Here is a creative way to enforce savings. Have any of you tried this approach? From our partners at MainStreet.com.
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“Pay-to-Use’ Helps You Save Cash
By Jeffrey Strain | MainStreet.com

With the souring economy, people are realizing that they really need to find ways to save more money.

One way to do that is to initiate a “pay-to-use” program, which is fairly simple. When you use, say, an appliance that you own, you pay a predetermined amount to your emergency fund.

For example, if you did not own a washing machine or dryer, you would have to go to your local laundromat to wash and dry your clothes. In order to use the machines there, you would have to pay for each load you washed.

When setting up a pay-to-use system, you simply pay yourself for using the machines you already own, rather than the laundromat owner.

In the above example, you might decide to pay a dollar toward your emergency fund each time you wash your clothes. You might also decide to add two dollars to your emergency fund for every laundry load that you placed into your dryer.

By making small payments for the appliances you use, your emergency fund should start to fill up quite quickly.

Even better, you’ll develop additional skills that will boost your budgeting and personal finance skills. Here are just a few benefits of pay-to-use.

It teaches details about your spending.

People often think about spending in terms of shopping, but every time you turn on a light or get into the car, you are spending a little bit of money. Most people probably aren’t aware of how often they use many of the appliances and other items they own, but a pay-to-use program will clearly show you.

It creates better organization.

A funny thing happens when you have to pay each time you use something that you already own. You begin to organize your life so that you don’t have to use those things as often.

It makes you rein in your impulses.

When you have to pay up-front to do things you normally do without a thought, you’re likely to take a minute to question whether you really need or want to do it.

If you must pay $5 to watch an extra hour of TV, you’re likely to reflect on whether the TV show is worth that much money, when otherwise you would just flop down and watch without thinking.

It will change your habits (for the better).

When you adopt a pay-to-use savings program, you will notice that your habits change. Just like $4-a-gallon gas changes driving habits so you don’t waste as much gas, you will notice that you will begin making changes to your lifestyle that will help reduce the amount that you spend.

You’ll learn what is important and what things are worth to you. Finding out this information is a good way to find out which costs you can eliminate without them causing much heartache.

It will reduce your spending.

Not only will you be creating a stash of cash, you’ll also be reducing your spending at the same time.

If you set up the system correctly, you’ll probably charge yourself to do things that cost money, time and energy, or are wastes of time.

For the pay-to-use system to be successful, you need to pay the cash to your fund as soon as you do whatever it is you have to pay to do. If you simply write down the amount you owe or tell yourself that you will pay it later, the system will fail.

One easy way to make sure that you pay is to set up a central piggy bank or money jar in a well-trafficked area of your house where all payments should be deposited. Once a week or so, you can take the proceeds to the bank and deposit them into your emergency fund account.

Include all your family members when setting up this program. The system works best as a family unit, rather than a single person within the family.

What’s better than random personal finance topics? Topics bundled up in a nice, easy-to-chew series. For the next few weeks we’ll be exploring the basics.

Does this mean no more random stuff or videos? Heck, no! We love random stuff and videos — we never want to be like other financial sites. (Most are sooo boring…)

What’s in it for you: Neat, bite-sized basics. With a twist. The twist is that these will appear simple. Maybe too simple. But a review of the basics will help you zero in on the areas in your own financial situation that need attention. Sure, we can talk all day… but are you doing any of it? Let these short bursts spur you into action.

That said, let’s start with the first of the series, “Growing Money”. Why the mushroom photo? Mushrooms spring fourth from less-than-ideal starting points. So can growing your money.

Growing Money: S stands for…

Okay, Einstein. The “S” does not stand for “sugar”, “stars”, or “shrooms”. The “S”, of course, stands for saving. There are two flavors: short term and long term. Which do you want?

The answer is: both. But you knew that.

Let’s discuss each, shall we?

Short term savings. This is a liquid, cash account whose purpose is to cover emergencies and unplanned expenses. It’s the ace in your pocket. Make building this “emergency fund” your top priority.

To do so, figure out how much you need to support your lifestyle. Set aside something out of every paycheck. Small amounts add up. Even better: there’s a bit of magic to doing this. Once you start to consistently set money aside for emergencies, you tend to stop having emergencies…

HINT: I set up multiple savings accounts at ING Direct. This way I could separate my money into different channels and re-name each bucket accordingly. I named my “emergency fund” short term savings “emergency prevention fund” to remind me that my efforts were preventing future emergencies.

Types of accounts for short-term savings: savings accounts, money market accounts

More about short term savings:
Build a Three-Month Cushion
Emergency Fund: Is Your Stack Wack?
Planning for the Unexpected Funeral (or other emergency)
How to Have Good “Horse Sense”

Long-term Savings. Not to be confused with retirement savings! Long-term savings are for big-ticket purchases or other goals. The advantage is having more cash available for a large down payment (for example). This translates into lower-cost borrowing or avoidance of borrowing entirely. If you can pay entirely with cash from long-term savings for a big-ticket item (such as a car), you have a lot more negotiating power.

Types of accounts for long-term saving: certificates of deposit (aka, cds), U.S. Treasury Bills, Notes, or Bonds.

How to do it: Like your short-term savings the best approach is to route a certain amount out of your hands every time you are paid. An earmarked account makes it easier to separate your various savings goals.

HINT: Saving for “long-term goals” is a boring way to think about it. It’s not particularly motivating. So, rename your long-term savings into exactly what you’d like to use these monies for… for example, “China Olympics 2008 Fund”.

More on long-term savings: “How to Play $1K: Sweet CDs”

Simple, right? Now ask yourself… have I established short- and long-term savings in order to grow my money?

Act today!

I’ve heard that many Americans are one paycheck away from serious financial trouble. That’s pretty scary, so I decided to check out the goals page to see who’s building an emergency fund.

I discovered lots of users with this goal, but only a handful following through. Maybe some of you are just forgetting to use the tools to track your progress. If not, it might be time to visit the confessional.

An emergency fund is critical for peace of mind. When the unavoidable happens it helps if money worries don’t have to cloud your judgment. Then you can calmly decide the best way to deal with a crisis.

Here are three things to remember when trying to grow your cash cushion:

1) Pay yourself first.
This is the best way to start saving and lots of us don’t do it because we’re stuck in ‘Wait Until’ mode.

The problem with this approach is that the right moment never arrives. There will always be something that requires our cash and attention. The only way to develop a ‘pay yourself first’ habit is to make the leap and start. Now.

2) Be proactive with the little things.
Procrastination and impulsive behavior create avoidable emergencies that suck energy and resources. Prevent surprise expenses by taking good care of your health, home, and car. Don’t sabotage your efforts with actions that ultimately work against your goals.

3) Prayer is not a substitute for planning.
Bad things happen to good people all the time. Nobody gets to avoid accidents, disasters, or general misfortune. Why not be prepared? Then you can focus your prayers on those less fortunate. Like people who don’t use Geezeo.

An emergency cash cushion is an important step on the path to financial well-being. So don’t give up, your peace of mind is worth the effort. Congratulations to Sunny who is 56% of the way to building his emergency fund!

Natural born spenders might be unclear about emergency vs. non-emergency needs. Check out the group My Wallet Is Bulimic for a checklist.

I was looking out my front door this morning, watching a bird perch inside the the top corner of my porch. At first, I passed it off as nothing since it flew away. However, I saw the same bird on the ground looking for something. I assumed it was food. However, the bird picked up some dried grass, flew back to the same spot, and carefully placed it, just to fly away again (to get some more I presume). When the bird flew away tho, it’s efforts seemed pointless since it kicked the blades of grass just enough for the wind to take them away.

Well, did the bird give up? No. The bird kept bringing back blades of grass, small twigs, anything that would be suitable for the nest it was making. Eventually, the nest settled into place and began to form.

You might wonder at this point what exactly this has to do with your finances? Good question. Use a little bit of imagination, and think about when you are trying to build a “nest” of savings. Every once in a while, a “gust of wind” may come along and blow some of it away, something that could quite possibly be out of your control. But should you give up trying to add to that savings, wondering if another “gust” will just take it all away? Of course not. Eventually, the pieces will fall into place and stick. Your actions will become habit, and you will be able to fulfill your goals of paying down debt, and building a substantial savings.

For instance, we recently came up with a master plan to solve our debt issues and build a decent “nest” of savings. We thought it was going to work just great. That is, until a “gust of wind” came along, and blew that plan out the window. Due to work slowing down, and the inability for the company to “afford him”, my husband lost his job this past week. While I could sit here and be upset and/or depressed about the situation, we decided to make the best with what we have. Our end goal is to still pay off debt and build a savings - that won’t change. What will change is the path we are going to take to get there.

Let Geezeo help you see where your finances are, create a budget to be able to live within your means, as well at set some goals to save for your “nest”.

(Photo Courtesy of: Niuet / Stock.xchng.hu)

So with the first wave of economic stimulus checks coming through, I am eager to see the total amount that will actually be sent to us. According to the IRS website, we should be receiving it by this Friday.

However, our family doesn’t plan on stimulating much of the economy with the check. We plan on using it to pay off a major bill. Something that was supposed to be paid off with our tax refund, but that didn’t happen due to our washer and dryer quiting on us!! (Yes, at the same time - Oh the joys of being an adult with responsibility now!)

I’ve been reading a lot of blogs and different magazine articles talking about how many are planning on following the same idea as our family - paying off a large bill/credit card debt/etc.

However, I was watching a news program the other night, CNN I believe, and it mentioned that while the government is expecting a large number of citizens to use it to pay off debt, they fully expect the economy to still be stimulated. How? They are expecting that once citizens free up debt, they will go right back to charging more because 1) it’s “available credit”, and 2) things are rising in cost (so how else will they pay for it?) I thought about it, and I agree. For the average American they are probably right.

But don’t fear, Geezeo is helping its users to redefine the average American! We have the tools to help set up budgets and track our spending so we can be better prepared for the things that might happen tomorrow. Take full advantage of the capabilities. Set some goals so that you can pay off that debt, keep it off, and have a cushion to rely on in hard times (so you really can stimulate the economy with the IRS check and a guilt free conscience!!). Share your successes with us in groups such as You Don’t Really Need It…tales of consumerism. And if you do take a step backward (which most of us do), you can always get your purchase off your chest by confessing your money sins here!!!

Thinking about how this past year stacked up? Planning for the new year? Here are some things to do to get your financial life spruced up and ready for the new year.

1. Check to see how much you’ve contributed to your IRA. (Do you even have one?) Yearly contributions vary depending on age and income. Have you maxed it out? If you haven’t, get cracking. I believe you can still add to your IRA as a “2007 Contribution” until April 15th. (But check with your certified tax or investment person, I’m no expert!). Once the year is out, so is your opportunity to contribute to your future, tax-advantaged.

2. Use some of the “down time” to gather everything you need for filing your taxes. Note: I didn’t say you had to DO anything with the paperwork…just put it one place! This will make life at tax time easier…particularly if you’re self-employed. The best part of this task is that there is no reason you can’t do this part with a cup of eggnog (or soynog) in hand.

3. If you moved this year send a postcard to your old employer giving them your new address. It’s a nice gesture, and besides, you need them to send your W2 (or 1099, or other tax documents) to your new place so you can file your taxes without delay.

4. If you secretly think that you could do a better job of saving or investing for your future, now’s the time to sit down and set up that automatic draft. Set it and forget it.

5. Finally, clean out your closet. According to feng shui this opens up new possibilities in your life. But in practical terms, it’s nice to feel organized. And you can donate those unused items for a nice tax write-off… and help someone else out. Isn’t that what it’s all about?