• Part 1 of the series discusses the key behavioral trap investors fall into that prohibits them from reaching this milestone.
• Part 2 describes the assumptions you need to consider when calculating how long it is going to take you to get to that next million.
• Part 3 describes the keys to starting on the path to becoming confident in your retirement plan.

PART 3:  Keys for Savings Success

• Start saving now. Today.
• Set a realistic goal based on your needs.
• Live on a strict budget. If you don’t have your spending under control, you won’t be able to save what your need.
• Live below your means. It’s the only way to ensure you have enough money to save.
• Pay yourself first – before you pay your bills or anything else. If you are short for the month, cut back on other expenses.
• Develop a sound investment strategy based on proven principles and practices.
• Don’t invest too conservatively. CDs, savings accounts and money market funds may be ultra safe, but they are currently yielding negative returns (considering inflation). It’s a guaranteed way to lose purchasing power.
• Understand risk. Risk is good. It’s the reason why the stock market can generate above average returns. If you understand it and manage it effectively you will always come out ahead in the long-term.
• Exercise discipline and patience. We’re not talking about instant gratification here. In fact, the less gratification you seek today will ensure the more of it you will have in the future.
• Don’t go at it alone. The world of investments is vast and confusing. And it’s easy to let your emotions drive you to make big, costly mistakes. You need a coach, a financial advisor who is willing to educate you, hold you accountable to your plan, and keep you moving forward even when things get rough.

Yes, anyone can become a millionaire – at least anyone who has a plan and the discipline to stick with it. The only thing standing in the way of you becoming one is your lack of action. Remember, time is your most valuable asset. Use it wisely.

I know what you’re thinking… an insurance company? But really, GEICO customers know that calling their insurance company is not something to dread.  GEICO customer service representatives do everything they can to make sure you have a delightful experience. Whether you’re calling for the first time, or you have GEICO on speed-dial, GEICO reps can’t be happy until their customers are delighted. GEICO wants non-customers to be delighted too, so they have created Delight by GEICO Customer Service. Get a quick bite of delight with a “10 Seconds of Delight” video featuring Jim from GEICO customer service and some adorable guest stars. Take 10 seconds to watch. It’s cause for delight!

Our SocialMoms members also want to share their delight:

• The Suburban Jungle says unexpected thanks can brighten her day. “But then, out of the blue, one of my kids will say thank you for something I’ve done. Usually something small and insignificant, but knowing that my small effort had a meaningful result, brightens my day.”
• Mommy Gaga delights in the little things. Things like “After fighting to remove myself from my pillow to wake up early in the morning, I LOVE the smell of hot, fresh coffee brewing. The first cup is bliss” – and – “Getting a simple hug or hearing a simple “I love you” from one of my kids.”
• Makobi Scribe believes good customer service is a great thing to delight in!. “I am talking about good customer service. So many companies these days do not give it, trust me! I was in a car accident with my son many, many years ago. I hit a train. Yeah, yeah I know…but I didn’t see it. This was 15 years ago and I had just switched my insurance over to Geico. Needless, to say I was freaking out. I didn’t know what to do. I was 23, and my car was totaled. As you can imagine I was on the phone with Geico a lot. Not once did they make me feel stupid for hitting a train (when I totally would have) or looked down on me for being a young mother.”

• Part 1 of the series discusses the key behavioral trap investors fall into that prohibits them from reaching this milestone.
• Part 2 describes the assumptions you need to consider when calculating how long it is going to take you to get to that next million.
• Part 3 describes the keys to starting on the path to becoming confident in your retirement plan.

PART 2:  How Your Money Grows

When saving for a future goal, you need to know what it will take to achieve it. It involves a variety of factors, including: how much you need to save, what rate of return you’ll need to earn, and how long it will take to achieve your goal. Usually you have at least one of these in mind – but the other factors will also impact your allocated savings. There are a variety of savings calculators online (like this one) that allow you to input your own assumptions for these factors, but it is important to understand how they work and impact each other before beginning to plug in the numbers.

Present Value/Balance

This is, essentially, your starting point. You may be starting with an amount already saved, or you may be starting from scratch. Either way, this will determine how much you need to save.

Monthly Payments/Deposits

In doing your budget, you may have already determined how much you are able to save each month. So, all you will need to know is how much you need to earn on your investments to achieve your goal. But, if the required rate of return is unreasonable or involves taking risks that are beyond your tolerance, you may have to find a way to increase your savings amount if you expect to achieve your goal within your desired time frame; or you may have to extend your timeframe.

Conversely, if are dead set on your timeframe and you are willing to assume that your money can earn a certain rate of return throughout that timeframe, these factors will determine how much you will need to save each month. It then becomes your responsibility to budget for that savings amount.

Rate of Return

This is probably the most difficult factor to determine, but it is also the most critical. It really all comes down to risk and how much of it you can tolerate or are willing to take. It’s vitally important to realize that the returns you earn on your money are inextricably linked to risk. The more risk you can take, the higher the returns you should expect. So, risk isn’t necessarily bad if you know how to manage it. And there are specific strategies that can be used to mitigate risk while achieving higher returns.

The keys to minimizing risk are:

• Creating an asset allocation comprised of a big basket of stocks and not trying to pick individual winners.
• Diversifying your portfolio across many different sectors of the economy and across many parts of the globe.
• Rebalancing your portfolio each year by selling stocks that outperformed and buying more of those that underperformed. This will enable to maintain the asset mix that fits your risk tolerance and your investment objective.

When you monitor your portfolio, and repeat these steps each year, you’ll be able to capture all of the returns the market has to offer with minimal volatility.

Note: If you want to factor in inflation, which is a good idea, you would simply reduce your expected rate of return by an assumed rate of inflation. For example, if you expect to earn 8 percent on your money, and you expect inflation to average 3.5 percent throughout your timeframe, your assumed rate of return would be 5.5 percent. It may mean having to increase your savings amount or lengthening your  timeframe, but it will give you a more realistic projection.

Time

We’ve already discussed the value of time. There truly is a “cost of waiting” you incur when you put off your savings. The less time you have the more expensive your goals become. However, with savings, it’s never too late to start.

If you have a set timeframe, you will need to adjust your monthly savings amount and/or your rate of return based on the number of years you have to save. If you know how much you want to save and you expect to earn a certain rate of return, these factors will determine how long it will take to achieve your goal.

The following chart from TimeValue.com illustrates how your timeframe and your investment return impacts the “cost” of accumulating $1 million:

Saving $1 Million

Monthly Savings Required Based on Timeframe and Return

Future Value

Your goal is the future value you are seeking to create. Using the example of saving a million dollars, that is the future value of what you currently have and what you will be saving over time. When planning your financial future, you need to know the total cost of your goals. For many people, a million dollars wouldn’t be enough to maintain the life style they envision in retirement. Confidence comes from knowing you will have enough to sustain your idea of a good life for the rest of your life, so “the number” should be based on what it will take to do that. It could be a million, or it could be $3 million. Whatever is determined, that becomes your target.

Future value can also be used to determine how much you will accumulate when you know your savings amount, timeframe and rate of return.

Stay tuned for Part 3: Key for Savings Success

• Part 1 of the series discusses the key behavioral trap investors fall into that prohibits them from reaching this milestone.
• Part 2 describes the assumptions you need to consider when calculating how long it is going to take you to get to that next million.
• Part 3 describes the keys to starting on the path to becoming confident in your retirement plan.

So, let’s get started:

PART 1:  The Top Behavioral Trap To Reaching Your Next Million

It’s an American tragedy in the making: The majority of Americans admit they are unprepared for retirement. In a survey conducted by EBRI more than half of workers report they have less than $25,000 in savings and investments; and a quarter more report that they have saved less than $1,000. The primary cause can be found in the declining savings rate that has been occurring over the last three decades.  The U.S. Department of Commerce reports that the personal savings rate has been declining steadily, from a high of nearly 12% in the mid 1980s to a negative 1.8% in 2009.

Time is your friend in this equation

The real tragedy is that most Americans are in a position to save what they need for the future; yet they simply don’t do it. We are taught to try to save 10% of our income, which in these lean times may be somewhat of stretch for many people. But, the problem for most people is not how much they can save; it’s their attitude about saving: “I’ll start saving next year.”

The #1 behavioral trap to reaching that next million (or first) is procrastination.  There’s no bigger dream killer.  You may not realize it, but time is your most valuable asset; but it’s a wasting asset if you don’t put it to work for you. Each day you wait to take action, the cost of your financial goals increases.  It’s imperative that you set your sights, map out your plan, and take action today.

Anyone Can Become a Millionaire

Who wouldn’t want to be a millionaire?  We all have a goal of becoming financially independent at some point in our lives, and while it will probably take more than a million dollars to achieve that, it’s a pretty good start. The fact of the matter is that anyone can save a million dollars, although the longer you have to save, the easier the task. All it requires is discipline, patience and motivation. And yes, it also requires the money to set aside each month. But once you know how much you need to save and how realistic the goal really is, the motivation will come.

If you are already saving for the future, getting to a million dollars will be that much easier because you have established the habit. If you’re starting from scratch, you’re first challenge will be in developing the habit.  But, no matter where you are, the absolute key is to start saving early and often.  If you can do that it will be very difficult to fail.

Stay tuned for Part 2: How Your Money Grows.

Take Warren Buffet – who is famous for his frugality. Roger Lowenstein, in his book on Buffet, recounts that when Buffet’s first child was born, he turned a drawer in his dresser into a bassinet. He later borrowed a crib for his second child. He also drove a Volkswagon until his wife, convinced it was bad for his image, bought him a Cadillac. He is now #3 on the Forbes Billionaires list, proving that being frugal pays off.

How you spend or save may be determined by your personality, but anyone can learn how to live frugally. Here are 10 ways to pinch your way to riches:

#1 – Ignore the money in your bank account.

You’ve heard it before: Live beneath your means. However, many don’t have a true picture of what their “means” are month-to-month. To determine this amount, take your monthly income and subtract all expenses to determine your disposable income. After savings and investments, this is the amount you have to work with each month. But don’t spend it all. By acting as if you don’t have extra money in the bank, you can be more frugal in your choices.

#2 – Lower your food expenses.

The ideas for cutting food costs range from dining in and taking leftovers to lunch, to shopping at discount grocery chains and growing your own vegetables. Buying in bulk or using coupons are additional ways to enjoy savings.

#3 – Avoid debt.

With the days of layaway a distant past, consumers have lost the zeal to save up for major purchases. And with credit cards being offered to first-year college students, we’ve grown to be a “get it now, pay later” society. As a result, many are in debt beyond what they’re able to fully pay back in their lifetime. If you’re in debt, make a plan for eliminating it, including using any additional funds to pay it off. Then avoid it like the plague.

#4 – Go green.

Going green at home is a great way to lower your costs in the long haul while doing good for the planet. You may incur extra expenses initially in purchasing your green items, but the savings will outweigh the costs long-term. Ideas include unplugging electronic items when not in use, using energy-efficient light bulbs, and installing a programmable thermostat.

#5 – Pay with cash and leave the debit and credit cards at home.

Financial experts teach that it’s often harder to part with cash than it is to swipe a debit card. By using cash for your purchases, you may find that you avoid over spending on unnecessary items.

#6 – Eat well before going grocery shopping.

You’ve probably experienced it a time or two, buying that bag of potato chips that wasn’t on the list simply because you were too hungry to think straight. By eating before shopping, you’re more likely to avoid impulse buying and stick to the list.

#7 – Only buy if it matches.

Look for sales, but only buy an article of clothing if you already own something that matches it. Otherwise, you will have to spend even more to purchase something to match the lone article.

#8 – Redecorate in the winter.

Wanting to remodel? Hire painters and contractors in the winter when business is slower. They may be more likely to offer discounts.

#9 – Stay next door.

When traveling, scout out the fanciest hotel in town, but book your room next door at a lower-priced competitor. You’ll still enjoy the location and the view without the hefty cost.

#10 – Buy kids clothing on sale at the end of the season.

While your kids are young, you can purchase larger sizes during an end-of-season sale and then store it away until the next year.

Have you found great ways to pinch pennies? Please share it in the comments section below.

1.  Women Have Less Ego

Men see wealth as a way to get richer; women see it as a means of security.  They realize the money they make goes to support their families, and this makes them less likely to take unnecessary or dangerous risks with their investments.  Men tend to have their eye on “more” wealth, while women want “enough” wealth to bring them security.  As a result, women do not make decisions based on gaining the competitive edge, but rather based on what will guarantee the most security.

2.  Women Are Patient     

For years, it was believed emotions had no place in the making of financial decisions.  Studies now are proving this to not be the case.  The fact that women are more in touch with their emotions than men is helping their portfolios. Since they understand and actually know what they are feeling more often than men, women are better able to separate their emotions from their decision making and thus make decisions based on other factors.  If an investment is doing poorly, they may feel fear, but they understand it is only a feeling and can look at the data to determine whether to ride it out or sell if it’s warranted.

3.  Women Are Not Overconfident

Men tend to move in and out of the markets at a “hyper” rate.  This can be attributed to their “overconfidence,” brought about by an overestimation of their precise knowledge and abilities. It leads to a masking of failures and the inability or reluctance to take responsibility for mistakes. Men are more likely to blame the markets or factors beyond their control for bad decisions, while women are willing to face their failures and learn from their mistakes.

The “under-confidence” demonstrated by most female investors results in the exercise of caution, self control, and discipline in making trading decisions. Under-confidence in women leads them to have a formal investment strategy and compels the discipline to stick with it.

4.  Women Exert More Self-Control and Discipline

When under stress, women are more likely to exercise self-control and discipline than men. This accounts for the reason why, in periods of market declines, studies have shown that men are more likely to trade out of their stocks (49%), while women will refrain from doing so until after they have further assessed the situation.  Over the long term, staying patient and disciplined to a sound investment policy is a key investment practice to follow.

5.  Women Know When to Ask for Directions

We all know that women are not shy about asking for directions on the road. That same inclination is found in their willingness to turn to financial advisors for help, both in planning their investment strategy and for guidance in making difficult investment decisions.  82% of high net-worth women report seeking professional financial advice, compared with only 53% of men. Women know when they need help and are not afraid to ask for it.

You Have the Tools…

Since you are already equipped with the tools … Go use them!  Remember you do not need to be fluent in the language of finance.  Investing is like medicine.  You should hire experts to help you, but it is important to be educated on the decisions you are making.

In a recent Gallup poll, they found that the average American will spend $770 on Christmas presents this year. 

For many families, $770 is a very large sum of money. However, for some $770 is just a drop in the bucket of their holiday spending sprees. In fact, 30% of respondents said that they have or will spend over $1000 on Christmas shopping this year. Regardless of income, it seems that giving gifts is something that most families plan on doing. Only 6% of respondents said they will not be purchasing holiday gifts this year.

Though the thought of spending $770 on Christmas presents may seem crazy to some, the holiday shopping season and forecasts are typically a really good indicator of the state of the economy. The more stable the economy and financial outlook, the more willing consumers are to spend more money for the holidays. The less secure consumers feel in the economy the less they spend.

So how does this year stack up compared to recent years? This year is actually on a decline. If you look at the graph from the study you can see that 2008 was a rough year for holiday shopping and consumer purchases dropped significantly from 2007. This was due to the financial crisis of 2008 with fear of uncertainty within the economy and declines in wages. However, rebound came and spending  rose sharply in 2009 and then slightly in 2010, but dropped off in 2011 and declined again approximately 1% this year. What does this say about the consumer?

Most economists agree this year will not hold any surprises for retailers. Sales will be on target for most markets and according to the Commerce Department, consumer spending in 2012 has been up each month over 2011 levels, but by modest amounts at best, and it looks like holiday shopping will maintain that pattern, providing a 3.5% to 3.7% increase in sales. This is very important since the nation’s retailers typically need a strong Christmas shopping season to help them meet their revenue goals, and, in terms of the planning that goes into inventory and hiring, it is always better to be prepared for a slow year than unpleasantly surprised by one.  With shopping relatively on target, most retailers are not going to be surprised by the holiday retail numbers.

Does this poll surprise you? Do you think a $770 average holiday budget is reasonable, over-the-top, or not enough?

They’re all needed, you reason.  Each one will help you do something better, faster, neater, prettier.  After all, you have to keep up with the times.

But if your purchases are leaving you a little low on funds at the end of the month, it’s time to break the habit.  You can keep shiny objects from stealing your income by implementing these five tips aimed at stopping the urge to buy impulsively:

1.    Make a priority list of your financial needs.

You can write it down as a numbered list or put it in budget form.  Include every financial need and family expense you can think of – mortgage, utilities, clothing, and dry cleaning.  Look back at past receipts, bank statements or your checkbook registers to identify your common expenses.  You will also want to include a category for shiny objects (aka your allowance).

Next, as financial planning guru, Dave Ramsey, says, “spend every penny on paper first.”  Write down the estimated amount for each type of expense and be realistic and thorough.  Quarterly and annual expenses, as well as occasional expenditures, should be included as a monthly amount.   Compare that amount against your monthly income and make adjustments (cutbacks) as needed.

If there’s not enough left over to support your purchasing habits, then consider cutting back on your shopping outings or find an at-home business that will allow you to earn more.

2.    Shop on paper.

Make a wishlist of your top 5 – 10 “wants” along with their prices.  Carry this list with you on shopping outings or post it near your computer for online shopping excursions.  When you see a new “shiny object,” compare it to your wishlist.  If there’s a match, and there’s room for it in your budget, then make a note of what it is and where you can buy it.  Wait at least 24 hours before you purchase (48 – 72 hours is better), and if you still want it after that time period, then move forward.

This waiting period will give you time for the excitement to die down and for you to rationally decide if it’s a good purchase or not.

3.     Create “Shopping Days.”

To curb your shopping appetite, try assigning a limited number of days each month for shopping trips or online shopping.  You might consider scheduling them after pay days (and after your budget is created).

4.     Become accountable.

If your shopping habits are causing you some angst, try enlisting the support of others who can help hold you accountable.  You may ask for your spouse’s help by committing to first agree on making purchases over a certain amount.  Or shop with a buddy who can help you realistically decide how much to purchase.  There are also support groups, online and off, that can help extreme shoppers curb the habit.

5.     Get interested in saving.

Give yourself an incentive for saving.  Perhaps decide on a reward for saving “X” number of dollars.  If you are visually stimulated, buy a Mason jar or fancy glass container and see how many dollars you can stuff in it until it’s full.  Once you reach your goal, reward yourself with a portion of the savings, bank the rest, and start over.

With determination and effort, you can curb your spending and save more money.

Of course it’s not as easy as snapping your fingers. There is some effort involved with setting up a passive income stream. But once it’s established, you won’t be required to do much more than collect the money.

Here are five great passive income ideas that you can implement now to start making money “in your sleep”:

1. Blogging. You don’t need special programming skills to start a blog and contribute content to it on a weekly or daily basis. If you blog about a popular (i.e., lucrative) topic like personal finance or celebrities, your website can easily make several hundred dollars a month. You might also wish to try products and review them online. To generate passive income, you can place ads on your site through an affiliate network like Google AdSense. You can also earn affiliate income by featuring individual products on your website through programs like ClickBank or Amazon Affiliates (depending on your state of residence).
2. Writing and selling an ebook. Many successful entrepreneurs write an ebook and earn a passive income by selling it online. If you have a special skill set or degree, you can capitalize on your knowledge by offering it to others. Your ebook can be featured on your own website as well as the websites of your affiliates. You can also create an online forum for members who have bought the ebook and wish to learn more; this is a great way to introduce and sell additional “backend” products related to your ebook.
3. Peer-to-peer lending. Online peer-to-peer (P2P) lending sites such as Prosper and LendingClub allow individuals like you to become lenders and earn a good percentage on their money in the process. You can become a lender with as little as $25 and earn up to 30% on your loan over the course of a year. To minimize the risk of an individual borrower going into default, you should select borrowers who have a credit rating of good or excellent and a low debt-to-income ratio (generally under 20%). P2P lending site borrowers pay you back a portion of your invested principal once a month along with interest.
4. Buying dividend-bearing stocks. Many publicly traded company stocks pay a monthly or quarterly dividend, providing you with a guaranteed amount of money throughout the year. Some tax-exempt stocks, such as real estate investment trusts (REITs), pay out a good percentage of their earnings through dividends, giving you up to a 35% return on your investment. Additionally, since most stocks do appreciate over time, you have the added benefit of seeing your original investment money grow. You can easily buy dividend-bearing stocks through discount brokers like E-Trade and Ameritrade.
5. Renting property. With the housing market still in a financial slump, you can purchase and rent out real estate to make a passive income every month through your tenants. It’s imperative that you get a good deal on your purchased property and not spend additional capital fixing the place up, since that will cause a delay in when you actually start earning money on your investment. If you can purchase and rent out several properties to reliable tenants, you may not even need to keep your regular job anymore.

Here are some easier ways to save money this back to school shopping season!

1. Delay some purchases.

Get the basics necessary for the first day, but remember that the kids really don’t need every single supply immediately. I’ve been known to send in some items weeks after school starts. For example; My teacher called for a box of tissues from each child (for classroom supply). That meant 25 boxes on the first day. Instead I sent a note letting the teacher know I’d send in a few boxes in December when colds are more prevalent.

2. Know your prices.

If a marbled notebook is on sale at 2 for $3.00 at one store, it could very well be 50 cents at a discount store. Try to remember which stores offer the best prices consistently and do your shopping there. Big retailers like Wal-Mart and Target often offer the best prices but office supply stores can be good too. Don’t forget the dollar stores for certain items too.

3. Know what’s in demand.

For middle schoolers with lockers, you may want to buy supplies early. By the time I went, the office store was out of locker shelves and locker mirrors.

4.  Keep some inventory at home.

Take inventory of art and school supplies you have at home before shopping. I have no problem sending in colored pencils that are almost full length and not in a brand new box. I’m sure most teachers wouldn’t mind this.

5. Buy extra.

If your combined school lists call for 7 folders, get 10 or even 12. Folders break fast around here. Stock up on loose leaf, pencils, glue sticks and erasers if possible.

6. Make the list and keep it with you.

As you buy each item, cross it out or delete it from your phone so you can clearly see what you have left to purchase. This way you don’t buy extras and have to trek back to the store to return them.

7. Separate wants from needs.

Especially for clothing … Most kids will need new shoes, new socks and some basics. Name brands may be a “want” and you can budget for special items.

8. Wait on the shoes.

Sometimes kids can grow a whole size in the summer, or more. Hold off on buying a new pair until closer to school. Same thing with pants, though many kids do start the year off in shorts, so you can buy pants in the early fall.

9. Comparison shop online.

Online shopping has saved me more than once.  Instead of searching stores for the particular style and size backpack my middle schooler wants, I head to Amazon and browse their great selection of sizes and colors.

10. Remember thrift shops.

For high-quality, previously owned clothes, visit a thrift or consignment shop that sells higher-end clothing. If you are on a budget your child can still feel like they are getting some new clothes and you can buy many more outfits.

11. Save even more on clothing. 

If your state has a tax-free week, you may want to head out shopping at that time (even if it means fighting the crowds). The savings can really add up!

How do you save when it comes to back-to-school?