d have $5. After 20 days, you’d have $5,000 and, after 30 days, you’d have more than $5 million.
Read the details in Jonathan Clements' blog: https://humbledollar.com/2019/01/repeat-for-emphasis/

7 Ways to Trick Yourself into Saving More Money in 2015

Great research-based advice to stay on the right track in 2015:
1. Use Inertia to Your Advantage
2. Keep Your Eye on One Prize
3. Focus on the Future
4. Ignore Raises and Bonuses
5. Make it Contractual
6. Keep Impulses from Undoing Your Budget
7. Force Yourself to Feel Guilty     
Read the details by Susie Popick at: http://time.com/money/3658298/how-to-save-more-money/

5 ways your retirement money makes money

1. Interest earned
2. Dividend payments
3. Tax deferral
4. Rebalancing
5. Compounding
Mitch Tuchman explains why "time is money" and why you need to start early. It's never too late; today is the first day of the rest of your life so get going! Details at: http://www.forbes.com/sites/mitchelltuchman/2014/12/22/retirement-5-ways-money-makes-money/

How Giving Up Cable TV Could Save Your Retirement

“Ditching cable frees up cash to save for retirement and reduces your retirement expenses.”  David Ning explains:  “We all know that higher spending lowers the amount we can save for retirement. An inflated lifestyle also requires a bigger retirement stash if you want to continue to fund those higher expenses in retirement. Even relatively small luxuries necessitate saving more for retirement if you want to continue to enjoy them over 30 years of retirement. Consider the impact your cable TV bill has on your monthly expenses. Many people pay $100 a month or more for the privilege of channel surfing. A $100 per month bill costs you $1,200 per year or $36,000 over a 30-year career.” Read the details at: http://money.usnews.com/money/blogs/on-retirement/2014/07/23/how-giving-up-cable-tv-could-save-your-retirement

8 Ways to Motivate Yourself to Save for Retirement

Retirement researchers are examining what causes us to save for the future. By Emily Brandon

April 30, 2012 (quoted from the article). Click on this link for more details: http://money.usnews.com/money/retirement/articles/2012/04/30/8-ways-to-motivate-yourself-to-save-for-retirement

Motivating yourself to save for a retirement that's decades in the future can be a daunting challenge. Behavioral researchers are testing exactly what triggers cause people to sign up for retirement accounts and increase their contributions. It turns out that a variety of experiences, including spending time with your grandparents, worrying about problems you could face in old age, and even picturing what you will look like in retirement could persuade you to boost your retirement account contributions. Here's what researchers say motivates us to save for retirement:

1.      Break it down into steps. Instead of focusing on the final account balance figure out how much you need to save each week or month.

2.      Project your retirement income. Consider calculating the annual income your current nest egg is likely to produce in retirement. "People often get intimated and overwhelmed by a huge number. When they see how much it actually translates into, they are maybe more motivated to make decisions."

3.      Don't set your goal too low. "People who want to save more should focus on ambitious targets," says Emily Haisley, a behavioral finance specialist.

4.      Consider the negative consequences of failing to save. "Focusing on some of the things that will happen if you don't reach that goal can be an effective tool in encouraging workers to save. Failing to save can lead to a retirement that is not as enjoyable."

5.      Set up automatic contributions. One of the simplest strategies to save more for retirement is to take the decision out of your own hands.

6.      Picture yourself in old age. When researchers showed people aged photographs of themselves, it made them more likely to want to save for retirement.

7.      Spend time with your grandparents. Spending time with older people can encourage planning for your own future.

8.      Think about your future self. People who feel more connected to their future self may be more likely to save for retirement, according to recent research. "Write a letter to your future self," says Hershfield. "That will at least help you start thinking about your future self as a realistic person who is going to be the recipient of the decisions that you make today with regard to finances."