00:00 Brad

According to a recent survey by Allianz Life, 70% of Americans feel financially prepared to reach their goals. But nearly all think that they would be better prepared if they had a financial plan in place. So, for some tips on saving for your goals, I want to bring in Jean Chatzky, who is the Her Money Media CEO, as part of our saving series brought to you by Synchrony. Jean, great to see you. How can savers use behavioral finance to help save for those milestone goals?

00:29 Jean Chatzky

Hey, Brad. And I love that question because the problem with saving money is that human beings are just not wired to be good at it. And so we've learned a lot from the field of behavioral finance in terms of tools that we can essentially use to help us get out of our own way. And the biggest by far is automation. If you think about why a 401k plan works, and they do work, it's because it's automatic. The money comes out of your paycheck, you don't see it, you don't touch it, you don't spend it. And the trick is to try to take what we've learned from that 401k and just apply it in other areas of your life. So if you're trying to build an emergency cushion, whenever your paycheck lands, you want to automatically move some money into a savings account. Same with 529 college savings plans. Don't wait to make yourself do this on the regular, instead just automatically move the money. And if you don't have a 401k or another work-based plan, this is even more important, make sure that you are automating contributions into an IRA or a Roth or a SEP or whatever kind of an account you're using to get you there.

02:20 Brad

How do you know when it's time to modify the percentages that you're automating for your savings as well?

02:28 Jean Chatzky

Look, I'd like to see people get to a point where they are saving a solid 15% a year. And that basically counts on the fact that you're going to be doing this for decades. If you're getting a late start, you got to save more in order to have that 30-year retirement that your last guest was talking about. We don't get there by automatically starting to save 15% because it feels like a crash diet. It's just too much. What we do know is that we can nudge our way there by about two percentage points at a time every time you get a raise or once a year until you're hitting that goal.

03:32 Brad

So, how can people balance their financial equation here? This is something we often hear about, and for some people, it can be quite the chemical equation to try and balance.

03:49 Jean Chatzky

Can go kaboom, right? Yeah, now the problem is that when you are looking to control your money and when you're looking to achieve a certain savings rate, there are two sides to the financial equation. And often we try to nickel and dime our way there by trimming our expenses to the bone and cutting things out when, if we've done enough of that already, what we really have to look at is the money coming in and whether there is a way to improve the income that we're getting from our day job, improve the income that we are getting from some sort of a side gig, look at picking up some extra hours. If it's been a while since you've looked at that side, the left side of the equation as I like to think about it, um, maybe it's time to talk to your employer about additional compensation.

05:01 Brad

And so, you also talk about making your goals visible. What do you mean by that?

05:09 Jean Chatzky

Yeah, this is another behavioral finance hack, and it's essentially if you can see it, it's easier to accomplish it. So if you know that you are saving for a home renovation because you want a kitchen that you saw on House or House Beautiful, rip it a picture or print out a picture of that kitchen and put it someplace that you can see it, and name that account for that goal, the kitchen renovation fund. You want to continually remind yourself of these things because it makes it easier when you are sitting and shopping on your computer late at night, staring at some jacket or pair of shoes or something that is just calling your name in the moment, if you've got that reference point of the kitchen, it makes it easier to not buy the shoes.