Hospital pediatric coordinator Javier Salazar has a 2014 New Year’s resolution: to save even more money.
His wife is great at budgeting, he said, and a chunk of his salary slides directly over to savings. But to be sure they can survive any economy, they’ll need to spend even less this year.
How? He’s going to resist the urge to pull out his credit cards.
“It’s hard to stop the habit of using credit,” Salazar said. “I’ve got to be focused and ask myself, ‘Do I really need this now?’ ”
When it comes to saving money, it’s fine to recognize our weaknesses, researchers say, but focusing too intently on correcting them can cause us to miss other goal-achieving opportunities. So rather than zooming in on how we’re going to reach those financial finish lines, Robyn LeBoeuf, an associate professor of marketing at the University of Florida, has research proving we also must remember why we want to get there.
“If you form a plan you might miss out on other things that are not in the plan,” LeBoeuf said.
LeBoeuf verified this in her lab, where she paid college students trying to save money each $3 to participate. She first instructed them to think about why they wanted to achieve their financial goals. Afterward, half were told to formulate a plan, with most revealing they’d eat out less or order fewer pizzas. The whole group was then later offered the opportunity to buy a snack for 75 cents. Those who did not formulate a plan were more likely to resist the surprise impulse purchase.
“If you focus too heavily on not eating out, you might not remember to buy in bulk or cut coupons,” LeBoeuf said. “The plan made them less likely to save money. You don’t want to lose sight of the big picture.”
It makes sense, said Dr. Ronda Fuchs, a licensed psychologist in Miami Beach. Sure, being hyper-focused might keep temptation at bay, she said, but it also cuts off advantageous options.
“Thought should always come before action,” she said. “First, you think about why you want to save more or grow your business, and then you think about how to execute.”
That’s why we’re best off setting broad financial parameters, said Wes Moss, chief investment strategist at Capital Investment Advisors in Atlanta. He tells clients to spend 30 percent of their incomes on taxes, put 20 percent into savings, and live on 50 percent.
“To retire comfortably, you need to live off just half the money you earn,” Moss said.
To stretch those dollars within your plan – and keep your options open – the experts share some unexpected ways to save.
• Medicine: Slice pharmacy co-payments by one-third, said Mike DeAngelis, director of public relations of CVS Pharmacy, by filling a prescription once for 90 days instead of three times for 30 days.
• Housing: Forget mortgage calculators that suggest 30 percent of your income go to housing, Moss said. “That’s a dangerous path,” he said. Instead, save money on your house by – yes – buying a cheaper house.
• Mortgages: Think – and really think – about how long you plan to own your home, said Neil Stein, a home lending officer at Citibank in Boca Raton, Fla. If a job, school or another circumstance has you there more than 10 years, get out of your short-term loan in favor of a longer-term product, saving yourself from being at the mercy of future rates.
On the other hand, if you’re planning in the next five years to move or pay off your loan, choose a short-term product.
“Typically, short-term mortgages have lower rates,” Stein said. “But if you’re there a long time, higher rates could be worth the security.”
Finally, if you’re in a 30-year fixed mortgage but you qualify for a 15-year loan, take it, Stein said. The rates are lower, and you’ll pay the debt off sooner.
• Gas: Slow down. “There are significant savings in just driving the speed limit,” said Bo Saulsbury, senior research and development officer at Oak Ridge National Laboratory in Tennessee. Also, keep your car maintained with proper tire pressure, removing items from the trunk. They make the engine work harder.
• Clothing: Don’t buy anything the first time you see it, said Elysze Held, a personal stylist and shopper. Instead, ask the commission-earning salesperson to keep an eye out for reductions. Plus, the distance between you and the potential purchase could make you think twice.
• Groceries: Always look at the lower shelves while strolling the aisles, said Erin Richardson, director of marketing at ZipList.com. “Brands pay a premium to be displayed at eye level,” she said.