Making your money real

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We live in an age where you may rarely see your money. Paychecks get directly deposited to checking accounts where automated bill pay functions whisk large chunks of it away to pay bills in faraway states. You use a piece of plastic for paying gas and another for shopping at the mall. You use a debit card for groceries and receive an alert on your phone when your funds are getting low, but it’s just all numbers flickering on a monitor. The concept of money is even disappearing from our language. We talk about account balances instead of how much money we have. Under these circumstances, it’s easy to lose your connection with money.

For some people, sitting down and figuring out a budget on paper works fine. For others, the association between the squiggles on the screen and dollar bills is more tenuous. If you’re having trouble sticking to a savings plan, these tips may help make the concept of money real to you again.

Making your money real

Association game
Figure out one expense that you can do without every once in a while and use that as a gauge to help make your savings tangible. For example, if your goal is to save $40 a month and you know that you spend $4 a day on espresso drinks, you can think of your savings as 10 coffees. This way your savings goal is not just an abstract number, but something specific to tackle. How you save the $40 is up to you, but you can start thinking of how to reach your savings goals in terms of familiar items.

Exchange system
Often money management advice suggests that you radically change your lifestyle, creating an either-or situation to reach your goals, says Ruby Payne, a researcher and author of “A Framework for Understanding Poverty.” She offers instead the concept of exchange: “Once a week, skip Starbucks. You’re not asked to give something up completely, just trade it at times for something more valuable.”

The concept of exchange is useful on two levels, both strategic and inspirational.

Strategically, if you’re used to spending $10 a day eating lunch out with your co-workers, using the concept of exchange then you know that if you want to save $20 a week you’ll need to bring lunch twice. Thinking of your funds in terms of how many lunches out you’re trading off is good for planning your strategy, but you may need to reframe your mindset as well.

Say you’ve been virtuously brown-bagging to reach your savings goals. Unless you know why you’re saving, tying it to a specific reason or a purpose, you may become discouraged quickly or give up completely. How exciting is it to save as you watch your co-workers trot off to Chili’s while you’re left clutching your lunch sack? Your belly grumbles, missing your share of the Awesome Blossom fried onion, but the only thing you have to console yourself is the knowledge that you’ll see in return a slight upward shift in your savings balance at the end of the month.

This is where the second, inspirational level to the concept of exchange comes in: You’ve got to have a goal in order to make the getting there worth it. You’re exchanging the temptation of the moment for something more valuable.

The next time you’re out and that shiny new pair of shoes or doodad catches your eye, pause for a moment and rethink the trade-offs. When you understand why you need the savings cushion, you’ll probably end up putting money into savings instead.

Envelope system
The envelope system is an old trick Payne thinks should be dusted off to help people who just can’t stick to a budget. In this system, you keep track of your money each month in a series of envelopes rather than on paper, translating your budget from an on-paper concept to something you can literally grasp.

To begin, gather a number of blank envelopes. On the outside of one envelope write “rent” or “mortgage payment,” on another write “utilities.” Create as many envelopes as your budget requires and fill them with the money allotted to that item. Then, if you take money from food to pay rent, put an IOU in the food envelope so you know how much money you need to replace. Unless you pay that envelope back, the whole exercise becomes a shell game and falls apart.

Paper for plastic
People spend between 12 and 50 percent more when using a credit card versus cash, spending surveys reveal. To see how much money you spend needlessly with plastic, Ruby Payne, a researcher and author of “A Framework for Understanding Poverty,” suggests this exercise:

Look at your old statements and see how much money you’re spending a month on credit cards. Fill your wallet with Monopoly money or make a number of homemade paper notes and leave your credit cards at home.

Every time you don’t make a purchase that you normally would have used a credit card for, move the fake money from your wallet to an envelope. At the end of the month, see how much you saved.

If you’re in bad enough shape that you still need cards to float you for the short term, limit their use to the absolute essentials. Payne suggests you say to yourself: “It’s not my credit card, it’s my friend’s credit card so I can only use it for [the agreed upon item].” Even if you’re using the card for groceries, reconsider. Unless you’re able to pay off your balance in full at the end of the month, you’ll still be paying interest on that box of cereal long after it’s gone — making for an expensive box of Wheaties.

Cash-only diet
Test your mettle by implementing a weeklong moratorium on plastic. Make one last trip to the ATM and take out only the amount of cash you think you’ll need to make it for a week. Pack away your credit cards, debit card and checkbook too; for the next seven days you’ll have only your wits and the greenbacks in your pocket to help you get by.

Prep steps

  • Did you consider these expenses?: Groceries, meals out, coffeehouse drinks on the go, entertainment, gum and other convenience store grabs, books, music, cosmetics, gifts and allowances.