Secrets of successful savers

By MP Dunleavey

So you're having trouble saving money. Welcome to the club!

In the best of times, saving money is tough, and these are not the best of times.

In fact, sometimes it can seem as if the universe is conspiring against you.

"How is it that the minute you have a spare $25 to save, there's a mysterious $25 expense?" asks Angela Bauer, a longtime Women in Red member.

That's exactly the phenomenon I'm struggling with as I try to reach my $15,000 savings goal.

Luckily, say Bauer and several psychologists and economists I interviewed, when it comes to saving, money is almost the last thing you need to worry about.

It's not the money

"What all the economics research suggests is that you don't have to find more money to save -- you need to be very intentional with the money you have," says Bauer, who is a founder of the Women in Red Savers and has watched hundreds of women become successful savers. (See "How to save $200,000 in six months.")

Socking away money is tricky, experts believe, for the same reason that diets often fail. The brain resists sacrificing immediate pleasures (eating, spending) for abstract, far-off goals, such as looking cute in a swimsuit or having money in the bank for a rainy day.

According to Princeton psychology professor Eldar Shafir, one obstacle is that the choices we make in one context become more or less appealing when circumstances shift. It's like going to the grocery store when you're hungry, Shafir says. "You promise yourself beforehand that you'll only spend X, but if you shop when you're hungry, you're almost certain to spend more."

To save successfully, you have to recognize that your choices are vulnerable to these unruly changes of heart. So don't expect yourself to do the right thing; assume part of you is likely to fail. Then put your smarter self in charge.

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For example: You depend on your practical side to put the alarm clock out of reach at night so that in the morning, your sleepy self can't hit the snooze button. In the same way, when choosing to save money, rely on your most motivated self to make all the arrangements.

Embrace inertia

"It turns out that the most powerful force in our financial behavior isn't knowledge -- it's inertia," says Ray Boshara, the director of the asset-building program for the New America Foundation, a nonprofit public policy institute that develops savings programs nationwide.

Fortunately, much like gravity, fiscal inertia can be useful if you know how to handle it. The aim is to have to do as little as possible.

• Make it automatic. The best strategy: automatic transfers. "There's no way we'd save without it," Bauer says. One member of the Women in Red Savers automatically transfers a dollar a day from her checking account to her savings account. "It's only seven dollars a week, and it doesn't sound like much," says Bauer. But without the automatic transfer of a single dollar each day, Bauer points out, she might not find that $30 a month.

• Move your money. Just moving funds from checking into savings seems to deter people from touching their own money. Putting the money into a certificate of deposit or money market account protects your stash even more. One woman even put her savings in a bank across town so she would be less likely to pass it each day. The point is, by understanding when and where you're likely to fail, you can find clever ways to increase your chances of saving successfully.

• Enlist technology. Ask your employer whether it's possible to have part of your paycheck funneled into a savings account, instead of direct-depositing the whole thing into checking. A growing number of companies offer this option -- and so does the Internal Revenue Service, thanks to Form 8888 (.pdf file).

"The last thing you want," Boshara says, "is to cash your refund check and expect yourself to save any of it."

Continued: Harness meaning

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