New Dollar Coin Offers Fun Way To Save
Posted on April 9, 2007
Between 2001 and 2005, low interest rates and the huge run-up in real estate prices gave people a euphoric feeling that making money was easy and effortless. Time alone would produce rapidly rising prices that would bail them out even if they made poor financial decisions. The message that you could become rich with little or no effort was broadcast over and over in television infomercials. All one had to do was buy this or that get-rich-quick course and all their problems would be solved. Oops! What Happened?
Bolstered by assurances that the real estate gravy train would go on forever and paying back loans would be no problem, millions of people spent money they didn’t have; in anticipation of profits that never materialized. They bought into the myth that an exploding population would produce a growing shortage in the housing market which would result in double digit increases in home values for generations to come. Sub prime lenders became the fastest growing segment of the lending industry as they enticed new buyers with less than sterling credit into the market and encouraged homeowners with good credit to tap into their growing equity with low or no interest adjustable rate loans. This phenomenon poured even more money into an already overheated real estate market and kept it flourishing.
But, by the end of 2005 this feverish period of rapidly rising home prices and easy credit had produced a spending spree that resulted in Americans spending more than their take home pay for the first time since the 1930s. They were spending all of their after tax income and dipping into prior savings or going in debt to finance the purchase of cars, boats and other big ticket items and the problem only grew worse in 2006. The only other time in history that the savings rate been negative for two consecutive years was in 1932 and 1933 in the depth of the Great Depression when people were dipping into their savings to keep food on the table. 2007 could bring the first three year decline in history unless significant changes are made.
The attitude of the country seems to be that saving is old-fashioned. The double digit inflation that caused property owners to feel wealthy is now declining. Interest rates are rising, sagging sales and oversupply is causing real estate to lose much of its luster. The growing numbers of foreclosures and volatility in the stock markets are once again bringing the importance of saving to the forefront in many people’s minds. Without a savings cushion many people are just a couple of paychecks away from financial disaster.
Breaking a spending addiction can be more difficult for some people than breaking a drug or alcohol addiction. Developing a meaningful savings program requires behavior changes. Impulsive spending habits have to be curbed or eliminated and replaced with disciplined actions that produce a nest egg for the future. Many try to do this with payroll deductions that are deposited directly into retirement plans, but this method, while better than nothing, does not change negative spending habits the way daily actions that produce visible results can.
In 2007 the US Mint will begin releasing new one dollar coins that depict our past presidents starting with George Washington. These will be released at the rate of four per year for the next eleven plus years in the order that the presidents served. If you’re one of those people who have trouble saving, these coins can be a fun way to start a new habit.
Here’s a tip! Get a cup, jar or other container and place it on the sink in your bathroom. (Hopefully you won’t have to lock it from the other members of your household.) On your next trip to the bank, get a roll of the new dollar coins. Each morning when you’re getting ready for the day, drop one of the coins in the container. When you start running low, get another roll of the coins. Do this each day for an entire year and you will have saved $365.00 and I’ll bet you won’t have missed the money. Whether it’s a cup of coffee, a candy bar, cigarettes, lottery tickets, or other junk, nearly everyone blows a dollar a day.
What this exercise does is help you develop a habit. After a couple of months of putting the dollar in the container, it becomes a routine part of your day. Watching the volume of coins grow allows you to see your progress as the year passes. If you want to make it even more fun, after the first two months increase the deposit to two coins each day; after two more months increase the deposit to three coins each day. By increasing the deposit by one additional coin every two months, in that first year you will save over $1,260 and have a sizable container of the new dollar coins.
“That’s silly! That’s child’s play,” you say! You’re right, it is, but it also serves several purposes for those who have trouble saving. One, it provides a specific daily action that can lead to developing the habit of saving. Two, it reinforces the action by giving positive feedback as you watch your savings grow. Three, by putting the container in the bathroom where most people generally start and end their day; it acts as a gentle reminder to keep you from forgetting. And finally, it lets you end the year with a sizable amount money you would otherwise not have.
Silly? Yes, but a very effective way to develop a good habit that could significantly change your life for the better.
» Filed Under Success Tips Articles
Comments
Leave a Reply