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Chapter 7
Saving Money Isn’t Always Easy
In This Chapter
✧ Understanding financial personality
✧ The difference between savers and spenders
✧ Determining your financial personality
✧ Learning to make saving easier
✧ Convincing reasons to start saving now
 
 
Saving money is a good idea. In fact, it’s a great idea to save and invest money when you’re young so that you’ll have it when you really need it. Some people manage to save money easily. It seems to come naturally to them. Others struggle to put even a little bit aside. Their natural tendency is to spend, spend, spend and worry about the consequences later.
In this chapter, we look at how people differ when it comes to saving and spending money. Why is it so much easier for you to stash away $5 or $10 a week in savings than it is for your brother? Or, why does every penny that comes your way seem to fly right back out of your hands the minute you walk into a store? Just as there are different types of personalities, there are different types of financial personalities as well.

Why Some People Find It Harder to Save

There are different theories about how a person’s temperament and personality relate to the way he or she handles money, but one thing is for sure: People are as different about money as they are about most other things in life. Some people are impulsive and act spontaneously. Some are more reserved and controlled. Some people believe in living for the moment; others carefully plan out their lives. Some people are constantly afraid, whereas others are undaunted by life’s challenges and ups and downs. These different personality traits definitely can affect the way a person handles his or her finances.
Let’s consider Bobby for a minute. Bobby is a great person—outgoing, fun to be around, and extremely social. One of Bobby’s favorite things to do is hang out at the mall with his friends, and he does so often. They walk up and down the mall, checking out new stores and stopping at their old favorites to make sure they haven’t changed.
056
Scary Stuff
We’re sometimes tempted to look down on a person with poor financial habits, but we shouldn’t. It could be that he or she has just never learned the importance of smart money handling.
The problem is that Bobby finds it very difficult to control his spending when he’s out with his friends. When he sees something at the mall that he likes, he buys it—every time. He doesn’t plan to spend; in fact, he tells himself every time that he goes to the mall that he won’t buy anything that day. Somehow, though, he always comes home with a PlayStation game, a new baseball cap, or whatever.
Katie, on the other hand, goes to the mall only when there’s a specific item—let’s say a particular CD—that she wants to buy. She’ll check out three stores to see which has the best price on the CD, buy it, and leave the mall. She’s completely in control of her spending. Katie’s trip to the mall is an errand, not a social occasion. She knows how much money she has to spend and what she wants to buy. All that’s left to do is find the best price and complete the transaction.
People who know what it’s like to not have much money sometimes develop peculiar financial personalities.
People affected by hard times such as those of the Great Depression sometimes become hoarders and savers, determined to never be without money again. Other people who survive financial hardship turn in the opposite direction and become great spenders to compensate for the lean times.
In short, nobody knows for sure where and how different people develop their attitudes toward money. We do know that people view money and finances very differently and that the way they handle their money can be either a good or bad thing. You probably can figure out your financial personality pretty easily by looking at the way you handle your money. Knowing why you have that particular personality, however, is much more difficult.
Think back to how you handled birthday gifts of money when you were a little kid. Let’s say your Aunt Jennifer has given you $30 on every birthday since you were born. When you were very young, your parents probably handled the money for you. But, as you got older, chances are you began to have some say in what to do with that $30.
If you saved all of it every year, chances are you have a nice little account someplace. Good for you! Maybe you saved half and spent the other half on something you wanted (remember when $15 seemed like a fortune?). Maybe you took the money every year and spent it on Ninja Turtles or clothes for your Barbie dolls.
057
Imagine That
Just so you know, if you’d saved the $30 every year in a savings account at 4 percent interest, you’d have more than $900 when you turned 20.
The way you handled that money—or other money you might have received or are still getting—will give you some good insights into your financial personality. A quiz in the next section also will help you to determine whether you’re a saver or a spender. If you want to know why you have the particular personality you do, you’ll need to examine your attitudes and financial background.

What’s Your Type?

Let’s try to figure out your financial personality by taking a little quiz. Don’t worry. This requires no studying, and you don’t need to tell anybody else what you get on it.
1. Do you know, within a dollar or two, how much money you have in your possession at this particular moment?
a. Yes, I know almost to the penny how much I have and where it is.
b. Haven’t got a clue.
2. You’ve just found a pair of shoes that are to die for, but they cost $60 and aren’t on sale:
a. You decide to wait it out for a week or two and see if they go on sale.
b. You borrow your mom’s credit card and buy them immediately.
3. You get $15 every Sunday to buy your lunches for the following week:
a. You usually spend only what you have to, and try to save part of the money to use on the weekend.
b. You’re almost always out of money by Wednesday and picking up leftovers from your friends’ lunch trays.
4. You go to the drugstore down the street to buy a bottle of shampoo and some cream rinse:
a. You buy the items you went for and leave the store.
b. You buy not only the shampoo and cream rinse, but end up with body wash, gum, and a magazine.
5. Your next-door neighbor asked you to cut her grass for her and gave you $20. You didn’t expect to have this money:
a. You stash it in your drawer so that it doesn’t get mixed up with the money that’s in your wallet.
b. You call your girlfriend and ask her if you can take her out to dinner that night.
6. You and your friends love movies, but you don’t like the admission prices:
a. You opt to wait to see some of the movies until they get to second-run theaters, or even until they come out on video.
b. You go to the movies you want to see as soon as they come out so that you can tell everyone about them.
7. You’re looking for a dress for the holiday dance at your boyfriend’s school, but the only ones that you like cost more than $125 and you don’t even know anyone at this school except your boyfriend:
a. You decide to wear the same dress you wore for your school’s holiday dance, even though your boyfriend will see it twice.
b. You decide that you simply must have a new dress, so you buy one of the expensive ones even though you know you’ll only wear it once.
8. Your friends ask you to go with them to dinner at the new café that just opened in your neighborhood. You know that if you go, you won’t have enough money to pay to get into the football game tomorrow night:
a. You tell your friends you’ll have to pass this time, but they should be sure to let you know the next time they go.
b. You go out to eat, figuring that you’ll worry about money for the game tomorrow.
9. You’ve decided to start saving money to use for a car when you start driving:
a. You open a special savings account so you can deposit and keep track of all your baby-sitting money to use to buy the car.
b. You have great intentions to save the money you earn from baby-sitting but somehow by the time you get around to going to the bank, it’s gone.
10. You get a clothing allowance and you’ve decided you really need new sneakers for gym:
a. You find a moderately priced pair of sneaks, figuring that you’ll hang on to some of your clothes allowance for something else. After all, they’re only for gym class.
b. You want to buy some cheap sneaks because they’re only for gym class, but somehow the $90 Nikes end up on your feet and you’ve blown your clothes allowance for another month.
Take a minute and look over your answers to these questions. If you circled mostly A’s, your financial personality probably leans toward being responsible with money. You don’t find it too difficult to save money, even when you’re tempted sometimes to buy something you like.
If you circled mostly B’s, however, your financial personality could be a source of potential problems for you. You find it difficult to not spend money, even if you know you should be saving for a specific purpose.

If You’re a Saver

Being a saver doesn’t make you a better person than someone who loves to spend, but it does mean that you’ve got a good start toward successfully managing your personal finances. This will become even more important as you get older. Just one thing, though: If you’re really inclined toward saving—I’m talking about somebody who never spends a cent—be sure not to get too carried away.
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Scary Stuff
If you find saving money difficult, you’re by no means alone. About 80 percent of the general population of the United States live paycheck to paycheck with very little, if any, savings.
Saving money is good. Never having any fun because you don’t want to spend any money is not. Remember that there are no guarantees in life. Not all of us will live to be 100, or 80, or 60, or even 40. It’s important to enjoy every day that we have, and although starting to save money while you’re young is a great idea and a good way to ensure financial security in the future, having no fun while you’re young is a really bad idea. Just be sure that your saving habits aren’t out of balance with being a teenager and having a good time.

If You’re a Spender

If you’re a spender, don’t get upset. You’re still young, and there’s a lot to be said for enjoying yourself and living for the moment. The only problem is that living too much for the moment now means you’ll have less to live with later on. One piece of advice that nearly all financial advisors agree on is that the earlier you start saving, the better off you’ll be.
You have the great advantage of time when it comes to saving, and even little bits saved now will add up for the future.
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Money Matters
If you have trouble keeping track of where you spent your money, try carrying a small notebook with you for a week and recording every penny you spend. Note every pack of gum, every soda—everything. This will give you a clear picture of how much you’re spending—and on what.

Ways to Make Saving Money Easier

Being aware of your spending patterns and habits and evaluating purchases before you lay down your money will help you to think more about spending and saving. If you really think about it, you might discover that you spend a lot of money on things you not only don’t need, but don’t even really want. The next time you’re tempted to buy another bottle of nail polish, ask yourself if you really need it or even want it. Chances are the answers to both questions will be “no.” I mean, 30 different bottles of nail polish might not only be unnecessary, but a real pain to deal with. You’ve got to find a place to keep them and move them around to get to other things, and you usually only wear one color at a time, right?

Big Reasons to Start Saving Now

How old are you? Fifteen? Sixteen? Seventeen? Whatever the number, you’re young. I know. You feel sometimes as if you’ve been around forever; but really, you’re just getting started. Although your age makes you lucky in many ways, you’re especially lucky in terms of your ability to save money. You’ve got years ahead of you to make your money grow and work for you.
Obviously, the earlier you start saving money, the better off you’ll be when you’re older. It’s hard to think about being 65 or 70 when you’re still a teenager, but believe me, it’s true that time flies. When you’re 65 or 70 and able to travel, lie on a beach, play golf, or shop, you’ll be really glad that you started saving money early. In fact, if you start saving money early and continue to do so, you might not have to wait until you’re 65 or 70 to start enjoying it.
Consider this: Jessica gets out of college and lands a good job with a big advertising agency. She’s really excited because it’s exactly the kind of job she’d hoped for, and she’s earning $40,000 a year to start. Not bad, right? Jessica is smart about her money, so she starts investing $2,000 each year in a diversified portfolio that earns her a 10 percent compound rate of return (you’ll learn more about investing in Chapter 16—all that fancy language means is that Jessica’s getting 10 percent interest on her money).
If she throws in $2,000 every year from the time she’s 21 until she’s 29, and then doesn’t put in any more money, she’ll have $839,396 in that account when she turns 65. That’s $839,396 from an original investment of $18,000.
By starting to save or invest when you’re young, you not only set yourself up for financial comfort when you’re older, you give yourself a lot more options along the way. Because you have money already saved, you have the luxury of having more money to use for other things—such as a new home or sending kids to college.
 
 
The Least You Need to Know
✧ Saving money is smart, but it’s a lot harder for some people to do than for others.
✧ Many factors contribute to a person’s financial personality.
✧ Most people are either savers or spenders.
✧ Keeping track of your money and being more aware of your spending habits can help make saving easier.
✧ The earlier you start to save, the better off you’ll be.
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