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Appreciate What You Have, And Enjoy It!

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As we all begin recovering from our Thanksgiving feasts, and possibly a Black Friday shopping trip or two, I thought today I'd take a step back and reflect on what's truly important in life this Holiday season.

In this Christmas season it can be so easy to forget about what's important in life and start to get caught up in all the consumerism that is so rampant in today in our culture.

So while we move into December and start to focus on our upcoming Christmas gatherings, what can we do to have a happy holiday?

Appreciate Your Blessings

I was reading a post over at Money Talks News where Stacy Johnson was talking about his Thanksgiving wish for everyone (more on that later).  In the article he quoted Bob Lotich of ChristianPF.com, who when asked for his best frugal tip responded in essence to “appreciate what you have and enjoy it“.

We live in a time where we all have so many cool things that we didn't have even 100 years ago.  Things like tablet computers, GPS, wireless phones and airplanes.  Still, we can't keep ourselves from complaining.  Reminds me of a comedian Louis CK on Conan O'Brien a while back and his rant that “everything's amazing, and nobody's happy!”:

Instead of complaining about why we don't have the things we want and why things aren't working the way we had hoped, why not try this instead:

Just be thankful for all of the blessings – material, spiritual and relational – that we do have?

Focus On What's important

So while I may not have the extra money this holiday season to go out and buy an iPad, at least I already have a working desktop and laptop that work great still!  And while my home value may have dropped 70k in the last few years and I don't have enough for a down payment on a new home – at least I have a nice home and a job, and a family that loves me.

The Christmas season should be a reminder of the things that are important in our lives – our faith, our family and friends, and giving to others who haven't been as blessed as we are.

Earlier I mentioned I said I would get back to what Stacy Johson's Thanksgiving wish was for everyone, and I think it applies not only to Thanksgiving, but to  Christmas and all  year round!

Shop till you drop, but remember that when you’re on your deathbed, you won’t be remembering the things you had, you’ll be remembering the times you had. So as often as you possibly can, surround yourself with the people you love and savor those moments.

Ok, maybe the shop til you drop part of it doesn't apply all year round, but the rest of it does.

Be with the ones you love, appreciate what you have and just enjoy! 

Are Your Emotions Getting In The Way Of Your Financial Success?

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It's impossible to completely keep emotions out of finances. After all, money is related to a number of emotions, especially fear and excitement. While it might not be advisable to completely eschew all emotions, you do need to acknowledge how they affect you — and watch out for indications that your emotions could be getting in the way of your financial success.

Emotions and Finances

Excitement

It is possible to let your excitement get away with you. Consider how you feel when you first get paid. Indeed, studies have shown that people are more willing to spend money on pay day — when they feel flush. So, even though you might be excited about pay day, or an unexpected windfall, it's important not to spend money when you are in that first flush of giddiness. Don't let your excitement, or your relief, overwhelm your good senses. Say no to extra spending, and take a step back. Examine your priorities and make sure that your excitement isn't leading you to make a poor decision.

Fear

My husband has a Ph.D. in experimental psychology, and one of the things that he says that studies show over and over again is that fear is a very strong motivator — especially in the short-term. Unfortunately, when it comes to money, the fear-based decision making of the short-term can have very long-term consequences. Making decisions based on fear, whether it's pulling out during a stock market drop or buying into a Ponzi scheme because you're afraid of missing out, can lose you a lot of money.

Your fear of loss can also work against you. If you have a huge fear of risk, you might miss out on opportunities to grow your wealth, or start your own business. While you want to limit your risk, and take calculated risks, you do have to be careful of avoiding risk altogether. That kind of paralyzing fear can keep you from reaching your financial goals.

Despair And Disappointment

One of the hardest things about getting out of debt is getting over the despair and disappointment. It is easy to look at the impossibility of the situation, and give up. Try not to let this despair cripple you, though. If you do, you can become trapped in a debt spiral. Instead, find a little optimism. Make a plan to help you get out of debt, and make progress toward your goals. Once you do that, you will be more likely to notice your progress, and avoid the debilitating emotions associated with giving up on your goals.

Sticking To Your Plan

Making a plan is a good idea no matter your situation. Whether you are creating an investment plan for retirement, or making a debt reduction plan, having a road map to follow can help you avoid the pitfalls of letting your emotions rule you. When you feel like spending money because of a sense of euphoria, or when you are ready to sell a stock because of a market crash, step back and refer to your plan. Having that to fall back on can help you keep your emotions in check — and your finances on the right path.

Is Money A Means To An End? Or An End Itself?

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One of the questions you have to ask yourself when you begin probing your relationship to money is this: Why do I want more money? It makes sense to want to earn more money, but why are you so interested in having more money?

Think about why you want more money, and try to define some of your reasons for making the effort to amass wealth. Your reasons for striving for more money can reveal a lot about you — and your level of happiness.

Do You View Money As The End Result?

It's easy for money to become the end result. If you want money just to buy more things, or just to have more money, you have made money the end. You may not have a plan for that money. Instead, it just sits there. And the more money you have, sitting without purpose, the more likely you are to be dissatisfied. In some cases, amassing wealth can become something of a hobby — or even a measure of status. When you begin to confuse net worth with personal worth, it becomes harder to be happy with what you have. After all, there is always someone with more, and you can never get all the money there is. Without a purpose for your money, you can quickly get caught up in deciding that money is the end result, rather than viewing money as a means to an end.

Money As A Means To An End

Most of us recognize that money is a necessity. We need money to buy clothing (or at least cloth to make our own clothing), and many of us have to buy at least some of our food, no matter how great our gardens grow. Additionally, we use money to pay costs associated with maintaining an adequate living space, and for other necessities of life. Having money can help you improve your quality of life, and it can provide you with the things you need. However, it helps to have a purpose for your money, so that you are using more effectively. Plus, you are more likely to enjoy your life more when your money is used for things that bring you pleasure and a sense of fulfillment, rather than having it just sit there, granting you some perceived social status.

The first thing to do, when you want to use money as a means to an end, is to figure out your priorities. Decide what's important to you, and then direct your financial resources in such a way as to make those important dreams a reality. Try to be as specific as possible. Sure, you want to save up money for a comfortable retirement. But what do you want to be comfortable doing? Consider what your ideal retirement would like, whether it's travel, volunteer work, or entertaining family. Then, make a plan for your money so that you can accomplish your goals. The same is true if you want to go back to school, pay down debt, donate more to charity, or build alternative income streams so that you can quite your day job.

Rather than looking at money as an end itself, consider money a tool to help you accomplish your goals. You'll be more likely to live the life you want — and have the financial resources to succeed.

Is It Bad To Be A Spender?

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It can be tempting to lump spenders into the “bad” category. When we talk about money personalities, the spender always comes up. Those who like to spend can be vilified in some circles. Even if it is unintentional, the focus that is so often placed on saving money, cutting spending, and being frugal can really put the pressure on spenders.

But is being a spender really so bad? Since I am, in fact, a spender, I'd like to think that it's not a bad thing at all. Like so many other things, it's in how you do it.

Spending Doesn't Have To Be A Dirty Word

In my mind, having a spender personality isn't a bad thing — unless your love of spending leads you into debt. Additionally, spending doesn't have to mean that you are using the money only for yourself. My husband is a spender as well, and he loves spending on other people. He likes buying gifts for others, and we both feel it is important to give to charity, and to our church.

Even spending on yourself doesn't have to be a bad thing. However, you have to draw the line when it comes to getting into debt to pay for your spending ways. As a college student, I often took my spending too far. I took out student loans — even though I had a full-tuition scholarship and a part-time on-campus job. I also got credit cards, and promptly proceed to max them out. Even though I had a number of advantages that should have made it easy for me to live within my means, I overspent every chance I had. I ended my undergraduate career with a great deal of debt.

I learned my lesson. My spending wasn't a bad thing; spending beyond my means was the problem. Now, I make sure that I live within my means. I have spending priorities, and make sure that I spend on those things first. If I run out of money, the spending stops. As long as my enjoyment of spending doesn't put my finances at risk, I think that my habits can be a way to help others, provide my son with valuable experiences, and help me find a little extra pleasure in life.

Preparing For The Future

Just because your spending is kept within your means, though, it doesn't mean that it's ok to put your future at risk. Before you spend on the “fun” things, it's a good idea to make sure your future is provided for. You should have an emergency fund, and you should be saving for retirement. If you have long-term goals, such as homeownership or sending your child to college, you need to plan for those things as well. You can use your love of spending to direct your resources into specific goals that can provide you with a more secure future.

In the end, being a spender doesn't doom you to a life of financial ruin. As with any other money personality, being a successful spender is about harnessing your impulses and desires so that you can use them to your advantage. Figure out what you want, and create a spending plan that helps you achieve your goals.

Can Identifying With Your Future Self Get You To Save More For Retirement?

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Our country is currently going through some hard economic times, with record numbers of people being unemployed, or out of the work force. So when folks finally get back into the workforce, it can be tough to even begin thinking about setting up a retirement plan and saving for retirement. The problem is, time waits for no man (or woman). People are in danger of having to drastically reduce their lifestyles in retirement out of necessity. In fact the Center for Retirement Research at Boston College found that 51% of American households are at risk of being unable to maintain their standard of living in retirement, up from 43% in 2004.

While we continue getting older, unless we're regularly saving for our retirement, our retirement is becoming less and less sure. So what is it that people need to get over that hump and be convinced that they need to be saving and investing for retirement? What are some things that can help make them more likely to save?

Visualizing Your Future Self

One thing that researchers have found is that people have a hard time thinking about the future because it seems so distant, because they don't know how to think about what their wants and needs will be in the future and because they can't really identify with where they'll be 20-30+ years in the future.    In other words, they can't identify with their future selves.  Excerpts from the WSJ:

Staring into a mirror today and seeing yourself as you will look in the year 2057 is unnerving. But that may be just what it takes to shock Americans into saving more. At Stanford and other universities, computer scientists, economists, neuroscientists and psychologists are teaming up to find innovative ways of turning impulsive spenders into patient savers…

Behavioral science offers at least a partial answer: To make long-term financial goals more achievable, you must make yourself feel as if the future is now.

The project underway at Stanford seeks to close this gap between the present self and the future self, without turning young people into misers. By enabling the young to see themselves as they will be when they are old, virtual-reality technology can transform their urge to spend for today into a willingness to save for tomorrow.

William Sharpe, the Nobel Prize-winning economist who co-founded Financial Engines Inc., a firm that provides investment advice to retirement savers, says, “The idea of getting people to feel sorry that ‘Poor old me, at age 70, is going to need help if I don't save more now'—I regard this not as persuasion, but as additional information.” After he heard about the technique, Prof. Sharpe asked to monitor the research and became a co-author of a forthcoming study on its effectiveness. “It's very promising work,” he says.

What they found was that when people were put in a situation where they had to identity with how they would look and act in the future, they were more likely to be open to investing for the future.  Why? Because of what they call the “Proteus Effect”

The Proteus Effect

So what is the Proteus Effect?  In it's simplest terms, it's behavioral alteration in the real world triggered by changes in how our bodies appear to us in a virtual world.  In other words, things that happen virtually have a very real effect on us.

Experiments have shown that if you are sent into a virtual-reality environment with a particularly good-looking “avatar,” or digital self-image, you are likely to become more sociable. Seeing your avatar exercising in a virtual world can spur you to add an hour a day to your exercise routine in the real world; people whose avatars do the dirty work of sawing down a virtual tree use less real paper later in the day. Given a taller avatar, you will act more confident and negotiate more selfishly.

What researchers also found was that when young people were shown future versions of themselves, they were much more likely to want to save for retirement, probably because they were more able to relate to their future selves, and realize they would have a need for money in the future.

“People who see their future selves end up being more patient,” says Hal Ersner-Hershfield, a psychologist at the Kellogg School of Management at Northwestern University, who led the project.

In one experiment, young people who saw their elderly avatars reported they would save twice as much as those who didn't. In another, students averaging 21 years of age viewed avatars of themselves that smiled when they saved more and frowned when they saved less. Those whose avatars were morphed to retirement age said they would save 30% more than those whose avatars weren't aged.

Real World Applications

So how can we take the knowledge that feeling more in tune with your future self can help you to save, and use it to our advantage?  For starters, why not create your own age morphed photo?

Create an aged picture of yourself to put on the refrigerator or on your computer – and use it to remind you of your need to save. One great site to do that at is In20Years.com.  You just upload a photo of yourself and it will instantly age you by 20 or 30 years.  It's quite eye opening to get an imagined version of yourself – that far in the future. Here are a couple of examples done using that site, with the originals in the lower right corner:

I know when I did it for myself, it certainly made me feel a bit more of a sense of urgency to save.

What are some other possible real world applications of age morphed photos?  The article suggests some:

  • Placing age morphed photos on a company's benefits site:  Encourage employees to save for retirement by placing an age morphed photo of them on the company's benefits page, with their approval of course.  It might be a good way to encourage savings.
  • Tool for financial advisors: Financial advisors could use age progressed photos as a part of their practice to help encourage people to think about the future.
  • Brokerages and mutual fund company sales tool:  Companies could of course use technology like this as a sales tool – which isn't necessarily all bad if it gets people to save.

Other Ways To Encourage Saving For Your Future Self

There are of course other things that you can do to feel more in tune with your “future self”, to encourage your savings.

  • Set an actual retirement date:   Studies have found that people are more willing to put off the benefit of future realized savings, if they can imagine an exact date that they will retire. So set an actual date that you would like to retire, and even name your accounts by that date!  For example, The “May 8th 2041 Fund”.
  • Monitor your progress regularly:  Set goals to save towards, and monitor your progress regularly. Even consider setting up prompts in Google Calendar or other software to remind you to go and update your progress on a regular basis.
  • Imagine how you would feel in a comfortable and worry-free retirement: Studies have shown that just taking 3-5 minutes to visualize a trouble free and relaxing retirement every once in a while and using that as a prompt to save works quite well.   People were found to be 25 percentage points more likely to increase their savings on the spot when engaging in such behavior.

What other ways can you think of that can help you to visualize your retirement, and encourage you to save today?  What tips and tricks do you use?  What do you think of the age morphed photos? Tell us in the comments!

Do You Know What’s Important? Spending And Priorities

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One of the most challenging aspects of personal finance is identifying what is important — and then keeping your spending in line with what you value. Because personal finances are, well, personal, each person has their own ideas of what is most important. They key is to decide what is important to you and then create a spending plan that reflects your priorities.

What's Important to You? Identifying Your Values

Different people value different things. Before you can create a financial plan that reflects your personal values, you need to reflect on what you value. If you value more time with your family, you might choose a career path that allows you to be at home more, or you might move closer to your work so that time isn't spent on the commute. If helping others is important to you, chances are that you donate money to charitable causes or volunteer your time. Those who enjoy travel might spend money on vacations or frequent mini-trips. Others prefer to stay home, and spend money on making their homes as comfortable as possible.

Deciding what is most important to you is not a matter of “right” or “wrong”. It's more of an issue of what you prefer. Write down the things that are most important to you, and then rank them. Be quite honest. If saving up for a family vacation is more important than giving money to the food bank, rank your list in such a manner. I don't care if I leave a pile of cash for my son to spend after I'm gone, so my financial priorities focus on a modest and adequate retirement fund, with a bigger budget for fun now (including family fun).

Bringing Your Spending in Line with Your Priorities

My husband and I have always believed that giving to our church is a must, so our spending has always including tithing. However, not all of our spending has always been in line with our priorities. We enjoy eating out and trying new foods. For a while, though, we had a premium cable package — even though we don't watch that much TV. We realized that by scaling back the cable package, we could eat out more. We barely miss the premium cable channels. Of course, the value my husband places on ESPN, NFL Network and MLB Extra Innings is the reason that we still have cable at all.

Look over your spending, and see if it matches with your priorities. If you have listed early retirement as a priority, it doesn't make much sense to spend money on a new car. Instead, put more money toward your retirement fund, and buy a less expensive used car. If your biggest priority is paying down debt, look at your spending. Are you buying lunch every day or getting the latest movie when it comes to DVD? This doesn't jive with your debt pay down priorities. Be honest about your spending, and how it matches up with what you actually want out of life. Then see what adjustments can be made so that your spending matches your values.

Does your spending match your values?  What things could you cut to better meet your goals and priorities?