Monday, January 07, 2013

2013 Money Challenge - don't set yourself up for failure, plus tips



I have been seeing a lot of blog posts encouraging their readers to participate in a money challenge for 2013.  Basically, you start out slow, saving $1 the first week of the month, then $2 the second week, then $3 the third and so on.  If you keep adding a buck a week, you'll end up saving $1,378 in one year.

I totally understand the premise and honestly, until you might hit about the half way mark, you might not have as much trouble saving back that money each week.  However, if things are already tight for you, you'll have to find a way to save money just to be able to save the money for the challenge.  Don't misunderstand me --- a $1,378 goal is a worthy one, but I just want to look at the reality of the structure.

Assuming you deposit money into your savings account on each Friday of the week (normally payday), here's how that breaks down in monthly totals:

First Month:  $1, $2, $3, $4 = $10  Doable! 

Second Month:  $5, $6, $7, $8 = $26  Not too hard yet...

Third Month:  $9, $10, $11, $12, $13= $55  Now it's getting a little harder.  This amount saved per month may be the max someone could reasonably do if they're already pinched and barely scraping by.  And it's only March :(

Fourth Month:  $14, $15, $16, $17= $62

Fifth Month:  $18, $19, $20, $21, $22 = $100  You might start feeling the pinch if you haven't found other ways to save money.  May is another 5-Friday month. 

Sixth Month: $23, $24, $25, $26 = $98   A slight respite from last month, but still about $100 a month.

Seventh Month:  $27, $28, $29, $30 = $114

Eighth Month:  $31, $32, $33, $34, $35 = $165 (August is another 5 weeks of Fridays month)

Ninth Month: $36, $37, $38, $39 = $150

Tenth Month: $40, $41, $42, $43 = $166

Eleventh Month: $44, $45, $46, $47, $48 = $230   Christmas is coming and I have to save $230 this month?  Whee-doggie!  Gonna be tough! 
Twelfth Month a/k/a December, a month you're probably spending a lot of money anyway: $49, $50, $51, $52 = $202

Total saved: $1,378 if you save as directed.

Now, when you look at it that way, it seems like a daunting task, one that will set you up for failure.  And I may just get negative comments about this blog post being too negative... a kill joy.  But reality is that once you get past the first six months, you're putting back $100 a month.  That's a worthy goal.  Even $50 a month saved if that's all you can comfortably afford to do is well worth the effort.  But it's really the second half of the year that gets you in the end, particularly with larger expenses looming.  

Anything you save, whether you hang in on the 2013 Money Challenge for a few months and then drop out is worth the effort.  Having an emergency fund is a necessity to help tide you over when you have unexpected expenses or job loss or if you lose hours at work, making your paycheck smaller.  


TIPS!

Make Saving a Habit!  Saving is a habit, just as much as anything else you do on a regular basis.  You know to pay yourself first --- that is, designate savings like you'd pay a bill you might receive in the mail.  If you have a figure that you think you can comfortably save per week or per pay period, then make that a 'bill' you pay each time you sit down to pay your bills.  Ideally, if you have the ability to do so, have that amount auto-drafted out of your checking and transferred to savings.  Just be sure to pretend that it doesn't exist so you won't be tempted to use it for other things.

Think you can hang in the 2013 Money Challenge for a few months?  Good!  By completing each week, you'll find that sweet spot -- that amount each week you can comfortably save.  If you find by the end of March that you don't feel that you can afford to put more than $13 a week into savings, don't quit the challenge, just readjust to your reality.  From then on, there's 39 weeks left of the year.  13 x 39 = $507.  Add that to the $91 you saved already and you're up to almost $600 you could save by sticking with $13 a week for the rest of the year to finish out the challenge.

Halve the challengeIf you are worried that you won't be able to continue on, after seeing how the monthly breakdown, but want to actually fully participate, consider this option: halve the challenge.  That means 50 cents (pocket change or frisk the couch for two quarters!) the first week.  Sure, you won't save as much, but by December, you're saving about $25 per week, something you may reasonably be able to do.  You'll save half of $1,378 ($689), which really isn't too shabby either.

Other than saving money from my paycheck, what else can I do?  Saving part of your paycheck is a good place to start, but there are other ways to find money to save:
  • Use coupons on items you would normally buy anyway and set aside the money you save by redeeming them at the store. 
  • Treat any money you set aside in an FSA that you receive reimbursement for as spent money.  Don't let it go back into your checking account if you can help it.  
  • Rebate money should be treated spent money and once those checks roll in, deposit them into your savings.  Look for No Alcohol purchase required rebates in the beer/wine aisles at your grocery store.  See this list of money back guaranteed items that you can try without risk. Know that most stores back their store-brand items with a money back satisfaction guarantee.  If you don't like it or it doesn't perform as expected, take it back for a refund.
  • Blog!  It's easy to monetize a blog and sign up for affiliates.  Save any money you derive from your online activities.
  • Does your credit card offer cash back?  Be sure to pay in full each month and it's free money.  Discover is one of my favorite cards for this.  I earn cash back and generally don't carry a balance, except in extreme circumstances.  It's free money, money that you can apply to a statement, use to redeem for gift cards, or even have direct deposited to your checking account.  Discover currently has a special offer that you might be interested in.  Become a member and make a purchase within first 3 months of having your card and get a $50 bonus. 
  •  Hold a yard/garage sale or list items on eBay to earn extra cash, just be sure to save it!  You'll be getting rid of items you don't want anyway.
  • The big one:   Save some of your income tax refund if you are due one.  Another thought:  change your withholding so that you receive more money during the year when you need it most.  A tax refund just means that you lent Uncle Sam your money interest free.  Adjust your withholding so that you get less of a refund and more of a beefed up paycheck!
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