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How to: Trick yourself into saving money

By Janet Bodnar, Source: Your Money Kiplinger

If cheap is chic, then saving is suddenly sexy. The U.S. savings rate, which had dipped into negative territory, headed up to 4.6 percent last year. The savings rate could climb as high as 6.5 percent, according to Allianz Group Economic Research.

You know you're on to something when investing icons such as Burton Malkiel and Charles Ellis jump on the bandwagon. Malkiel and Ellis are authors of a nifty little book called "The Elements of Investing." The book is just 154 pages long, including glossary, and its investing advice can be summed up in four words: "Keep it simple, sweetheart." a strategy I wholeheartedly endorse

But, say Malkiel and Ellis, "it all starts with saving." Who would have imagined that this legendary Wall Street duo would be advising readers to buy next year's Christmas cards on Dec. 26, or rent a movie instead of going out? People at all income levels tell me that they have trouble putting money aside because they're living paycheck to paycheck. But I'm convinced that saving is a classic case of mind over money. Here are 10 surefire ways to trick yourself into spending less and saving more:

Know your plastic personality. Disciplined credit-card holders can earn rewards points by using their cards for all their purchases and paying the bills in full each month. Consumers with less self-control may want to use debit cards to make sure that they don't spend more than they have. In either case, your monthly statement provides a handy record of areas where you're leaking cash.

Don't trust yourself to pay yourself first. Instead, have someone else do it for you. Sign up for your employer's retirement plan. Set up an automatic deposit with your bank to seed your emergency fund. Even Uncle Sam will jump-start your retirement savings by automatically depositing your tax refund in an IRA. And you'll never miss money you don't see.

Do what my son Peter does: Deposit your paycheck and other money to your savings account instead of checking. You're much less likely to spend the money if you have to transfer it from savings. "That really hurts," says Peter.

Instead of hitting the cash-back button for $35 every time you go to the drugstore or supermarket, limit yourself to one ATM withdrawal per week and make your money last.

When you make a credit-card purchase, record it immediately in your checking-account register. You won't be surprised when the credit-card bill arrives, and you will have enough money to pay it in full.

When you subtract a check from your account, round up the amount to the next dollar. That way, you'll always have a slush fund. Your bank may even do this for you. Sounds like small potatoes, but even if it's only $100 every couple of months, that's still money in the bank.

Toss your spare change into a fun savings bank or glass jar -- anything that will catch your eye and your quarters. I know one person who accumulates $900 to $1,000 a year this way and uses the money to buy holiday gifts.

Bag the savings from brown-bag lunches. Each time you bring your lunch to work or pass up the temptation to buy a latte, take the money you would have spent and put it in your cash jar. It's an immediate reward for your self-discipline.

Pay yourself after you've paid off a debt. Once you finish paying off a loan or credit-card balance, keep writing the check but send it directly to a savings or investment account.

Can't decide between two items in a store? Give yourself a cooling-off period. Chances are you won't go back.

Remember, if money is power, then saving money is empowering. It gives you financial security and the freedom to make choices. Every once in a while I tap my own slush fund to send my three grown children checks to treat themselves to dinner. They appreciate the gesture and I have fun making it.

(Janet Bodnar is the editor of Kiplinger's Personal Finance magazine. Send your questions and comments to moneypower@kiplinger.com. And for more on this and similar money topics, visit Kiplinger.com.)