MONEY

Best advice now for saving and spending

Experts and Money readers share their tips on everything from reducing your financial stress to saving on travel.

  • Stop worrying, blaming and stressing out

    Settle any money fight

    Your approach with a spouse or any other family member should be “We are in this together.” It is not about blaming, or being angry, or fighting, or winning. You need to prepare, both psychologically and logistically. Put together an agenda in writing — what you want to discuss.

    If you’re going to talk about a highly charged issue, do it in an environment that’s not associated with financial stress, a place of safety where you can find common ground. You can have a nice conversation in the park or at some impartial environment like an adviser’s office, if it is a comforting place.

    Lori Sackler, author of
    The M Word: The Money Talk Every Family Needs to Have About Wealth and Their Financial Future

    Shed financial stres
    s
    Money worries often trigger an obsessive-thought loop, sending your brain and body into fight-or-flight mode. In this state you can’t make good decisions.

    So first break the physical response: Close your eyes and take a couple of slow, deep breaths. Next, break the mental response: Focus your attention on the sensations of breathing.

    This process opens up the medial prefrontal cortex, the reflective, creative part of your brain that develops strategies to solve complex problems in a way that’s simply not possible if your body and brain are still trying to fight or flee. When the worry loop restarts — and it will — you can always come back to your breathing.

    Stephen Cope, director of the Kripalu Institute for Extraordinary Living

    Be healthier for free

    Take the closest thing we have to a wonder drug: a walk. It reduces the risk of diabetes, heart disease, cancer, depression, and many other ailments. Even if you never lose an ounce of weight, increasing activity is crucial to protecting your health.

    Dr. Tom Frieden, director of the Centers for Disease Control and Pr
    evention

  • Lower your taxes

    Minimize your tax hike

    High-income earners are facing increased tax rates this year. One of the best ways they can soften the blow is to take full advantage of retirement savings opportunities through contributions to 401(k) or IRA accounts.

    Other tax shelters are likely to be nothing more than a fancy way to throw money away.

    There are legitimate ways to avoid taxes on capital gains. You don’t pay tax on a gain on property you donate to charity. And a gain on property held at death escapes income taxes.
    Kaye Thomas, tax lawyer and founder of the investor tax guide Fairmark.com

    Related: Readers weigh in with their Best Money Advice

    A bigger bite

    Average 2013 federal tax increase:

    Annual income: $75,000 to $200,000 Tax increase: $1,558
    Annual income: $200,000 to $500,000 Tax increase: $2,796

  • Be smart about college

    Help your kids to go to a dream college …

    Have your child record herself answering her admissions or scholarship essay questions out loud, then transcribe the recording.

    People speak at about 200 words a minute, but write or type at 30 to 60 words a minute. So the act of writing interferes with the flow of thought. Answering a question out loud will yield a much more passionate and personal essay.
    Mark Kantrowitz, senior vice president and publisher of the Edvisors Network

    … And pick a major that will offset rising tuition costs
    The three big predictors of high income are your college major, whether you go into management, and whether you go to graduate school. More and more, your major matters more than what school you graduated from.

    Related: Business majors most likely to be underemployed, report finds

    People who major in scientific, engineering, mathematical, or technological fields get higher starting salaries, move into management faster, and recover better during downturns.
    Anthony Carnevale, director and research professor at the Georgetown University Center on Education and the Workforce

    Borrow smart for school

    Stick with federal loans. They have better repayment options than private loans. And sign up for one of the federal government’s Income-Based Repayment options such as Pay As You Earn. The federal Income-Based Repayment program is saving me hundreds of dollars a month. I wouldn’t be able to work in the non-profit world without it.
    Rory O’Sullivan, policy director for the Young Invincibles

  • Embrace technology that helps you save

    Harness tech to save more

    Our research suggests that using software to aggregate multiple savings accounts could improve your saving and spending behavior. With many accounts, your sense of how much you have saved is too vague. With one, your tendency to justify spending decreases, because you have a clearer sense of your financial situation.
    Promothesh Chatterjee, assistant professor at the University of Kansas School of Business

    Painlessly stick to a budget

    Rather than track every little expense, set aside a certain amount of money. Then feel free to spend the rest however you see fit.

    This requires two steps. First, add up the amount per month that you need to save to reach your goals, like a home purchase, new car, retirement, et cetera.

    Second, set up a monthly automatic withdrawal from your checking account to a separate account, preferably an online savings account that pays a little higher interest. Then spend your money as you want.
    Peter Lazaroff, CFA/CFP with Acropolis Investment Management

    Connect with your future

    My new research, like other work in this area, shows how important it is to think of your future self as real. I found that speakers of languages with grammars that blur the lines between present and future tenses, such as German and Mandarin, tend to exhibit more future-oriented behavior, like saving more for retirement.

    But your language is not your destiny. It’s just a force that nudges you. You can learn to create other nudges, like setting small, attainable goals that will slowly improve your habits.
    Keith Chen, economics professor at the Yale School of Management

    Best tool: Seeing yourself old makes you more inclined to save for retirement. The 99¢ smartphone app AgingBooth takes your picture and morphs you into a senior citizen.

  • Help your kids help themselves

    Help your kids leave home

    If they are sitting in the basement playing video games all day, sleeping in until 11, and not moving along in life then, yeah, charge them rent. But usually kids want to move along with their lives. If they are living at home, it is because they can’t afford to move out.

    Do you want to punish them for not being able to find a job in a down economy? The higher the rent you charge, the longer it is likely to be before they can afford to move out. Maybe you can help them with job prospects if you have connections to people in their field. But they should definitely contribute to the household with chores like cleaning the bathroom.
    Jeffrey Arnett, psychology professor at Clark University and co-author of When Will My Grown-up Kid Grow Up?

    Do your heirs a favor

    To save inheritors money, time, and hassle, most people with a significant amount of property — that could mean anyone who owns a home and has at least one substantial investment account — would be wise to use a living trust to avoid probate.

    In addition to having a will, most of your major assets should be in a trust or transferred on death by other probate-avoidance methods, such as IRA accounts, where the owner can name a beneficiary.

    Setting up a living trust will cost you $1,000 to $2,000 and a bit of paperwork, such as preparing a deed transfer to register at the county recorder’s office.
    Denis Clifford, author of the Nolo legal guides Quick and Legal Will Book and Plan Your Estate

    Help your parents get help

    With boomers turning 65 at a rate of 8,000 to 10,000 a day, we need to rethink communication with older adults. The biggest mistake people make is treating them like children. While they are besieged by losses, including health, family, and friends, they have not lost their ability to make choices. Don’t lay siege too. Help them preserve choice and control.

    Ask questions: “What is your long-term plan to maintain independence? Tell me so that I can help.” That way you join the team. Follow up: “How will that work? What is going to happen if this occurs …?” Then, sometimes, they recognize that it doesn’t make sense, that it is magical thinking.
    David Solie, author of How to Say It to Seniors: Closing the Communication Gap With Our Elders

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