Turn saving into a habit

@Money June 27, 2012: 6:37 PM ET
savings budget net worht

It takes about 66 days for repeated behaviors to forge a good habit.

(Money magazine) -- Regular savings is one of the surest ways to increase your net worth.

This is part of a special report on 101+ ways to build wealth. In this story, readers and experts weigh in with advice for significantly boosting your savings.

Stick to a budget for just a month. A Canadian study found that people who stuck to a budget had higher net worth than those who didn't have one or had one they didn't follow.

Know you can't commit to a lifetime of constraint? Financial planner Sean Dowling of Stamford, Conn., suggests focusing on your biggest spending problem area and tracking it with Quicken for just a single month. Then set an attainable goal for the following month -- like one latte out for every two drip coffees at home.

Then bump up savings for the next three. Studies show that it takes about 66 days for repeated behaviors to become habits.

So tell yourself you're going to try to bank your latte savings for three months or so to see if you can manage without the cash, leaving yourself the option to reevaluate once the trial run is over.

"Most people find that their budget naturally adjusts," says T. Rowe Price Investment Services financial planner Stuart Ritter.

Restore equilibrium regularly.

A Vanguard study spanning 1989 to 2009 showed that regularly rebalancing a portfolio to target stock and bond allocations increased returns, on average, by 0.5%. To get similar results, rebalance when your target allocation strays more than 10%. The reason it works is classic: You're essentially buying low and selling high.

Hammer the message home. A 2010 study showed that people who received monthly text messages from their bank about their savings goals put away 6% more than those who didn't. For savings above what you've automated, set up alerts on your phone.

Find a carrot ... or a stick. Dean Karlan, an econ professor at Yale, has found that commitment contracts help people stay on track to reach their savings goals.

So enlist a buddy to hold you accountable, and allow yourself rewards (say, a massage) for successes along the way.

Or, if the carrot approach doesn't do it for you, use stickK.com. You input your goals and authorize the site to charge a certain amount to your credit card -- then send it to a person or organization of your choice, like a political candidate you hate -- if you fail to hit your target.

Put away your raises. Each time you get a bump up in your salary, dedicate a portion of that extra pay -- say, half -- to increasing retirement contributions or other savings.

If a 35-year-old starts out saving 6% of his income for retirement and then puts half of his 3%-a-year raises toward his 401(k) for the next five years, he'd be at a 15% annual contribution rate at the end of that period, assuming he also gets a 3% company match. That rate would allow the saver to maintain his lifestyle over a 30-year retirement -- even if he went on shopping sprees with all his subsequent raises.

Auto-escalate your 401(k). Don't count on your good intentions to put that raise away. Some 40% of plans let participants set retirement contributions to increase annually, reports Aon Hewitt; take advantage!

Money readers weigh in: Pay the mortgage, even after it's erased.

"When we paid off our home, I opened a new savings account, and every month since, I have deposited the same amount into it that I used to use to pay the mortgage. Now we have $20,000 in the account." -- Nona Cervenka, Chicago

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