Eat, Save, and Be Healthy

In January we often think more seriously about reducing our debt as we recover from holiday buying, make plans for the New Year, and think about paying taxes.   For people who owe multiple creditors, it can be challenging to keep up with the payments.  Sometimes there is not enough cash to pay all of them the amount needed every month.  In such circumstances, it pays to establish priorities.  Professionals suggest that some payments are more vital than others and give the following guidance:

Higher priority should be given to:

Protecting family well-being

• Rent or house payment
• Utilities
• Food
• Child care
• Health insurance

Protecting property

• Car loan(s)
• Other secured loans
• Home and car insurance

Preventing or responding to legal action

When it comes to distributing scarce dollars among credit card accounts or other unsecured loans, there are some useful strategies to consider.  First, stop adding to the debt load by using cash instead of credit for day-to-day purchases.  Set an amount that your budget will allow for paying down your debt.  Allocate that money to the various accounts.  If at all possible, pay the minimum monthly amount for each account in order to prevent extra charges and escalating interest rates.

In order to reduce your long-term costs, you may choose a strategy that is sometimes called the “snowball” approach.  That method involves allocating any extra money toward paying off one of the debts, and as that one is fully paid, shifting those dollars into the next one to speed up payment of that debt as well.   The choice of which one to begin with is yours, of course.  Personal finance professionals usually suggest that you start with the account that has the highest interest rate in order to get the biggest cost savings.   Another approach is to repay loans beginning with the one with the smallest amount owed to eliminate debts (and creditors) most quickly.

There is a very useful tool to help you assess your accounts and see how you can achieve success in reducing your debt.  The tool was created by Extension professionals and is free. PowerPay is available on the web.  You will have to register by putting in your name and email address and creating a user name and password.  Go to https://powerpay.org/ The instructions are simple and are included on the web site.

Behavior happens because it is something we have done over and over, i. e. it is a habit, OR it is something that we do because we have a reason for doing it.  Changing behavior, therefore, requires different strategies for these different types of behavior.  Researchers have studied intentional and habitual behavior and have some ideas about how we might make changes.

Behavior that is “new, untried and unlearned” happens as a result of intentions:  a person means to do it for some reason.  As the behavior is repeated, particularly if it takes place in the same context (at the same place, with the same people, etc.) the brain puts it into memory and the behavior becomes guided by habit, a state in which a person doesn’t have to think as much about it – it becomes automatic.  These habitual behaviors become triggered by certain stimuli as they are repeated, and we may find ourselves doing something that we didn’t intend to do.  The repeating of the action builds a memory that links the action with the context in which it takes place.  As a result, well-developed habits may become stronger forces causing behavior than either attitudes or intentions.

Habits have been studied in a number of situations and seem to have four qualities that make them automatic:  a lack of awareness of performing the behavior, difficulty in controlling the behavior, mental efficiency – being able to perform the behavior with little conscious thought, and performing the behavior without actually intending to do it.

Making New Year’s Resolutions work for you:

• Creating a new habit. If you want to add a positive behavior to your life, find a way to make it a habit.  This will build it into your brain as an automatic function and increase the odds of your keeping it up during the new year.  Repetition in a stable context (consistent in the way you do it, place in which it occurs, etc.) is important.  Eventually you don’t have to give it much thought and the stress of the action is reduced.  As you begin this strategy, your intentions take charge  – you will need to keep thinking about what you are doing and why until you have repeated it enough times that it begins to move into your memory as a habit.  Eventually it will become automatic and you will find yourself doing it often without thinking about it.

• Stopping unwanted behavior. Researchers suggest that stimulus control (changing the environment) is important for changing behavior that is a response to temptation.  Because the context (or environment) in which the behavior takes place provides the cues that trigger the behavior, avoiding that environment (such as the people, the places, sights and sounds, etc.) is usually necessary.  This strategy will help because you are not exposed to the temptation and reminded of the behavior.  You are stopping it before it starts.

• Breaking strong habits. Because old habits have been put into your brain so firmly, they require conscious effort to stop. Just changing your intentions is not enough for most people to break a strong habit. It requires vigilant monitoring of your behavior and intervening after the automatic response has been triggered – stopping it after it starts.  This strategy will require more awareness of what you are doing:  you will have to be on high alert for a while.  Each time the habit is triggered you will have to take action to stop it.  You will have to pay attention to break the automatic response.  If you can put into action a new behavior when you realize that you are doing the old unwanted one, a new habit can eventually replace the old one.

Sources:

Quinn, J. M., Pascoe, A., Wood, W. & Neal, D. T.  (2010). Can’t control yourself?  Monitor those bad habits.  Personality and Social Psychology Bulletin 36, 499-511.

Verplanken, B. (2006).  Beyond frequency:  Habit as mental construct.  British Journal of Social Psychology 45, 639-656.

Wood, W., Tam, L. & Witt, M. G.  (2005). Changing circumstances, disrupting habits.  Journal of Personality and Social Psychology 88, 918-933.

The small repeated expenses are the “budget busters” for many people.  It can be hard to know the impact of these small items on your overall expense picture without adding them up.

The eXtension Financial Security for All web site features a new calculator for estimating the annual cost of small repeated expenses.  Go to the link and enter your expenses for items such as coffee, sodas, lunches, gasoline that you purchase frequently.  The calculator will add up the items that you enter on a daily, weekly or monthly basis.  You can see the approximate annual cost.

The link to the Budget Calculator is  http://www.extension.org/pages/Budget_Calculator The link takes you to a short description of the calculator and then another link (https://share.extension.org/public/FSA/budget_calculator.swf) takes you directly to the calculator.   You can print your information or just review it online.

Barbara O’Neill, personal finance expert from Rutgers University offers a daily update on money topics via her Twitter account.

Check it out:  http://twitter.com/moneytalk1

Tips for saving money are posted on an easy-to-use web site featuring ideas by members of the web community.  The topics are Finance, Eco, Health, Tech, Shopping, Kids & Family, Car & Transit, Food, Vacation, At Home, At Work, and Miscellaneous.  Read the set of popular tips that flash on the screen or click on a topic link and view the tips by topic.  Posts come from across the globe.  Viewers may also sign up to vote for their favorite tips and add their ideas to the list.

The link is:

http://moderator.appspot.com/#16/e=3cfc

What are your tips for blog viewers that can save them money in the months ahead?  Add a comment to suggest ideas.

I wanted to alert you to two programs on money management that will air on Public Broadcasting TV stations.  Look for them on your local station.  They should be showing Wednesday, September 9th at 8 PM and 9 PM EDT.  See the descriptions below:

Your Life, Your Money (YLYM) is a one-hour program about money management for young adults that is set to air on PBS stations nationwide this fall.   The program is hosted by Scrubs television star Donald Faison and was produced by WNED, the PBS affiliate station in Buffalo, New York.

The program describes the money management successes and challenges of six young adults (from diverse backgrounds and representing a diversity of ethic backgrounds and career choices) and, through their stories, teaches viewers about key personal finance topics such as the wise use of credit, investing for retirement, and insurance.  Also featured in the program is Hop-Hop mogul Russell Simmons and two financial experts, financial author Beth Kobliner (author of Get a Financial Life) and Michelle Singletary, a financial columnist with the Washington Post.

YLYM was produced with funding by HSBC in the Community Foundation (USA) Inc. The program Web site is http://www.pbs.org/your-life-your-money/.

Recently, most of us have had many opportunities to consider the financial condition of our economy and how that impacts us.  For some of us, this is the time to change the way we have been managing our money.

But, altering our behavior is not easy.  In fact, changing money habits can be especially difficult. How we’ve always handled money feels familiar, comfortable, and predictable – not only to ourselves but also to those around us.  Family and friends often expect us to act and respond in certain ways and may even have vested interests in having things continue as they are.  Because family members and friends may feel uncomfortable when they see us trying to make changes, they may set up barriers – either subtle or obvious — to prevent change.  We may not be clear about how to implement change – what is a better way to manage?  Change is not easy or straightforward.  We may try things that don’t work so well for us, or we may get discouraged when our attempts fall short of what we desired.  One good source of information and suggested ways to start new money management practices is the following site:  http://www.extension.org/personal_finance In addition to the suggested practices and practical advice by experts found at extension.org, the research below provides guidance on setting and accomplishing financial goals.

Research sheds some light on how we might be most successful in changing financial behavior.

The first step in changing our money management is to set a goal – what do we want to achieve and by when?  Research studies have pointed to three main keys to increasing success in accomplishing your goals.  The first point is that goals should be  clear, narrowly focused, accomplished without much difficulty, and completed relatively soon (naming a specific date). Tip #1:  Set goals that are specific in terms of what you want, how much it might require of time, money and any other resources, and when you want to have it.

The second key to being successful in reaching your goals is to know why you have chosen the goal.  In the terminology of some psychologists today, “you need to own your goal.”  In other words, a goal should come from you for your purposes and NOT be handed down by someone else. It must fit with who you are and what you need and want, being realistic about your time and money resources, of course.

The goal may also have to be planned with others in your family or household. Everyone involved needs to be considered and everyone needs to feel ownership in, and commitment to, the goal in order for it to be accomplished.  Tip #2:  Set a goal that is one you want to achieve and know why you want to achieve it.

Having your goal defined and being sure you know why you have set it are two important contributors to goal success. The third key factor is having a specific plan to reach your goal. The action plan will need to have dates attached to it, so that you know when you will start, when you will reach certain milestones along the way, and when you will fully accomplish your goal.  Sometimes there are dates imposed by circumstances outside yourself, such as holidays, vacation dates, birthdays, graduation dates, weddings, etc.

The other important part of action planning is to recognize that you will have some distractions and temptations to use your time or money for things other than achieving your goal. These opportunities to spend now rather than save for the future come to everyone and most of us find it hard to avoid these temptations.  These enticements may prevent you from reaching your goal on time. It is easy to become discouraged when these things happen. However, if you plan for ways to avoid or recover from these disruptions, you can quickly get back on track. Tip #3:  Establish a target date and create a detailed plan of action to follow that will act as a guide to achieving your goal, including ways to overcome obstacles or temptations that could interfere with completing your goal.

References

Koestner, R., Lekes, N., Powers, T. A., & Chicoine, E. (2002).  Attaining Personal Goals:  Self Concordance Plus Implementation Intentions Equals Success.  Journal of Personality and Social Psychology, 83 (1), pp. 231-244.

Prochaska, J., Norcross, J., DiClemente, C. (1994) Changing for Good, New York: Avon Books.

Seiling, S. (1999) “Behavior Change and Money Management” in McKinney, C., Seiling, S., Little, F. and Varley, I.,  Pathways to Money 2000+, Section 1, pp. 18-23.