Video: 7 Tips For Saving

Here’s another installment from my KLRN public television video series “It Just Makes Cents.” This one is on how to save money.

The text is linked here, if you like to read.

Or…if you like your juicy savings tips in podcast/audio format…we’ve got that too!

Fine, fine. Here’s the actual text on KLRN

You want to save money. Duh. Who doesn’t?

I’m a true believer in one way above all others. Let’s start with the one TRUE thing before reverting to other tried-and-true pieces of savings advice. 

1. Automation

I believe in this above all other savings methods. Automate regular contributions of a set amount, on set days, into a savings account. You set up this automated plan with your bank or credit union once and then let it run in the background of your life. For the rest of your life. Every week, or every other week on payday, or every month (or whatever, knock yourself out, set it on daily, go crazy!) you automate a transfer from your checking account into a somewhat-harder-to-access savings account. 

The key is to make today’s decision to save happen automatically in the future. Electronic. Programmed. Unchanging. Savings by Robot. That way, You don’t have to make the decision more than once. We’re not strong enough for that. But automation doesn’t depend on us being strong. Which is exactly why it works.

My bank takes a small amount of money every few days out of my checking account, automatically, and puts it into my savings account.

I’ve also successfully used the automated savings app Qapital for this automating function. This is by far the best new school way to save money and if you’re not doing it then I don’t know what to tell you except this, in a deep Arnold Schwarzenneger voice: DO IT. 

After automation, tips 2 through 7 could also help.

2. Goal Setting

First – set a specific dollar amount. Next, name it. Write it down. Make it real. The idea here is that when you name your goal “Three fabulous new outfits to rock the house,” “Dream trip to Dollywood, TN,” or “BMX racer” or whatever you’re actually saving for, you change the feeling of savings from that grey gnawing emptiness in your belly into something tangible, exciting, colorful, and worthwhile. Going without today is a necessary step toward having something awesome tomorrow. Goal setting can help do that.

3. Round-ups

The old school way was to drop that pesky pocket-change of coins and small bills, collected throughout your day, into a change jar for a year or so, and then bring that all down to your bank or that coin machine at the grocery store.

The new school way is to use ‘round-ups,’ essentially the less-than-a-dollar change you’d get from making plastic purchases (via debit & credit cards) and then electronically tracking all that electronic loose change. When it reaches $5, you automate that amount into a savings account. Many banks can do this automated round-up thing for you, as will many savings apps like Qapital and Acorns.

Does it work? Yes, it works. Mostly because of (see above!) Automation.

4. Identify the Tiny Leak, maybe?

Maybe you can’t save, and you don’t know why. The answer is, maybe, in the small stuff? The dreaded answer, if you’ve ever read those other finance blogs aimed at Millennials, is your regular latte or your avocado toast. And you’re sick and tired of hearing that cliche. So you hope I won’t mention the words L*tte or a*ocado t*oast anymore.

Look, the big idea here is not to forbid you from having those things, or some other small luxury item you crave. The big idea is to find out – maybe just for informational purposes! – what you’re spending money on. So…try for a week…write down every single purchase you make. Tic-tacs. iTunes. Hulu subscription.  Everything. Did you find the leak? I’m not saying you can’t have those things, but rather – it’s worth maybe knowing where the leak is coming from. Right? Well, maybe.

5. Sorry, But It’s Actually The Big Stuff

The worst thing about the avocado toast and latte lecture to Millennials is not that it’s a cliche (although the cliche is admittedly bad) but that it’s not even the heart of the matter. The ‘matter’ being your struggle to save money. The true fact is that most of your money is going to housing and transportation every month, not lattes and avocado toast. Which seems pretty immovable. But also…the correct answer to the savings puzzle – the mathematical answer – is your house payment and car payment. Do you really, really, really want to save money but can’t? Big changes in savings won’t happen without making difficult choices about your house or car payment. Sorry, I didn’t invent math. I’m just reminding you of it. 

6. Only Carry Cash

You take out a certain amount of money. You buy stuff with that limited amount of cash. You don’t use plastic. When you run out of the cash, you don’t buy anymore, because: NO MORE MONEY. Your grandparents did this. They saved money this way. This is decidedly old-school and a bit extreme, but try it. Maybe it will work for you. 

A variation on creating an all cash world is the envelope trick. Some people swear by this one. It’s similar to the “Only Carry Cash” tip, but a bit more organized. You label a bunch of physical paper envelopes with your specific monthly budget. Things like “Rent,” “Utilities,” “Groceries,” “Entertainment,” and “Gas Money/Transportation.” On payday, or the beginning of the month, you withdraw a set cash amount and put that amount in each envelope. When the money runs out this month, no more spending on that category until the next pay day. No plastic. No cheating. Again, it’s extreme. But this has worked for millions of people, and might for you.

7. Bargain/Haggle

You know what else Grandma did? She haggled. Everywhere. With her limited wad of cash. With all the shopkeepers. Like, every day. You can offer less than the store wants at pretty much any place that isn’t a complete chain store. All furniture stores, for example. Any service provider. All locally-owned businesses. Pretty much every business owner has a bit of flexibility in their prices, if you ask.


Does that seem uncomfortable? Would you be embarrassed to do this? 

Well, put it this way: Would you make yourself momentarily uncomfortable by sticking your arm under the driver’s seat of your car to retrieve a $20 bill? I would. Well, haggling at the store is more like sticking your arm in an uncomfortable position with hundreds of dollars within grasp, and thousands of dollars at stake per year. Try a little discomfort. Your grandma actually enjoyed it. You might also.

But can I remind you of the one best way? Ready? 

Automate your savings! 


(Thanks, Arnold.)

Post read (266) times.

IFTTT with Qapital

qapitalTransitioning from being a paycheck-to-paycheck person to a person with actual accumulated savings in the bank is one of the classic problems of personal finance.

Maybe you got there easily, as soon as you started earning money. If so, you are not the majority. Some never get there. A large number of people are in the middle, struggling from year to year to make progress on the problem of building up some savings.

If you have a problem saving money, maybe you need a fin-tech crutch, one of which I just tried using last month, called Qapital. **

The national average savings rate of 5.7% (saving $5.70 for every $100 earned) is not only well below the minimum recommended 10% rate, but also is well below historical averages in the United States. Not only that, but average means that for every above-average saver, many have no savings at all.

We know from behavioral economics that automation is one of the things that works for both savings and investments. Automation – the slipping away of bits of unnoticed money from your account over time – is the most important tool for savings and investment that I know of. Automation is why 401(k)–type plans work

I picture the power of automation in the context of dieting. If I’m served a big plate at a restaurant, you’re darned right I’m going to finish everything there. Proudly. But if I had a secret invisible robot to remove a portion of food from my plate at every meal, unnoticed by me, I might just slim down faster. Acknowledging my human frailty and appetite, I might just benefit from this technology solution.

Analogously, the automation of savings keeps our greedy little hands from spending all of our money as soon as we get it. The Qapital app which I’ve been trying since April applies this power of automation to the problem of savings, with a few clever twists.

iftttQuick side note: I guess the app is pronounced “Capital,” because “Kwap-ital” is just too absurd and awful. My wife, however, decided to call it Kwap-ital and that makes me laugh every time.

Anyway, about the app. First, it suggests that you set a goal for savings, such as going on a trip, a specific purchase, or paying down debt. You name your goal in the app. We probably need specific monetary targets, for a specific purpose, in order to do the hard thing.

In mid-April I decided to set a goal of saving $500 so that each of my daughters could have $250 to purchase more shares in their favorite stock. Man, they just love stock investing! I mean, not really, but a Dad can dream. My wife set a goal of saving for a vacation to Scotland. Man, we just love eating haggis. Again, not really.

Anyway, next the app prompts you to link your checking account, which funnels money into a newly-created savings account, held at Wells Fargo and fully FDIC-insured. No word yet on whether Wells Fargo will create a bunch of fake accounts in your name afterwards. (I kid. But they deserve it.)

unicorn_frappucinoFinally, Qapital came up with clever rules to encourage your savings – some sensible, some goofy. You can program Qapital to transfer money into a savings account for accumulating sports memorabilia whenever you use specific hashtags on Twitter, like #TomBrady is the #GOAT. You can set a rule that transfers money to pay for your CrossFit membership whenever you make a terrible decision like purchasing a Unicorn Frappuccino from Starbucks. You can save money for a cruise vacation whenever the temperature in your town goes above 75 degrees, or whenever it rains. You can set a rule that transfers money to savings – to be donated to your favorite political cause – whenever Donald Trump tweets. Seemingly anything that can be measured electronically can be linked to a Qapital rule. These programmed money transfers are known as “If This Then That” technology – or “IFTTT” for the cool kids.

Other rules follow a more prosaic program for regular transfers into your savings account. A friend of mine uses Qapital to automatically transfer 30% of every freelancer paycheck he receives, so that he’ll have enough money socked away at tax time. That seems like a very sober and clever use of the app.


I chose Qapital’s “52 week rule” in which on week 1 I save $1, on week 2 I save $2, and so on increasing each week by a dollar for 52 weeks. More poetically, they could have named it the “boiled frog” rule, as I feel like the slow increase in savings will be practically unnoticed by me over the course of the year.

Whenever the money moves from my linked checking account into savings, the app sends me friendly reminders and small encouragements. As of this writing I have $10 already in my account. Sweet! Go me!

All of you reading have no doubt already calculated in your heads that I’ll reach my target of $500 by week 32, or around November 26th. Also, if I let it ride for the whole 52 weeks I’ll have set aside $1,378. You can mark your calendars and send me a tweet to ask how the process went. Even better, you could program your Qapital account to transfer money into savings every time you tweet at your favorite finance blogger.


**Also, I’m putting this link here and hoping you’ll forgive me and think I’m not just a hacky shill for $5. But if you do sign up for Qapital after clicking this link, I think I get $5. And so do you!

A version of this post ran in the San Antonio Express News and the Houston Chronicle.

Please see related posts:

Check out this Acorns thing

Automatic deductions is the key to getting wealthy

Daughter’s first stock investment



Post read (304) times.

Rent vs. Buy – The Simplest Answer

Just add 2.3 children and a Viking stove and you’ve got the American Dream!

The “Rent v. Buy” discussion offers endless opportunities for debate.

We can talk about the opportunity to buy a piece of the mythical ‘American Dream’ – on the path to acquiring key accessories like a white picket fence, 2.3 children, and a Viking stove.

We can talk about the extraordinary risks taken by mortgage borrowers borrowing to the maximum before 2008 and the devastating financial losses many suffered in the aftermath of that financial crisis.

We can talk about the pride of fixing up one’s own dwelling as an owner. Or just as easily, we can note the smug satisfaction of calling Bob the superintendent and ordering it done. Make it quick, Bob!

Some of these preferences derive from personal leisure time preferences, risk tolerance, or lingering Leave It To Beaver fantasies. I don’t have any comment on those factors.

Are Leave It To Beaver fantasies leading you to home ownership?

I do have comments, however, on the financial implications of the Rent v. Buy debate.

Online calculators

You can find delightful Rent v Buy calculators online.

I prefer The New York Times’ calculator myself, but there are other great ones on various realtor’s sites as well as brokerage sites. Another site, walks you through a series of qualitative questions to determine suitability for home ownership versus renting. These are all fine and cool.

I do not recommend spending too much time with any of these online models, however, because ultimately the financial models depend on inputting assumptions about a bunch of unknowable future financial factors. Do you know what your income taxes and real estate taxes will look like five years into the future? Do you know the future rate of inflation, the rate of increase in rent, the insurance and repair costs of a home? I mean, if you had certainty and accurate insight into these things you’d be running a high frequency trading fund by now, not fiddling around with online rent v. buy calculators.

I’m in the ‘making things simple’ business, and I believe you only need to satisfy two conditions to make the move from rent to buy.

First thing: Do you have a steady, predictable income? If you do not, then home ownership is a terrible idea. It’s just too risky.

Second thing: Do you plan to stay in the same place for the next five years? If not, real estate values are too volatile to mess with, and the frictional costs of getting in and out of real estate ownership are too high – after factoring in brokerage, title, loan, and attorneys fees.

So that’s it: If you’ve got a steady income and plan to stay five years in the same place, then go for it.

Wait, I haven’t said this strongly enough.

Commodities Trader says Buy
Commodities Guy says: BUY! BUY! BUY!

Picture me for a moment like those commodity trading pits guys (who don’t really exist anymore) a phone in each ear and tie askew, hands gesticulating wildly and shouting “Buy! Buy! Buy!” into both phones simultaneously. That’s how strongly I feel about the financial advantages of home ownership, if you can satisfy my two conditions above.

In order of importance, here’s why home ownership offers powerful financial advantages.

Automatic Savings

I can’t prove this, but I’m convinced this is the most important financial reason to buy a home. Most of us have no extra money month-to-month, so the idea of putting money away for long–term investments is, let’s say, elusive. But when we own our home with a mortgage, we end up paying small chunks of principal in the ordinary course of paying for our shelter. Over 30 years many middle-class homeowners manage to sock away hundreds of thousands of dollars of wealth without much pain because it happens monthly, automatically, even sneakily.

Tax Advantages

Everybody talks about the mortgage interest tax deduction, which is fine, but not the most important tax advantage of home ownership. The most important tax advantage – by far – is that in most scenarios when you eventually sell your home, $250,000 of capital gains are tax free, or $500,000 for a married couple. No other financial asset offers that kind of tax-free growth in value. Not only that, but real estate taxes are deductible from federal income taxes, as are other mortgage expenses like ‘points.’ Home ownership is just a great big bundle of tax advantages, courtesy of your middle-class homeownership-pandering Congress. Thank you US Congress! We love you! Muah!

Inflation hedge

Hey gold bugs, you’ve got the wrong idea. Home ownership is an awesome inflation hedge, because you can reasonably expect the price of your home to go up in line with inflation. When you rent, inflation hurts. When you own, inflation helps. If you own a home, especially with a mortgage, you can be all, like, ”Inflation? Bring it on! I am hedged!”

Not an inflation hedge I endorse. But home ownership, yes!


That’s finance-speak for buying more than you can actually afford, through borrowing. Of course being debt-free is a great idea that everyone should aspire to, but the leverage part of home ownership has long been a key part of middle-class wealth-building.

Outside of mortgages, lenders will never offer you 4-to-1 leverage, meaning the chance to buy a financial asset by only putting 20% upfront and paying off debt over time.

How does leverage work?

If you put down just 20% of the value of a thing, and then the thing goes up in value by 10%, with 4-to-1 leverage the value of your ownership in that thing increases by 50%. This is amazing! Obviously leverage (aka debt) is a double-edged sword and can lead to catastrophic losses if your thing goes down in value by 10% (or more!) But still. Leverage!

rent-v-buySmall print disclaimer before my summary conclusion: I have not mentioned the issue of down payment (you need it!) and decent credit (you need it!) when deciding on Rent v. Buy. So there’s that to consider as well. But for now let’s focus on the simple message below.

The four factors above make ownership awesome. If you have a steady income and five years in the same place, BUY!


Please see related posts:

Housing Part I – What we do when we own a home

Housing Part II – The Risks

Housing Part III – Big Opportunities

Please see related video on Rent v. Buy



Post read (2208) times.