The Savings Burden

I'm a behavioral economics junkie. I can lose a day reading Kahneman, Ariely, or Benartzi. Helping people overcome cognitive biases and behavioral defaults in order to take care of themselves financially is my life's work.

But sometimes I feel like we forget about the external forces that also support or impede financial goals. The conversation tends to take a decidedly "red state" (personal action and responsibility) or "blue state" (political/macro-economic framework) focus, and we lose the interplay of person-in-environment, which is the "unit" we are taught to examine in graduate social work programs.

I do some work with a non-profit that is in the process of freezing their pension program. To compensate, they are offering employees a 401(k) match up to 6%. In many companies and industries this would hardly cause a ripple, but for people who are already trying to live on a social worker's salary in one of the most expensive cities in the world, this is a huge challenge.

We can employ as million "opt-out instead of opt-in" tricks to get people to contribute more to their 401(k)s, but let's not overlook the great number of people who struggle to save not because of loss aversion, but because they have barely enough money to cover their essentials.

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The Automated Life

I was reading a post by new Twitter friends oXYGen Financial (@oXYGenFinancial) about the pros and cons of putting bills on autopay, and I thought I'd contribute my two cents.

Our money takes us on a journey. Some parts of that journey are interesting and worthy of exploration, other parts are simply scenery that we pass by on our way to somewhere else. Putting bills on autopay puts them in the scenery. Which has advantages - do you really want to be examining every tree and mile marker? Not only could that get pretty dull, but it could also take energy and focus away from other parts of your financial life that would benefit much more from getting your attention.

When coaching people on developing financially healthy behaviors, I tend to start with a thorough examination of all expenses. Each expenditure tells us something (my mantra is "All financial behavior has meaning," and what you spend money on reveals a tremendous amount about you). So yes, I want to know why you chose that cable plan, or why you live in that apartment. I've been known to get lost in the story of when you stop for coffee. When you're at the beginning of the financial wellness journey it's not just every tree and mile marker, but even the blades of grass get at least a cursory glance.

However, there is competition for your attention, just like there's competition for your money. So after we get a sense of which budget elements need attention and which ones do not, tools like autopay can be immensely helpful. Not only does this feature have the benefits listed by oXYGen, but I would add that you can also avoid late fees and the anxiety of wondering if you've paid something on time. Creating a greater sense of safety around your daily finances frees you up to start working on deeper-level issues.

Automating a spending activity de-prioritizes it in your consciousness. That's fine (again, given the potential drawbacks so excellently listed by oXYGen), but it's not fine if that spending behavior becomes completely unconscious. A routine review of charges helps you keep perspective on what your choices cost. It also gives you the opportunity for a quick check-in that this expenditure is something you continue to value. I can't tell you how many thousands of dollars I've helped people save when they discover a mountain of subscriptions, dues, and other fees they didn't even know they were still paying, or when they pause to notice their Netflix payment despite the fact that they've been holding on to the same three DVDs for six months.

A huge part of financial wellness is learning how to pay attention to money. But attention is a precious resource, and figuring out the best places to apply it is an art. How does autopay work (or not work) for you?

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Katie, You're Doing it Right

I was thrilled to read Katie Karlson's DailyWorth piece today about jump-starting her savings account using her tax refund. For those of you who struggle to put money aside out of your paycheck, a tax refund, birthday gift, or other such windfall can be just the ticket to help turn you into a super saver.

Successful saving is a habit, and all good habits need a reward if they're to continue. The huge rush that we get from seeing a four-digit increase in our savings balance can trigger a desire to do more. In Katie's case, she doubled her monthly auto-transfer to meet her savings goal even faster.

The other smart thing Katie did was to have a specific savings goal. She's moving this summer, and wants to make sure she's financially prepared.

In order to reinforce her new saving behavior, I would recommend that Katie keep close tabs on exactly how each dollar saved contributes to her progress. For example, if she knows that renting a U-Haul truck will be $1,000 and she needs $2,000 to cover deposits and fees on her new apartment, she should regularly look at her account balance and say to herself,"I've got the truck covered now and I'm almost halfway there on fees and deposits. In x weeks I'll have enough saved to cover all of those costs, and if I really work hard and save an extra $75 in the month before I move, then I can afford to buy some pizzas and wine for my friends to bribe them into helping me unpack!"

Katie, here is what you're doing right:

• You have your goal in place even before you've figured out all the details of how to make it happen (the order goes values -> goals -> tactics);
• Your goal is specific, positive, and actionable;
• You maximized your dollars AND reinforced a good financial habit all in one fell swoop;
• You protected yourself from going into debt due to a foreseeable event;
• You paid it forward and helped improve your own positive support network by inspiring your co-worker to save more, too.

Way to go, Katie!

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Getting the Debt Ceiling off my To Do List

I was going to write a post today about the Debt Ceiling debate, but then I read Ramit's piece and decided to save myself some time by simply pointing to it and saying, "Yeah, what he said."

The highlights? Don't freak out. Don't do something stupid with your money just because your anxiety makes you feel like you have to do something. Think long-term and don't get distracted by (potential!) short-term events:

Yes, it’s possible the government could default, or the stock market could tank overnight…but it’s more likely that very little will happen in the short term. So would you rather focus on the 0.05% chance…or the 99% chance?

Thanks, Ramit! Now that that's done I can get back to compiling all of our current account statements for our new financial advisor. Yes, seriously -- that was my other To Do this morning. Thanks for the reminder!

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Solution to Saving: Find Your Inner Rat.

In the realm of financial activities, saving is rarely thought of as fun. Sure, having savings is fun, but the act of deferring today's spending for tomorrow's benefit is something we usually have to push ourselves to do.

When people try to move their needle from "spend" behavior to "save" behavior they almost always start by coming up with a goal. Not a bad idea, except that they usually start with the wrong goal. Retirement? So far away. Emergency fund? Snooze. Plus nobody likes to contemplate emergencies - especially when there is a beautifully distracting SALE! sign in that window. I'm not saying that it's not good to save for retirement or emergencies (please do save for those things), what I'm saying is that if saving is a new behavior then you need to actually learn how to do it. Walk before you run.

Learning a new behavior is a process that has ups and downs. To persevere through the downs, we need consistent reinforcement that the change is worth our efforts. This reinforcement can be negative (avoiding something painful) or positive (being rewarded with something pleasant). Failing to save for retirement or an emergency fund is huge, but those consequences are probably too far removed from the day-to-day difficulties of your behavioral change goal to be meaningful motivators.

(Many people will say that the solution to this is to automate your savings for those things, and while I agree with that, our topic today is not the savings result. It's improving the savings behavior.)

The solution to increasing the savings behavior is to make it pleasurable. You want condition yourself to save like a little B.F. Skinner lab rat gets conditioned to tap a lever and receive a cheese reward. Your cheese is the enjoyment of spending what you've saved, and in the beginning you will need these rewards to be more plentiful than after you've got some savings practice under your belt.

Start by saving small. DailyWorth has a great Save to Spend monthly budget that I think is absolutely genius. Then save for longer-term (but still fun, and not too longer-term) goals like a vacation or a splurge (iPad, anyone?). Soon you'll be such a seasoned saver that it will be easy to integrate emergency fund and retirement goals into your already established savings routine.

Tara Siegel Bernard, the New York Times journalist who interviewed me for her piece on ineffective budgets, just blogged about how she's going to establish some small, meaningful goals to improve her own savings behavior. Enjoy that trip to Europe, Tara!

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The Have-Nots vs. The Used-to-Haves

Let me begin by saying I am a huge lover of DailyWorth and the amazing, talented women who run it. I'm sure this post about the new Vh1 show "You're Cut Off!" was done in a spirit of fun and wasn't intended to be mean spirited:

“I nevah knew you could spend less than $800 on shoes,” says one girl, shaking her head sadly. And you nevah knew that watching dumb rich girls would make you feel so good about your own finances.

It makes me once again shake my head at how much we as a society love to laugh when someone who comes from money gets taken down a peg. We judge them when they discover, often painfully or in some situation of comical ignorance, how the "other half" (actually the other "99.99% of us") lives. Just because the overwhelming majority of Americans know that one can -- quite easily! -- spend less than $800 on shoes, it shouldn't mean that this one individual's discovery is worthy of our scorn.

Why is it funny when a person finds that the financial conditions she's been prepared for have evaporated? (Okay, okay, it's for the sake of a reality television show here, I grant you.) Would you find it funny if all of the sudden you had to go from indoor plumbing to having to fetch your own drinking and cooking water every day? Should people laugh at you when you wistfully talk about how wonderful it was to turn on the kitchen sink or flush a toilet?

It amazes me that a country that loves to fantasize about the effects of weath simultaneously loves to demean and humiliate the wealthy. Judging those who have more than us blinds us to the privileges we do enjoy. It keeps us all in rigid little boxes about the "right" amount of money to have (hint: it's always just slightly more than we personally have).

It's wonderful that the young women appearing in "You're Cut Off!" will be learning about financial competence. Despite the narcissistic paradox of participating in a show like this ("Act like a spoiled brat! Excellent! Now cry when I take your money away! Awesome!"), I'm relieved to see that they will be working with a life coach in order to -- hopefully -- come away with this having experienced some actual personal growth.

Will that be true for the viewers as well?

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Amanda in the NYT: Why a Budget is Like a Diet

One of the more difficult things about becoming a healthy adult is how we reconcile ourselves to limitations. In the US, where there is a strong cultural attachment to the value of freedom, healthy limits are especially tricky. "If some is good, more must be better! And anyone who tells me differently is trying to oppress me!"

We can get a little touchy about limitations.

In fact, healthy limits are essential to self-regulation. The key is to not get overly distracted by what we don't have, and to instead let the limitation increase our awareness of what we do have.

When our subjective financial experience is set to "broke" or "not enough," it can be very painful to pay attention to money. We spend and spend, but no amount of spending makes the feeling go away. And when that spending behavior makes us go in debt or leaves us unable to pay our bills, then we've created a financial reality that reflects our internal "not enough" state.

People are often shocked to discover that a proper spending plan can be the cure for "not enough." A spending plan requires that we establish priorities, tune in to our values, and put a dollar amount on the choices we make. It can be tough, but ultimately a spending plan demonstrates that there is, in fact, money being spent and the emotional setting of "broke" is not accurate. This can be an important first step in realigning your financial experience to one that is healthy and purposeful.

The Sustainable Money piece by Tara Siegel Bernard in today's New York Times includes more of my thoughts on how money should be seen as an energy source that helps us get to where we want to go. Hope you enjoy Why a Budget is Like a Diet -- Ineffective.

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Do you have a money story to tell?

I am moving forward with research for my book, currently titled The Good, the Bad, and the Money, and I am looking for subjects to interview. Do you know someone -- or do you -- have a money story to tell?

The Good, the Bad, and the Money is a project about how people experience financial challenges and how these experiences lead to personal change and growth. It will include profiles and stories about people from all walks of life, rich and poor, old and young, male and female. My work and research indicate that there is a universal process to how people overcome financial challenges. By including a broad range of voices and stories I hope to show that our experiences with money are life experiences, and facing a financial challenge can be a vehicle for personal transformation.

All names and identifying characteristics will be changed so participation will be anonymous. I would be happy to go into more detail about the project if you have questions. Any interested parties can email me at info@amandaclayman.com.

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Amanda in The Gentlewoman (UK)

A few months ago my dear friend Felix Salmon connected me with the editorial folks at The Gentlewoman. The Gentlewoman is an amazing new publication which describes itself as "a forward-looking magazine devoted to international women to love and admire." Needless to say, I am pretty excited to be included in such beautiful, smart, fabulous company.

I was interviewed by Emily King for a piece called Modern Money, which included a photo shoot with renowned photog Liz Collins (see photo box). If you can find The Gentlewoman on newsstands, I suggest you snap up a copy. Hope you enjoy!

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Amanda in Women's Health Magazine

Look at that amazing picture of me on the cover of this month's Women's Health magazine!

Sigh... only kidding, that's actually the uber-beautiful Brooklyn Decker, of course. I am, however, featured inside the magazine in an article titled When You Clash Over Cash, about the risk that money issues can pose to committed relationships.

Money issues abound in couples. Even the most financially healthy person in the world is bound to have strong preferences around money management, priority, or expectation that don't correlate 100% with their partner's.

And once begun, even small disagreements over money have a tendency to get very heated, very fast. Since money is closely tied to our sense of security, the self-preservation insinct can overwhelm any promise to love, honor, and cherish.

Next time you are your partner experience a financial spat, try to remember that money is a subjective entity, vulnerable to influences of the past and to emotional associations. Stop trying to be right and instead reach for connection. It's okay to ask your partner to cooperate simply because you need it. Though your partner may not comply, I would argue that this is still a more effective tactic than asserting that their collection of action figures/shoes/Civil War memorabilia is "obsessive and juvenile."

Money makes us want to protect ourselves, not fight fair. It's tough to ignore that rush of adrenalin and stay constructive. But couples who can learn to do it discover that it pays dividends of every kind.

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Break It Down, Avoid Breakdowns

Changes are afoot in our house. My husband and I recently reviewed our split of financial tasks and decided to revise who is responsible for what.

Just because I counsel people on issues of financial self-care doesn't mean these processes are always perfect in my own life. I probably have more than my share of quirks and blind spots -- why do you think I went into this business in the first place?

So I begin with a confession: I have fallen down a rabbit hole. I sit here surrounded by multiple stacks of open files. I have two online accounting programs open, as well as a now-four-page Excel workbook. I'm totally over-caffeinated and I've been in this chair for five hours.

It's not uncommon for large financial initiatives to inspire manic bursts of effort. But problems arise when we let our mania run the show. I started out on one small task -- creating a simplified family budget -- but then I had to look up some insurance info in our files. That led to reviewing policies. Then I opened Mint to look at numbers for shopping and groceries. This led to a hyper-detailed tagging project. Then I wanted a clearer idea of how much our daughter's activities cost per year, so I started pulling data going back several months.

Somebody help me!

Large financial tasks require structure. They require a goal, sub-tasks, and a time line. When you jump in with only a hazy idea and a Venti-sized twitch in your fingers, it's too easy to get into trouble. You start off strong, then you run into a snag, and then you get distracted, and then you start something else, until finally you're waist-deep in fifteen different projects with nothing actually accomplished. The cycle ends when you run out of time or energy, and the emotional imprint that's left on this experience is one of frustrated depletion. What's even worse, you've left the task in such a state of mess that it's hard to find the thread to pick it up again later.

If I were to be my own client here, this is what I would advise:

Set a start time and an ending time.

You never want to make your level of motivation the key determinant of task structure. This morning I was filled to the brim with motivation. I couldn't wait to get started! But five hours in I had exhausted myself. I'm walking away from the task feeling terrible. My motivation for picking it up later to continue the work? Not high, my friends. I've created an association between this project and feeling crappy about myself. That emotional association is going to make it more difficult to resume the task and see it through to completion. To create a positive emotional association, you want to structure the task such that you walk away with some motivation still in your tank. Then, next time, you'll be excited to jump back into it.

Make 'Create a Clear Plan' the first sub-task.

My simplified family budget idea was too vague. What's the purpose of said budget? What does "simplified" mean? Knowing that I have a visual learning style, I should have sat down with a blank piece of paper and sketched out exactly what it was that I wanted to figure out, what resources (information) I would need to do it, how long it would take and when I planned to do it. Only then should I have allowed myself to touch the computer or filing cabinet.

Make 'Organize the Project for Next Time' into the last sub-task.

Have you ever seen a contractor at work on a big construction project? It may seem like a waste of time (and your money) when they start putting everything away at 3:00 in the afternoon, but the truth is that ongoing jobs require careful organization for each phase of progress. Along with setting an end-time for today's work, I should have also allotted time to tidy up and put things away in some sort of order. Looking out at my sea of files, I want nothing more than to just dump them all in a drawer and never open it again.

Put the project away and do something rewarding.

Okay, so I was not good at these first three, but my reward today was to vent a little by writing a slightly whiny blog post. There is also a very good chance that as I type this I'm sitting here with a generous bowl of ice cream. And I'm totally watching The Closer as soon as I wrap this up.

Review of process is the only way we learn to do things better. The good thing about financial tasks is that they are a regular part of life. I am going to get many, many, many opportunities to work on this some more, and when I do I am going to follow my own advice.

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The World Spins Madly On

Surprisingly, I'm not a numbers person. When I do sums in my head I actually visualize colored bars of varying lengths that represent the "size" of the numbers, and then I mentally manipulate those colored bars. True story.

Dancing colored bars have their limits, so of course I'm totally fascinated by programs that visually model complex data. The World Bank Data Visualizer uses colored bubbles to show how population, life expectancy and income per capita have changed by country from 1962 to present. Watch the bubbles chase each other! It's not the World Cup, but you might still find yourself chanting "USA! USA!" as China and India race us across the board. Thankfully, the World Bank chose not to set this to an annoying vuvuzela soundtrack.

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