Not Saving? Strategies To Help You Start

When millions of Americans struggle to save any money from month to month, as research suggests they consistently do, the first step to a solution is not for them to make a realistic budget.

That's according to Daniel Wishnasky, a financial planner in Phoenix who says many frustrated, would-be savers have overlooked a more basic step. They first need to lay a solid foundation by examining entrenched spending patterns and the powerful, deep-rooted emotions behind them.

"It's the most important driving factor in financial decisionmaking -- the underlying personality and the often unhealthy attitudes" toward money, Mr. Wishnasky says. "And if you don't deal with these, nothing else is going to really happen."

Personal finance experts are rolling up their sleeves and delving deep into the American consumer's mind in light of disturbing reports from the US Department of Commerce. New numbers released March 1 say the personal savings rate for January was negative 1.2 percent, which means Americans aren't saving at all, but are either borrowing or dipping into savings to pay expenses. Negative savings rates have been the norm since the second quarter of 2005, and 2006 was the worst year for saving since 1933.

To help thinly stretched Americans get back on track, tough-love advisers generally agree on a few basic principles: Spend less than you earn, eliminate frivolous conveniences, and sock money away in efficient investment vehicles.

But good saving habits, they say, aren't simple plug-ins. They stem instead from realistic soul-searching and the adoption of strategies tailored to mitigate an individual's unique weaknesses in the face of temptation. The goal: a saving strategy that really works, even for people on fixed incomes and perched on low rungs of the salary ladder.

Dennis Filangeri has witnessed the benefits of putting cash-flow patterns and personalities under a microscope. A Las Vegas financial planner, he once counseled a two-income, middle-management couple who couldn't save a penny for their newborn son's college education. He gave them homework: Carry a spiral notebook and write down every cash expense for a month. Sure enough, they were frittering away 30 percent of their income on magazines, vending machines, and other incidentals.

Having pinpointed their unique weakness, he searched for a motivational nerve. He suggested they display two photographs side by side in their comfortable suburban home. One showed a Twinkie, representing unnecessary and easily forgotten expenses. The other featured their baby.

"You have to decide which life goal is more important to you: Twinkies on your break or sending your kid to college," Mr. Filangeri says. "It does require a certain bit of emotional fortitude, and no financial planner is going to give it to you."

Sometimes a person can accomplish the personality analysis by reviewing what he or she has done in the past with unexpected income, Wishnasky says. If a person tends to spend tax refunds at the mall or expand living expenses after receiving a raise, then those point to habitual weaknesses that require preventive safeguards.

In some cases, he says, the most helpful professional won't be a financial planner but a psychologist who can help wean people of the costly emotional rushes they get from routinely buying new gadgets or handbags. He also worries that credit cards play an unhealthy role by fostering the illusion that saving is unnecessary because one can always charge expenses in an emergency.

Once dangerous thought patterns and personal weaknesses come to light, experts suggest building firewalls accordingly. If money in the bank is an invitation to spend, then move it to a certificate of deposit or individual retirement account (IRA) where withdrawal penalties are steep. And steer clear of certain stimuli, from television advertising to free-spending friends, if they tend to loosen the purse strings.