Financial 'how to' Crack for people unwilling to do the math.

[Malaysia41]

OMG I came across this financial advice the other day.  It seems to be intended for people looking for a quick fix savings plan... people unwilling to actually look at their income and expenses and come up with a financial plan. 

http://finance.yahoo.com/news/surprising-power-dollar-saved-132000889.html

Un-freaking believable.  Does this guy not realize he is just hitting up the ATM a little more often and converting his money into loose change?  How about he just set up a weekly transfer of $50 from his checking to his savings/investment account?

Sigh.  This is a great example of bullshit financial journalism to share with my twenty something nieces.  I want them to know these turd-bombs exist and to smell them from a mile away so they can side step them when they get near.

[johnintaiwan]

This "plan" is not something I would suggest to others. But I do like a cash budget. I dont really have much of a choice here, but I think it helps. Every 10 days I get my money to be spent on everything except rent, utilities and pets. I have to remember what i spend each day and write it down at night. I think this helps me think about each purchase a little more. i also like the visual reminder when I open my wallet to see how I am doing. With debit/credit i think it can slowly creep up and you dont realize it until the end of the month.

[arebelspy]

Does this guy not realize he is just hitting up the ATM a little more often and converting his money into loose change?  How about he just set up a weekly transfer of $50 from his checking to his savings/investment account?

Some people don't understand Math.

He's probably amazed and wondering where this "free" "magic" money is coming from.

Though maybe it's coming from him spending less change.  Maybe he'd be using lots of cash anyways, and then having random small bills made him purchase small junk (gum, candy bars, soda, whatever) he isn't when it's going to have him break a 20, so it is saving him money by causing him not to buy.

Still, he should just work on having a little willpower, buying things that he needs and truly wants, and just save the rest, without having to jump through random "keep the change" hoops.

It's a start, sort of a silly one, but better than nothing, I suppose.

[Malaysia41]

Does this guy not realize he is just hitting up the ATM a little more often and converting his money into loose change?  How about he just set up a weekly transfer of $50 from his checking to his savings/investment account?

It's a start, sort of a silly one, but better than nothing, I suppose.

It is true that it could be a good change in that it is a start, but it might actually be worse than nothing if he is tricking himself into thinking he has a 'savings plan'... when he doesn't.  That said, using cash for everything can be an effective tool for limiting mindless swipe-spending.   I'm just not convinced this is what is going on in the author's case.

[arebelspy]

True.  It's hard to know one way or the other.  :)

[Jennifer in Ottawa]

If he was pocketing every bill lower than a 5 and all his coins, and he ended up with lots of coins and $57 in bills, I shudder to think how many transactions he completed that week and what he spent money on.  Especially since things like car and loan payments, utility and telecom bills are generally paid by people online or with a bank teller.

Buying frivolous things and declaring the pocket change 'savings' is pennywise and pound foolish in a nutshell.

I am a shiny new Mustachian with the merest hint of a shadow on my upper lip, yet I conduct perhaps only 6 or 7 transactions over the course of the average 2 week span.

[robotclown]

I used to run an all-cash budget.  It will keep you from spending because you really have to plan ahead for it...go to the atm, withdraw money, go to the store, spend the money, sort through the bills and coins.  But it was pretty annoying.  Now I have online banking and spreadsheets and rewards credit cards. 

This guy is on the right track at least.  Now he's thinking about money as a thing that doesn't expire when the next paycheck comes out.

[imustachemystash]

Yahoo finance is a joke!  I'll post another jem from them soon.

[deborah]

Actually, I have seen plans like this work. I know of someone who was on unemployment benefits, who saved $6000 over the course of 2 years by never spending a $5 note - she refused to spend each one she got. It works for people who earn very very little. Of course, the people I am thinking of got cash and didn't have credit cards so they wouldn't spend too much.

[terrier56]

This is how my gf saves. we also have a savings account that only I can access. I offer to let her see but she says "then the money will be gone". classic consumers!

[Ayanka]

I think this might help some people, who don't like breaking 5 dollar biljets for small amounts, the rest of the population, I doubt it. Plus what is he going to do with the change?

[greenmimama]

Well I think it's ridiculous, but if it helps them save money, whatever works I guess.

[Badass by 41]

Something I've suggested in the past to my consumerist friends is to put the same amount that comes back on your receipt as "savings" into your savings account.  Saved 15% on your $100 grocery bill?  Put $15 in your savings account.  Got a great deal on that new pair of shoes?  Put that 70% off into your savings account.

I personally love how this approach feeds on the consumerist need to feel like they're getting a deal (while still paying 100-200% markup at 70% off) and turns it into a savings pipeline.  It's not foolproof for sure, but it's another neat psychological strategy to transition a spender into a saver.

[Malaysia41]

Something I've suggested in the past to my consumerist friends is to put the same amount that comes back on your receipt as "savings" into your savings account.  Saved 15% on your $100 grocery bill?  Put $15 in your savings account.  Got a great deal on that new pair of shoes?  Put that 70% off into your savings account.

I personally love how this approach feeds on the consumerist need to feel like they're getting a deal (while still paying 100-200% markup at 70% off) and turns it into a savings pipeline.  It's not foolproof for sure, but it's another neat psychological strategy to transition a spender into a saver.

I can see this trick as useful for some people who get wooed by sales. Problem is, if they justify the purchases too often, they may find themselves dipping into that savings soon.  So, the $ may need to go to an account they can't touch it - like an IRA.

[sisca]

I read about this years ago, so I can't give any sources, but I believe research actually supports this. The way I remember it is that when you are spending cash, your joy of buying something new is somewhat offset by the pain of giving away something else, cash.

With credit cards there is no pain. Just swipe and swipe again.

Cash reminds you that you are actually giving something up.

Now I dont't follow any of this myself, as I have no problem with not spending money on crap, but I can certainly see it has some merit for the weak minded.

[avongil]

That was a painful read. Credit cards or debit cards are awesome, they show up automatically on mint so you can track your expenses. You should not have any spontaneous expenses like this.

[Malaysia41]

Yahoo finance is a joke!  I'll post another jem from them soon.

I use the yahoo finance app on my phone to check the market.  I come across some whoppers of stories too.  I'll post the next gem when it unearths itself too.

[Malaysia41]

I read about this years ago, so I can't give any sources, but I believe research actually supports this. The way I remember it is that when you are spending cash, your joy of buying something new is somewhat offset by the pain of giving away something else, cash.

With credit cards there is no pain. Just swipe and swipe again.

Cash reminds you that you are actually giving something up.

Now I dont't follow any of this myself, as I have no problem with not spending money on crap, but I can certainly see it has some merit for the weak minded.

I agree: switching to cash can have merit for people who psychologically find paying $20 cash harder than paying $20 cc.  It is well researched (Dan Ariely anyone?) and I believe pain-of-parting-with-cash is the theory behind this trick.  However, it is just a trick and in the author's case it seems to have had the opposite effect.  For, the idea is to make tiny purchases more painful ($5 bill) and stop people buying lots of small unnecessary things like soda at a convenience store.  But in the case of the author, it drove him to make a LOT of small purchases over that time period with the goal of getting more money in the change jar.   That just means he's taking ATM cash and converting to change. At least that is how I read it.   

I'm not a fan of tricking myself anyway (e.g. I don't set clocks ahead by a few minutes to trick myself into being early) - I'd rather try to get as close to the honest reality as possible.  So these 'trick yourself into savings' schemes smack of inauthenticity to me.  That said, if something truly works for someone (e.g. always using cash) - hey - good for them.  I'm a skeptic on this  particular change-jar scheme. 

[frugalnacho]

I vaguely remember a bank/debit card that followed a similar principal.  Every purchase was rounded up to the next dollar or 5 dollar increment and the extra was transferred to a savings account.  The more you spend the more you save. 

I could see how it would work for people that still consume mindlessly.  It would force them to save that money.  Except it really only deferred that money to a large stupid purchase down the line (oh I saved up $800? Time for a new TV!). 

[Zamboni]

When I was about 11 years old, I helped my neighbor's mom count change into stacks for the change wrappers.  She had been saving it by tossing it into one of those ginormous 4 feet tall Jim Beam bottles.  Yes, there was a few hundred dollars in that thing.

And she was now counting it out in order to purchase . . . wait for it .  . .
a king sized waterbed with a mirrored headboard.

[Malaysia41]

When I was about 11 years old, I helped my neighbor's mom count change into stacks for the change wrappers.  She had been saving it by tossing it into one of those ginormous 4 feet tall Jim Beam bottles.  Yes, there was a few hundred dollars in that thing.

And she was now counting it out in order to purchase . . . wait for it .  . .
a king sized waterbed with a mirrored headboard.

So glad I waited for it - totally worth it yikes.   

[robotclown]

It's amazing how many end-arounds people will come up with instead of just going straight to "don't buy crap you don't need."

[MarciaB]

My question is how they're going to handle all that loose change. And you know what I'll bet they'll do? Take a big old bag of it over to one of those CoinStar machines and dump it in. Now,  you pay about 9% of the total in fees to the machine for the "convenience" of turning all those pesky dimes and nickels into a piece of paper. But it was "free" money to begin with, right?

[warfreak2]

My question is how they're going to handle all that loose change. And you know what I'll bet they'll do? Take a big old bag of it over to one of those CoinStar machines and dump it in. Now,  you pay about 9% of the total in fees to the machine for the "convenience" of turning all those pesky dimes and nickels into a piece of paper. But it was "free" money to begin with, right?

I assume this was meant to be a response to a post in a different thread.

[arebelspy]

My question is how they're going to handle all that loose change. And you know what I'll bet they'll do? Take a big old bag of it over to one of those CoinStar machines and dump it in. Now,  you pay about 9% of the total in fees to the machine for the "convenience" of turning all those pesky dimes and nickels into a piece of paper. But it was "free" money to begin with, right?

I assume this was meant to be a response to a post in a different thread.

I'm sure they [entities in the other thread] have more efficient ways to deal with this.

But the individual who is likely to try a financial "strategy" like this?  Marcia's point is probably right - I wouldn't be surprised if the people trying this lose a significant chunk to a coin machine.

[Malaysia41]

It's amazing how many end-arounds people will come up with instead of just going straight to "don't buy crap you don't need."

+1

[frugalnacho]

You can redeem your coins at coinstar with no service fee if you redeem it as a gift card.  I just turned $160 worth of change into a $160 home depot credit a couple of weeks ago.  I know I will legitimately need to spend $160 at home depot at some point.

[Jags4186]

I just don't get how this is effective at all.

If you at the end of the month have saved $57 + coins by putting all your singles and change in a piggy bank...why wouldn't you the following month just increase your automatic monthly transfers by $57+ dollars and skip this ridiculously tedious process.

[Shor]

You can redeem your coins at coinstar with no service fee if you redeem it as a gift card.  I just turned $160 worth of change into a $160 home depot credit a couple of weeks ago.  I know I will legitimately need to spend $160 at home depot at some point.

Hehe, I can imagine it now: we saved $200 this month in loose change... we ended up having our wedding at the local Starbucks... We bought each guest a latte and a stale cookie...

[Elyse]

Un-freaking believable.  Does this guy not realize he is just hitting up the ATM a little more often and converting his money into loose change?  How about he just set up a weekly transfer of $50 from his checking to his savings/investment account?

Read the article again.  He does.  He has automatic transfers to savings already saved up.  He is already saving.  He just tried this as an extra side experiment. 

(assuming whole dollars in this next bit, and using $10 bills so that all change is in $1 and $5)

To get to $57, the minimum he would need to spend is $13.  Buying six $1 items with $10 bills gives $54 in ones and fives.  To get to exactly $57, one more purchase of $7 is needed.  So $13. 

To get to $63, the minimum needed to be spent is $7.  Seven $1 purchases giving $63 in ones and fives.

More than likely, that is not what is happening here.  He likely bought groceries or other high priced items.  But just because he saved over $50 with this method does not mean he spent more than $50.  As with most issues dealing with money, this number is meaningless with out seeing what he actually spent that week.

This savings method does actually work as a habit building technique.  It shouldn't be used alone, but it makes the person consciously decide to not spend money.  It also makes them feel guilty if they spend it.  As a starting point, it is an excellent experiment to run. 
 
Not everyone grew up frugal.  For those that didn't, they have to learn how to change their habits.  Going cold turkey doesn't last long. 

This is how my previously spendy roommate started learning to save.  She did this three years ago.  After realizing she could find the will power to save if she made it a game, she started saving more and more.  She paid for her wedding in cash this year.  Is this method how she did it? No.  But it taught her how to make what used to be a boring subject fun for her. 

If she had just "bought crap she didn't need", she would have been forcing it on herself and would likely break it like a diet.  Most people can't just flip a switch and start saving.  Automatic savings do not last long with spenders.  But games go over well with a majority of people.  By playing a game, it takes the scary money stigma away.

[Malaysia41]

Un-freaking believable.  Does this guy not realize he is just hitting up the ATM a little more often and converting his money into loose change?  How about he just set up a weekly transfer of $50 from his checking to his savings/investment account?

(assuming whole dollars in this next bit, and using $10 bills so that all change is in $1 and $5)

To get to $57, the minimum he would need to spend is $13.  Buying six $1 items with $10 bills gives $54 in ones and fives.  To get to exactly $57, one more purchase of $7 is needed.  So $13. 

To get to $63, the minimum needed to be spent is $7.  Seven $1 purchases giving $63 in ones and fives.

More than likely, that is not what is happening here.  He likely bought groceries or other high priced items.  But just because he saved over $50 with this method does not mean he spent more than $50. 

Hmm, I guess I should have done the math. Perhaps I should have titled the post, "Financial 'how to' Crack for people who have to trick themselves into saving."  Of course then I wouldn't have been able to feel smug about my superior math abilities..." 

The truest characters of ignorance are vanity and pride and arrogance.
Samuel Butler

[MgoSam]

Anything that gets people to save I suppose it better than nothing. Hopefully they will realize instead that this isn't rocket science and see how silly that they are, if they are instead to focus on consuming less and investing more, they will be far better off.