I’ll be talking about money and happiness live tonight on Wisconsin Public Radio’s “At Issue with Ben Merens” from 5 to 6pm CST/6 to 7 pm EST.

This week’s Yahoo!Finance column looks at the trend in tracking and analyzing personal behavior, with, of course, a focus on spending and saving. I report on new research that examines characteristics and motivations shared by people who plan ahead and track their spending.

One study I had hoped to include didn’t fit the column length, so I’m featuring it here. Researchers from Georgia Institute of Technology, Cornell University and Maastricht University examined the tracking habits of grocery shoppers in two Atlanta stores, one in a middle-income neighborhood and one in area with a 36 percent poverty rate, in February 2009.

Some 90 percent of low-income participants indicated that they track their spending as they shop, with 35 percent using hand-held calculators; for middle-income shoppers, the numbers were 80 percent and 17 percent respectively, according to the study, published in the Journal of Marketing in March.

“Even though people say groceries are not a big part of the budget – 12 to 13 percent on average — among low-income people that percentage goes up very quickly,” says co-author Koert van Ittersum, Georgia Tech associate marketing professor. “When it becomes critical to keep track of spending, people become innovative and find a way to do it.”

Interestingly, the study also reinforced the necessity of real data – especially for people on tight budgets. Researchers found that people most motivated to save money are most likely to mess up their mental tracking. Here’s how they figured that out: In the lab, one group of participants was promised a cash reward, with the amount dependent on how accurately they determined the cost of 19 grocery items flashed on a screen. A second group was asked to estimate the grocery bill with no reward.

The cash-motivated group would start by trying to add exact numbers in their heads and give up after the third or fourth item, Ittersum explains. “In the end budget shoppers are more likely to overspend. As a result of trying so hard, they messed up, and their final estimate turned out to be worse than people casually asked to estimate the price of the items,” he says. “Humans are not wired to process three-digit numbers on 19 products — we can’t pull it off. If you need to be accurate because you can’t overspend, bringing a calculator is the best way to do that.

“Information is power and the more you know, the more you can make more informed decisions,” he contiues. “Depending on how important those decisions are, it might be important to track certain behaviors.”

I would argument is that as long as the tools and analysis are so readily available, everyone should track their spending, because small decisions snowball into life-changing scenarios over time. “Not many people end up in debt overnight — it’s accumulation of many small decisions that end up causing a whole lot of trouble,” says Ittersum.

BusinessWeek recently ran a story called “Nine Ways Spending Changes in Retirement.” A professor interviewed in the story suggested that retirees “estimate that you will be spending anywhere from 100 to 110 percent of your working budget if you are planning to have an active lifestyle.”

That frankly makes no sense to me unless the retirees in question have no children. Many of the costs my husband and I incur relate to the raising and nurturing of our three kids:  College savings. Private school tuition. Enrichment Activities. Clothing. Food. Orthodontist. Five airline tickets for the family vacation.  When I look at my spending categories in Mvelopes.com, the online software I use (and the site where I write a column), nearly every category has some connection to children.

And I have daughters. My siblings tell me that their teen boys devour groceries. One of my sisters and one brother each had a son go off to college this past fall; they both remarked over Thanksgiving that the milk went sour for the first time before it could be finished, because there was one less person drinking it. That’s a phenomenon that’s probably rippling through their household expenses: water, power, gasoline for the car… the list goes on and on.

Granted, your kids could move out and you could suddenly replace those expenses with extensive travel, or expensive health care issues. But financial planners I talk to tell me that people who are savers and conservative spenders rarely change their style in retirement.

Is the professor right? Do you think you’ll need the same income in retirement? Or would you eliminate whole categories of spending when the kids leave the nest? Comment here or email me at laura at laurarowley dot com.

The Nashua Telegraph of New Hampshire has a humdinger of a court story this morning. (I love local papers, and am hoping the internet will eventually help them thrive rather than killing them. Really, when would I have read The Nashua Telegraph in print?) Anyway, one Meredith Moore-Flores, 31, divorced mother of four, was sentenced to one to five years in state prison for stealing $62,000 from her employer.

Moore-Flores confessed to skimming the funds from Insight Technologies by filing bogus expense reports. (She also claimed to be a student at a local college to score tuition reimbursement.) Assistant Rockingham County Attorney Amy Connolly, the Telegraph noted, said Moore-Flores had been involved in similar schemes at two previous employers in Massachusetts, and was making $1,000 a month restitution to one of them.

Moore-Flores told the judge that she has a “spending addiction” for which she is now receiving therapy.  According to the Nashua Telegraph, Moore-Flores said: “It isn’t just about spending money you don’t have or maxing out your credit cards. It’s an attempt to buy happiness … and push aside feelings of self-doubt.”

"Confessions of a Shopaholic" looked at the lighter side of spending addiction.

In a study published in the Journal of Personality and Social Psychology,  researchers Abhishek Srivastava, Edwin Locke and Kathryn Bartol asked more than 250 graduate students and 145 entrepreneurs how important financial success was versus their other goals, and what their motives were for making money. The researchers offered alternatives such as security, the ability to donate to charity or pursue leisure activities.

Among respondents who placed a heavy emphasis on materialism, the prime reasons offered were social comparison (“To have a house and car that are better than those of my neighbor”), seeking power, showing off,  and overcoming self-doubt (“To prove that I am not as dumb as some people assumed.”) The researchers found a negative relationship between the importance of money and subjective well-being because of the motives driving acquisitive behaviors. (Interestingly,  Moore-Flores was also an entrepreneur who owned a consignment shop.)

The tragedy, of course, is when shopaholics have financial responsibility for people other than themselves.  Moore-Flores’ attorney had asked for minimal jail time because she is the primary caretaker for her kids — ages 8, 6, 4, and 2. As the tearful mother told the judge: “I thought, ‘How did I get to this point in my life? How do I explain this to my children?’ ”

Do you think Moore-Flores should get a minimal sentence or the max? Does a “spending addiction” excuse her behavior?

The Wall Street Journal today reports on a study by economists that found that a simple reminder by cellphone encouraged people to save money, boosting savings rates by 6 percent.

The researchers, working with several banks the Philippines, Peru and Bolivia, randomly selected people who had recently opened savings accounts. Some were sent letters, others text messages, urging them to save, in both positive and negative terms. One message in the Philippines warned: “If you don’t frequently deposit into the Gihandom Savings account, your dream will not come true.” 

What I found most intriguing about the study was an upbeat or scolding tone didn’t make a difference; what did was reminding the account holder of their goals, as well as the incentives offered by the bank for making consistent deposits.

In a recent Yahoo!Finance column, I covered research that suggests setting specific goals and then man- aging background cues to support those goals makes a difference in both academic and financial achievement. Prom- inent reminders can focus attention and help people stay on the path to their goals.

Concrete goals — with real price tags and real time frames — are critically important. Dartmouth economist Annamaria Lusardi has found that people who at least try to plan for retirement ultimately end up with more money than those who don’t make a conscious effort.

A few tips: Put a list of your financial goals where you can’t miss them — on the fridge or on the wall above your desk. Put a piece of masking tape on your debit or credit card and write your goals on it to prevent thoughtless spending.  Recruit like-minded friends to support you in your efforts. And most importantly, automate your goals, so the money is swept electronically from your checking account into savings accounts (or into your 401(k) before you receive your paycheck).

My column today on Yahoo!Finance discusses how to manage volatile income. Long-time readers know I often write from direct experience, and that’s what inspired the story. My spouse and I both work for ourseives, and our household income has fluctuated by as much as 100% from year to year.

Everywhere I look I see households experiencing similar income fluctuations: Someone is laid off, or had their hours cut; someone has to stay home with a sick child or a sick parent; someone ends up unemployed for years because of a structural change in their industry — manufacturing, IT, journalism — and goes from full-time employee to full-time contractor for the same company (with no benefits), or cobbles together a living as a consultant or freelancer. As one reader noted: “From what I see, the line between contract employee and direct employee is blurring more and more.”

I interviewed financial planner Mike Masiello of Rochester, New York, for the story. “What we’re seeing is a ton of very talented electri- cal, mechanical and indus- trial engineers who have (lost jobs) as the manufacturing base dwindles,” he says.  ”The difficulty is there really aren’t positions. One guy I knew had two master’s degrees in mechanical and electrical engineering, and was competing for a job against a guy who has two PhDs.”

People with fluctuating incomes have to behave like the biblical Joseph, Masiello says: Store the seven years of bumper crops so you can get through seven years of famine. In good years, overfund retirement savings, and build four to eight months of cash reserves.  Don’t tap home equity, build up credit card debt or cash our retirement savings.

Those are the behaviors of his wealthy clients. “The millionaire-next-doors,” Masiello says (referring to the famous book by Thomas Stanley and William Danko), “are joys to have as clients because they get it. They are not into conspicuous consumption. They have a structured long-term strategy and long-term goals; they know where they are going and have a plan to get there.”

I am a frugal, no-debt kind of person, so I find the lean times fairly easy to manage. (For instance, I just successfully sold an old coffee table on Craigslist. This is not actually a lean time, I just got sick of looking at the thing.) The problem is that while I’m harvesting the bumper crops, I feel richer, and begin to imagine the possibilities — a kitchen renovation, a trip to Paris. The hedonic treadmill is not easily avoided. Managing the psychology around the money is just as critical as managing the money itself.

ah, my dream kitchen

 
I especially liked the advice of Matt Wallert of Thrive.  You need to physically separate the account that your paychecks go into from the account that you use to pay the bills. That way the paychecks can accumulate like water in a reservoir, and you shift over a pre-determined amount each month to cover your expenses. (See the story for more).

Do you have any secrets or insights into managing a fluctuating income? I’d love to hear them.

If there is an industry rife with streamlining possibilities for smart entrepreneurs, it’s got to be the cell phone industry. Last week I pulled the charger plug out of my Palm Treo and the entire bottom of the device popped out with it. I headed over to Verizon with a simple request: Please fix my phone or sell me the exact same model, and I will go along my merry way.

This being the cell phone industry, neither option was available. Instead, the salesman suggested, I could exchange my dead Treo for a new Blackberry, which was free — but only if I mailed in the $100 rebate, and agreed to extend my existing contract for another two years. But this would require learning an entirely new phone, I said, which doesn’t even have a touch screen. What if I don’t like the Blackberry?

No problem, he replied, you have 30 days to return it, no questions asked – although it will cost you a $35 restocking fee. And if I change my mind after 30 days and decide to switch to, say, an Iphone? Then it would be the restocking fee plus $175 if you break the new extended contract agreement, he said. But no worries, it’s pro-rated.

Huh? Can anybody make this industry simply give the customer what they want?

And here’s a question for you IPhone users out there. Tell me if the product is revolutionary enough and the experience life-changing enough to warrant returning my new Blackberry (with the no-touch screen) in the 30-day window. As regular readers know, I’m a practical gal. I buy products (like used cars and generic groceries) because they are useful and do the job. Neither my self-image nor my self-esteem are related to said purchases, and I don’t even know who the Joneses are, much pay attention to what they think.

However, I keep running across such interesting IPhone apps that I am wondering if this product has crossed the threshhold from luxurious item to impress the neighbors to useful item that will grow in usefulness over time.  Would love to hear your response…within 30 days if possible.

In my Yahoo!Finance column that posts on July 31, I outline some of the successful habits of financially peaceful people. Here are a few more:

They avoid pricey diversions.

When Nicholas Fidduccia was working in California, one of his bosses took him sailing. “He once said to me that if I ever wanted to know what it was like to own a boat, to put on a raincoat, step into a cold shower, and tear up dollar bills and flush them down the drain,” says Fiduccia, who retired this year at age 50. “I never got into any expensive hobbies that may have drained me financially.”

He is an avid photographer, however, but offsets his equipment purchases by selling some of his work. He also maintains a ballroom dancing habit that started in college. “I tend to be pretty lazy so anything to get me up on the dance floor doing aerobic activity is good – and socially it’s great too.”

They become experts in low-cost living.

Mary Lena Anderegg, 65, has been married 33 years and she and her spouse have lived on 30 to 40 percent of their combined salaries. They paid off their mortgage in just seven years. She has saved over the years by buying and maintaining used cars; raising vegetables in her garden; insulating her home to save on utilities; and hosting kids’ clothing swaps with friends.”We bought new underwear and new shoes, and for everything else did a clothing swap,” she says. To this day, she swaps books and even flower arrangements with friends. (She buys two new books a year and gets the rest from the library.)

“Keep your eye on the goal,” she says, “because until you are debt free you are not free. We really do not need things all the advertisers tell us we do.”

They keep recreation simple.  

Danny Kofke, a 32-year-old teacher who is married with two young girls, keeps leisure pursuits simple. “We go camping, we go to the park a lot, my mom works at library so we go once a week for story time – things that don’t cost all that much money,” he says.

They bought a 12-foot above ground pool for $100 at Target and swim daily in the summer. Rather than go to movies they subscribe to Tivo for $7 a month, so they can watch their favorite programs after the kids are asleep and zip through the commercials.

They give back.

Kofke’s school district recently implemented a new 403(b) retirement savings plan. “One teacher asked me to help her make a decision,” he recalls. “I spent about an hour in the media center and helped 10 of my colleagues with their choices. They told me how helpful I was. It made me feel so good. Empowering others is priceless.”For the last six years, Anderegg and her spouse have served as disaster relief volunteers for the Salvation Army and worked five hurricanes. They’ve made nine trips to Mississippi since 2006 to rebuild homes after Hurricane Katrina. “We’ve really been blessed,” she says.

Have you found financial peace? Comment here or email me at laurarowley123@aol.com.

I discovered yesterday, to my consternation, that a tall skim latte has 100 calories. I’m not a daily Starbucks drinker; I indulge once or twice a month. Anyway, after reading a report that found keeping a food diary can double your weight loss, I decided to write down what I ate, and looked up the calories on Starbucks.com. (I’m not overweight but must be thinner than my sister Mary before our family reunion in August. Hopefully she won’t read this.)

I had this idea in the back of my mind that there are no calories in a tall skim latte, which is absurd, since the skim milk has to count for something. But these are the mental tricks we play when we don’t have a handle on the real numbers.

The process works the same for money as it does for food. Unless you write down exactly what you’re spending your money on, it will be impossible to figure out why you’re not making progress toward your financial goals. Unless you crunch the numbers with a credit card payoff calculator and figure out how much that interest really costs, you’ll continue to run up debt.

See this post for an overview of how to track your spending the old-fashioned way. As my finances grew more complicated, I switched from pencil and paper to online budgeting software. I use Mvelopes, which links to your checking, savings and credit cards, and electronically records all your activity. It shows up in a big transaction folder, and you click and drag each item into the right category: food, rent, clothing, and so on.

I also discovered yesterday that salad really does have almost no calories. And is cheaper, and better for you, than a latte.   

For a story on Good Morning America this morning, I worked with the Bryants, a couple who live outside Phildelphia, to help them take their annual trip to see relatives in Myrtle Beach, NC. I was able to cut their travel budget in half. Click here for the online article with all the details.

Lots of people are concerned about the economy, and thinking about abandon summer vacation plans. But we all need a break, and vacations to see family members who live far away is an important part of happiness. How are you planning to save on your summer vacation?

In my Yahoo!Finance column that posts June 5, I review some online tools that help cut your grocery bill by $100 a week. One of those is Couponmom.com, run by an Atlanta mother of two, Stephanie Nelson. I used her site this week for my grocery shopping, and paid about $80 for a week’s worth of groceries for five people, including six nutritious dinners (Fridays are pizza night around here). 

You can register free for the site, and read Nelson’s e-book on how to use the system. But here’s the quick how-to: 

1. Subscribe to your local Sunday paper. (Since 80 percent of coupons come from the Sunday paper, Nelson says, the savings will more than pay for the subscription). Nelson recommends buying an extra copy or two of the paper if it’s a good week for coupons. Pull out the coupon inserts, note the date in large print on the front, and store them in the same place every week. (You can also find coupons in the “grocery coupon database” on couponmom.com, as well as sites like couponmaster.com and couponclippers.com.) 

2. Log on to couponmom.com and click “grocery deals by state.” Choose your state and store from the drop-down menu. You’ll see a list of items on sale, and to the left, a code indicating where you can find the matching coupon (these codes are explained on the main grocery coupon database page.) You’ll also see the date the coupon came out, when it expires, how much you’ll save, and how many you have to buy.  

3. Create your menus based on items on sale that have a coupon. Alternately, you can write out your shopping list, go to the “search deals” box and enter an item on your list, i.e., “toothpaste.” The site will tell you if the store is running a special and provide a list of every coupon for toothpaste that came out in your local newspaper. 

4. Get a small spiral notebook and create a “price book” to track the prices of the item you buy most often, so you can identify when they’re at their lowest, and stock up at that time. Think about your most expensive, most frequently purchased items, says Nelson. Cutting the cost of your top 10 to 20 regular purchases will produce an immediate difference in your grocery bill.  Create a page for each item (two pages if you shop at more than one store).

Create four columns for each shopping week with the date “week 1 (May 15), week 2 (May 22)” etc. Then write down the price each week (just take the prices off the receipt when you get home). The longer you track the prices the better idea you’ll have of the range. Once you’ve identified the lowest prices, write down all 20 items and their lowest cost on a single page to take it with you, so you know when to stock up. 

A few other tips: Don’t be brand loyal – grab the best deal. In addition, “go to store as infrequently as possible,” says Nelson. “Otherwise you’ll stop in for bananas and gallon of milk and walk out with a cart that wipes out your grocery budget.” Finally, if you get an item for free by combining a sale with a coupon, consider donating it to a food pantry.