Yahoo Finance Here Are the Best Savings Strategies for Your Personality Type
Tricking yourself into saving money is an exercise in psychological self-manipulation. After all, saving for retirement, college, summer vacation or any other goal involves delayed gratification, unnatural consistency and hard work. Squirreling away money typically requires some tolerance of risk and a certain degree of self-motivation.
"We're very conscious of behavioral finance," says Michael Resnick, senior wealth management advisor and certified financial planner at GCG Financial in Deerfield, Illinois. "Really, my job is to talk [clients] off the ledge."
[See: 10 Summer Savings Tips.]
If you are one of these four common types of savers, here's how to best structure a plan to meet your goals.
1. The goal-setter. These folks are motivated by progressing toward a target and seeing evidence of that progress, experts say. They enjoy "getting that satisfaction of achieving that goal and having that propel them to actually do more," says Melissa Sotudeh, a wealth advisor at Halpern Financial in Rockville, Maryland.
One saving technique that appeals to goal-setters is to create a different savings accounts for an important target -- favor an account with no monthly fees or minimum balance requirements. Use that account to save for summer vacation, for example, or a down payment on a new house. That way, goal-setters can frequently check in on their progress toward their target.
Another strategy for goal-setters is to download financial tracking apps, such as Mint, where savers can segment out goals electronically and track them digitally.
[See: Your Month-to-Month Guide to Savings.]
2. The gambler. The gambler scoffs at your mutual fund. She has a tip on a real estate project or a fledgling hedge fund that could net her triple-digit returns. She's at risk of losing all her savings in an ill-advised, get-rich scheme, and she needs to talk herself out of it.
Experts say these risk-takers can still play around a bit with their money. But they need to be able to scratch that gambling itch without imperiling important savings targets, like retirement.
Gamblers can set aside 5 to 10 percent of their portfolio, if they can afford it, to play around with, experts say. "It's OK for them to have some play money," says Marguerita M. Cheng, certified financial planner and co-founder of Blue Ocean Global Wealth in Rockville, Maryland.
But they should pick an amount that they could totally afford to lose, says Lora J. Hoff, certified financial planner and wealth manager at IPI Wealth Management in Dallas. The rest of their funds should be funneled into less risky accounts.
[See: 11 Ways to Save Time and Money.]
3. The nervous Nellie and nervous Norman. These savers are terrified of risk. They may have been burnt by a stock market crash or a job layoff. "I think that older clients of the Depression era, they like to know that their money is safe and accessible," Hoff says. But Millennials may also be nervous when it comes to risk.
Nervous savers are the ones who have $200,000 in a checking account and refuse to budge. Their challenge isn't squirreling away cash. It's funneling it into a financial vehicle that yields more than their savings account -- without losing sleep at night.
"For people like this, it's difficult because they have trouble looking at the long-term view and are always looking at the headlines," Resnick says.
These wary savers can make their money grow by depositing some of it into an online savings account, which typically yields higher rates than a checking account or a brick-and-mortar bank savings account, Cheng says. They may also feel comfortable tying up some of their money in certificates of deposit of varying lengths, with money maturing every six months or every year. Or perhaps they can invest some in a money market account. They need to find a product that works for them but doesn't give them ulcers, experts say.
4. The lazy saver. These laid-back savers don't want to think about saving, investing or retirement.
For them, it's crucial to automate their savings -- for example, telling payroll to automatically funnel money into their 401(k) and having their bank auto-transfer cash from their checking into a savings account. Whatever they can do to put these good behaviors on autopilot is key.
But they're not done yet.
These hands-off savers still need to set up a time to review their savings regularly, experts say. "At a minimum, you have to meet with them once per year," Resnick says of dealing with this kind of client. "We go through everything and say, "This is the plan we established. Have there been any changes in your goals?'"
A new job, recently purchased home, newborn child or a teenager entering college may require reworking the plan to accommodate those life changes.
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