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What Type of Saver are you?


What kind of saver are you? Lazy or go-getter? For those who are lazy, automate your finances and do a regular evaluation. 

But to motivate yourself to really save, you need to trick your mind through some form of psychological self-manipulation. This is because saving, whether for college, summer vacation or retirement, requires unnatural discipline, hard work and postponed satisfaction. Setting aside some money instead of spending it outright demands a significant amount of will power and enough risk-tolerance.

Michael Resnick, senior wealth management consultant and registered financial planner of GCG Financial in Deerfield, Illinois, describes his job as an expert in behavioral finance, “My job is to talk desperate clients off the ledge.”

Here are four classes of savers: Which one are you? How can you design an effective plan to attain your goals?

1.         The target-setter. This type of savers aims to gradually achieve a goal and monitoring proof of every achievement, according to experts. They seek the exhilaration of attaining that target and using that feeling to motivate themselves to progress even more," according to Melissa Sotudeh, a wealth manager at Halpern Financial in Rockville, Maryland.

An effective method which target-setters typically utilize is to assign a separate savings account for a major goal – preferably one without monthly fees or a required minimum balance. Save money using that account for a European tour, for instance, or a down payment for a dream car. With that, you can check regularly your progress toward the goal.

Target-setters can also make use of downloaded financial tracking apps, such as Mint, which enables savers to itemize goals electronically and to monitor them regularly with a PC.

2.        The risk-taker. The risk-taker laughs at your mutual fund. Her eyes are on a real estate venture or a newbie hedge fund from which she hopes to get triple-digit gains. She wants to gamble all her savings on a risky, get-rich investment; and she finds it difficult to avoid the impulse.

Risk-takers can go ahead and have their thrill with their money. However, they must avoid that gambling urge without endangering other major savings goals, such as retirement.

They can assign at most 10% of their portfolio to fill that itch, if they can afford to lose that much, according to experts. "That money can serve as their play money," states Marguerita M. Cheng, registered financial planner and co-founder of Blue Ocean Global Wealth in Rockville, Maryland.

Lora J. Hoff, registered financial planner and wealth manager at IPI Wealth Management in Dallas, suggests that risk-takers should peg an amount they can throw away, leaving the remainder to be invested in less risky accounts.

3.        The worrier. This type of savers avoids any form of risk. Perhaps, they got hit by a stock market meltdown or were fired from a job. Hoff believes her clients from the Depression era prefer to have their money put in a secure and accessible investment; but millennials may also have their own worries in relation to genuine risks.

Jittery savers are typically those who have a $200,000-checking-account that has remained stagnant. They have no qualms about stashing their money somewhere. What rattles them and causes them to lose sleep is investing it in an asset that can produce more than a savings account can provide.

Resnick thinks this attitude of worriers comes from their difficulty to see the long-term perspective and from their habit of reading the headlines.

Nevertheless, worriers can increase their money by depositing part of it into an online savings account which normally provides better rates than an ordinary savings account or checking account, according to Cheng. Moreover, they may feel at ease investing in certificates of deposit at different durations, which mature semi-annually or annually. They can also invest partly in a money-market account. There are other alternative products that will suit them without bringing them anxiety attacks, according to financial experts.

4.        The slacker. These slacker-savers avoid any thought of saving, investing or retirement. They usually automate their savings – as an example, asking payroll to regularly funnel money into their 401(k) and further telling their bank to auto-transfer money from their checking into a savings account. Their good behavior as savers runs totally on autopilot.

But they can do more.

Slackers fail to put in the time to evaluate their savings regularly, financial experts say. For Resnick, an annual visit with the squirreled money is vital. They need to check everything and ask questions, such as: "What were the goals set at the start? Have any changes been made on those goals?"

Perhaps, some changes in your life require that you revise your goals: a newly-bought home, a new job, a newborn child or a teenager about to enter college.

Now, find out where you fit and make some positive adjustments to enhance your wealth-building capacity.         


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