Four Common Retirement-planning Mistakes to Avoid

We all make mistakes. The key in most facets of life is to learn from those mistakes and avoid repeating them. Unfortunately when it comes to retirement, I have seen investors repeat the same mistakes over and over again, and the long-term damage caused is great. For individuals looking for a comfortable retirement, here are a number of common mistakes to avoid.

No plan: Too often I meet with retirees who, when I inquire as to their goals and needs, give me a blank stare. I can't stress enough the need to define goals and needs when retirement approaches, and to update those goals and needs as they change.

Todd Tresidder, the Financial Mentor writes, "Stated simply, you can't get to where you want to go if you don't even know where the destination is. You must set the goal and then design a plan to achieve it. Failing to plan is the same thing as planning to fail. The sad truth is most people spend more time planning their vacation than their financial future. You must be different."

No clue about spending: In an initial meeting with a prospective client, among the questions I ask is, "How much money do you spend?" Much to my chagrin, most people can't answer that question, but for a retiree, that lack of knowledge can lead to running out of money and having to move in with the kids.

Many in the first few years of retirement, without a budget, end up spending much more than they are able to as they travel the world, or partake in high-priced hobbies or eat out at restaurants on a regular basis. Over-spending at the beginning of retirement will make it much harder to have money left as the years pass.

Remember that 95% of the time the money that you retire with is all that you will have, and if it's over proportionally spent early on, you will need outsized market returns to rebuild the wealth already spent. Once in retirement, never count on unusually high investment returns as a retirement plan.

Asset allocation: Often due to the fact that retirees have no budget, and they do not know what kind of income needs they’ll have. I often see investor portfolios that are far too aggressive than they should be. A market drop can be devastating for a retiree if they suddenly need a chunk of cash.

As retirement approaches, you should figure out how much you will need to withdraw in the first five years of retirement. Then start to shift that money into more conservative investments to make sure that you will have that five-year runway. Yes, you may give up some capital growth, but it's more important that you know that you have the money to fund your new lifestyle. As you go through retirement, I like to apply the same five-year bucket approach of keeping that money safe, so that you always have that peace of mind.

No access to money: As retiree's age, they usually don't add someone to the account to execute changes on their behalf. I advise retirees to give a child or a trusted confidant trading authority. This way, if the client can't fully supervise the account, it doesn't become frozen. More than once I have seen a case where an older client had an individual account, and took ill. They are unable to execute any instructions in their account. This is the time when access to money is extremely crucial, and since the individual is the only one with any authority over the account, the money becomes as good as locked up.

There are many ways to go about this that provide for checks and balances. Perhaps you will want to require two signatures from a list of three possible signers. Perhaps you draw up a power of attorney. Consult with your family and advisors to devise a plan and instruments that work for you to give signing authority to someone. I can't stress enough the importance of taking care of this before it's too late.

Learn from the mistakes of others and avoid those same pitfalls to help ensure a financially comfortable retirement. - By Aaron Katsman, Market Watch

The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates.

Don’t Forget About Year-end Investment Planning

As the year draws to a close, there might be a slew of tasks on your to-do list. One task to consider is reviewing your investments. If you take the time to get organized now, it may help you accomplish your long-term goals more efficiently. Below are some steps that might help.

Evaluate your investment portfolio

Review how your overall investment portfolio fared over the past year and determine whether adjustments are needed to keep it on track.

Here are some questions to consider:

• How did your investments perform during the year? Did they outperform, match, or underperform your expectations?
• What caused your portfolio to perform the way it did? Was it due to one or multiple factors?
• Were there any consistencies or anomalies compared to past performance?
• Does money need to be redirected in order to pursue your short-term and long-term goals?
• Is your portfolio adequately diversified, and does your existing asset allocation still make sense?

Aim for balance

Look at your current asset allocation among stocks, bonds, and cash alternatives. You might determine that one asset class has outperformed the others and now represents a larger proportion of your portfolio than desired. In this situation, you might want to rebalance your portfolio.

The process of rebalancing typically involves buying and selling securities to restore your portfolio to your targeted asset allocation based on your risk tolerance, investment objectives, and time frame. For example, you might sell some securities in an overweighted asset class and use the proceeds to purchase assets in an underweighted asset class; of course, this could result in a tax liability.

If you own taxable investments that have lost money, consider selling shares of losing securities before the end of the year to recognize a tax loss on your tax return. Tax losses, in turn, could be used to offset any tax gains. When attempting to realize a tax loss, remember the wash sale rule, which applies when you sell a security at a loss and repurchase the same security within 30 days of the sale. When this happens, the loss is disallowed for tax purposes.

If you don’t want to sell any of your current investments but want to change your asset allocation over time, you might adjust future investment contributions so that more money is directed to the asset class you want to grow. Once your portfolio’s asset allocation reaches your desired balance, you can revert back to your previous strategy, if desired. Keep in mind that asset allocation and diversification do not guarantee a profit or protect against loss; they are methods used to help manage investment risk.

Set goals for the coming year

After your year-end investment review, you might resolve to increase contributions to an IRA, an employer-sponsored retirement plan, or a college fund next year. With a fresh perspective on where you stand, you may be able to make better choices next year, which could potentially benefit your investment portfolio over the long term. - The Des Moines Register

Avoiding ‘Hindsight Bias’ and Other Investing Pitfalls

Gina Macdonald finished a degree in psychology before pursuing a career as a fee-only financial adviser and portfolio manager. That social-sciences background has proved useful: Ms. Macdonald often finds herself helping clients manage their emotions as much as their portfolio holdings.

Among the “cognitive errors” she encounters are overconfidence and hindsight bias, which can make an investor believe that a past event was more predictable than it actually was. Another is regret avoidance – where investors refuse to admit to themselves that they’ve made a poor investment choice so they don’t have to deal with the unsettling emotions that the decision brings up.

All can affect an investor’s success.

“When I first started in this field, a lot of people thought psychology had nothing to do with financial planning,” says Ms. Macdonald, who is a principal at Vancouver’s Macdonald Shymko and Co. Ltd. “Now people have become more evolved and know that money has a lot of psychology to it.

“It’s like religion or sex: Money is a hot button,” adds Ms. Macdonald. “Money is a big thing in a relationship. Nobody’s spending habits or savings philosophies are necessarily perfectly aligned.”

That may be true for couples, but when it comes to an adviser-client relationship, the two parties’ investing philosophies need to be in sync, Ms. Macdonald says.

Her firm’s approach is not for those who like to speculate on the direction or timing of the market.

“We’re asset class investors, not stock pickers,” say Ms. Macdonald, a mother of four who’s been in the industry for 20 years. “No one has a crystal ball, despite the fact that many people try to convince you that they do. ... If you’re looking at things like sector rotation, that’s stock picking or active management or crystal-ball gazing, and we don’t do that.

“You have to make two good decisions: You have to know when to go in and – the harder question – when to get out,” she adds. “You have to have two perfect decisions, and you may do that once or twice, but on an ongoing, consistent basis over a long time period, you’re not doing it – otherwise you’re just throwing darts at a board, statistically.”

Macdonald Shymko describes asset allocation as a systematic and structured approach to creating an appropriate investment mix. That mix is based on a client’s goals and risk tolerance, not on market timing.

“We’re trying to diversify to optimize investments and reduce risk,” Ms. Macdonald says. “We look at risk profile and retirement-income needs to come up with an appropriate asset allocation between fixed income, equities and real estate investments. Then we primarily use ETFs [exchange-traded funds] and alternative investments, such as mortgage investments and flow-through investments, to meet those goals.”

Although ETFs have become an increasingly popular vehicle, Macdonald Shymko has been recommending them since the 1990s. Ms. Macdonald favours them because they have lower management expense ratios (MERs) and because they allow for diversification by capturing the breadth of the market.

ETFs typically incur fewer administrative costs than actively managed portfolios. They offer tax efficiency as well: Fewer trades mean fewer taxable distributions.

Ms. Macdonald notes that even with their advantages, careful selection of ETFs is crucial.

“People have caught on the buzzword of ETFs and they want them, but they seem to be focused on the fee and not necessarily the investment or what they represent,” she says. “All of the fund companies are coming out with ETF-type portfolios, or active ETFs; it’s just a mishmash out there.

“So you still have to drill down and investigate what you’re buying. Just because it says ETF at the end of it doesn’t mean it’s the best investment for you.”

Geographical diversification is another important element of Ms. Macdonald’s investing style.

“A lot of people just focus on Canadian investments,” she says. “Canada is only 3 per cent of the global market, yet a lot of people have a home bias of just investing in Canada; it’s comfortable. But you need to look at the global economy to help diversify yourself. If our dollar dropped 20 per cent in the last year, well, if you held U.S. securities in your portfolio, that would have been a 20-per-cent lift right there.”

Ms. Macdonald makes it clear, too, that her approach to money management is not limited to investments.

“Sometimes, when people first come in, they just want answers about their investments, but you need to look at your big picture first,” she says. “You need to step back and have the reflection process about what your short-term and long-term goals are.”

She looks at “how your assets and liabilities are structured between spouses and for tax efficiency; we look at isolating a savings capacity and productively applying it [savings] toward a goal. There may be insurance needs; maybe people are overinsured.

“Investments are a tool to reach your goals,” she adds. “My clients recognize that investments are part or your financial plan but are not your only financial plan.” - The Globe and Mail

Zeti Says Ringgit Significantly Undervalued Amid Economic Growth

(Nov 11): The Malaysian ringgit remains "significantly undervalued" and risks to economic expansion are unlikely to materialize with exports still strong, central bank Governor Zeti Akhtar Aziz said.

The ringgit doesn’t reflect fundamentals with the nation’s current account in surplus, unemployment at about 3% and inflation within Malaysia’s long-term average, Zeti said in an interview in Kuwait City on Wednesday. The currency may recover when the US Federal Reserve normalizes interest rates and as "domestic issues" in Malaysia are resolved, she said.

Malaysian policy makers have been struggling to boost confidence in its economy and finances since oil prices started to fall last year and as allegations of financial irregularities at a state investment company hurt sentiment. While the ringgit recovered alongside emerging market currencies in October, it’s still down about 20% this year, the worst performer in the Asia Pacific region.

"Our export growth remains fairly strong, it has not moderated to the extent that we expected," Zeti said. On expectations of a Fed rate increase, “investors have already anticipated this and have already priced it in, so we have already seen, we believe, most of the outflows."

Investor Withdrawal

Global funds have pulled 17.4 billion ringgit (US$4 billion) from Malaysian equities and 16.2 billion ringgit from debt in 2015. Still, sentiment may be changing with MIDF Amanah Investment Bank saying foreign funds were net buyers of Malaysian stocks for four of the last five weeks, while central bank data showed global investors raised holdings of Malaysian bonds for a second month in October.

"We believe investors, after they reassess their investment portfolios, will still gravitate toward growth areas and we are one of those growth areas," Zeti said. “When all this is resolved, we believe that the currency will reflect the fundamentals," she said, citing rate differentials with the US and the perception Malaysia is primarily an oil producer — even as 80% of its economy is manufacturing- and services-based — among factors that are affecting the ringgit.

The central bank left rates unchanged for an eighth meeting this month, even as Malaysia’s biggest trading partners of China and Singapore both eased monetary policy in recent weeks. While Zeti said officials have priced in the slowdown in China, Trade Minister Mustapa Mohamed said last week easing growth in the North Asian nation and the impact on orders for Malaysian goods means the government won’t be able to meet its trade targets this year.

Gross domestic product probably increased 4.7% last quarter from a year earlier after expanding 4.9% in the three months through June, according to the median estimate in a Bloomberg News survey of economists before data due Friday. At that rate, it would be the slowest in more than two years. - The Edge

Smart Financial Planning Beyond 50

With retirement looming and less room for making investment mistakes, The Sunday Times looks at eight issues to consider when planning for the golden years.

1. AVOIDING THE SEQUENCE OF RETURNS RISK 

When we are in our 50s, preserving what we have accumulated is crucial as we have less time to recover from big investment losses.

Yet, we cannot be too conservative or our nest egg will be eroded by inflation.

The sequence of returns (SOR) refers to a phenomenon where a high proportion of negative returns occur in the first few years of our retirement, assuming we have started withdrawing from our investment portfolio. This can have a lasting adverse effect, as there will be less investments available to generate returns in later years.

To avoid SOR risk, we should employ cashflow management tools to ensure sustainable flows of retirement income, in addition to the core portfolio of equities and fixed income. Retail investors can look at cash flow instruments for the more liquid portions of their portfolio, such as having fixed deposits, bonds like Singapore Savings Bonds and endowment plans with different maturity periods so that the payouts are staggered.

Financial advisory firm Providend's retirement income strategy uses a RetireWell "bucket" approach. This involves placing assets in several retirement income segments or "buckets", each with a different growth potential due to varying asset allocations and time horizons. Each bucket is meant to provide income over progressive five-year periods.

The first bucket holds cash and near-cash assets that can be used for immediate income needs.

There are also five buckets that are invested progressively from low to higher risks, with the holding period for each one increasing with higher levels of risk.

As each bucket nears the end of its investment horizon, the proceeds are transferred to the cash bucket for withdrawal. This is expected to generate growth and enable you to have a bequest for the family or a "live-on" amount.

Singapore at 50 would be considered young for a nation, but it's a far different story if you have just reached your half-century with retirement looming.

If we liken our lives to the North-South MRT line from Marina South Pier to Jurong East, those in their 50s are somewhere between Ang Mo Kio and Yishun stations. If you haven't started planning for retirement, you have only a few stops left to get your finances back on track.

You also have far less margin for error or "leakages".

The Sunday Times highlights the top eight financial issues you should look out for at this stage of your life.

2. FINANCIAL STOCKTAKE

To know what we have already amassed for retirement and to identify the gaps, do a financial stocktake exercise.

Mr Daniel Lum, Aviva Singapore's director of product and marketing, says we need to take into account our insurance policies, including savings plans that are maturing and their payouts, our Central Provident Fund balances, assets and any outstanding loans and liabilities.

We also need to determine our desired retirement lifestyle and how much is required to fund it, so we must decide when we wish to stop working.

"Knowing when your income stream will stop will enable you to establish how much you need and the time horizon you have to grow your money," says Mr Lum.

3. SANDWICH GENERATION

If you are in your 50s, you are likely to be sandwiched between your children and ageing parents - in what is known as the traditional sandwich - and perhaps also between grandparents and grandchildren, in a club sandwich. While the primary responsibility of raising your children is almost behind you, you may want to contribute to their wedding expenses or home purchases, and give gifts and allowances to your grandchildren.

With increasing longevity, you may need to balance the needs of your ageing parents and grandparents. So do remember to budget for these potential expenses in your retirement plan.

4. MANAGING DEBTS AND SAVINGS

Citibank Singapore's head of investments, Mr Zal Devitre, suggests minimising or eliminating large debts, even if loan rates seem favourable.

As it is, mortgage rates here have started to creep up as the threat of a rate hike in the United States becomes more imminent.

OCBC Bank's head of wealth advisory, Mr Gregory Choy, says we should be prudent when taking on additional long-term obligations. In fact, the debt servicing period should not extend beyond one's desired retirement age, he adds.

As people get closer to their retirement age, Mr Devitre also advises them to set aside at least 12 months of liquid savings, and preferably more if possible.

5. REDUCING PORTFOLIO VOLATILITY

As we progress from our 50s to our 60s, Mr Apelles Poh, head of Eagle's Wings branch representing Professional Investment Advisory Services, says it is wise to allocate more to bonds in the investment portfolio to avoid excessive volatility.

However, some equities are still needed in any portfolio, even after age 60, to achieve returns that can beat inflation.

Asset manager BlackRock reckons a top priority for those in their 50s is to own a diversified portfolio. In today's environment of lower rates and heightened volatility, retail investors are encouraged to cash their net wider in the search for yield, including seeking growth in different geographical markets.

A BlackRock spokesman says: "Consider dividend-paying equities, high-yield bonds and multi-asset funds such as BlackRock's Global Multi-Asset Income Fund, which can combine traditional assets with other innovative sources of income, to generate differentiated sources of return and diversification for you."

Traditionally, investors looked to bonds as the primary source of their income needs.

But with lower yields, investors need to go into more "opportunistic" areas for income and returns, such as high-yield debt or emerging markets fixed income, it noted.

In recent years, investing in dividend-paying equities are a popular way of generating additional income. You should seek quality companies with enough cash and earnings growth to raise their dividends over time.

6. INSURANCE

While the need for death coverage reduces as dependants become financially independent, it is the reverse for health issues that tend to surface as we age.

So do ensure that you have a hospitalisation and surgical cover that matches your needs and budget. Long-term care for disabilities can also be very costly.

Mr Patrick Lim, associate director at financial advisory PromiseLand Independent, advises coverage for long-term care, such as with the ElderShield scheme. He notes that according to the United States Department of Health and Human Sciences, seven in 10 people turning 65 can expect to use some form of long-term care.

Mr Marc Lansonneur, DBS Bank's managing director and head of investment products (Singapore), recommends adding a personal accident plan to help protect you financially against accidents and injuries.

7. PROPERTY

Aviva's Mr Lum suggests that if your children have moved out and you no longer need such a large space, you can consider downsizing to a smaller house.

The profits from the sale will help to build up your nest egg.

HDB owners can also consider the Lease Buyback Scheme, for elderly households in four-room or smaller flats.

It allows them to unlock the value of their home to fund their retirement, even while they continue to live there, Mr Lum adds.

8. ESTATE AND LEGACY PLANNING

If you haven't done so, remember to do up your CPF nomination and a will, so your assets can be quickly distributed to your loved ones according to your wishes, says Mr Poh.

People with bigger assets can consider a trust that can stipulate the passive income from an asset to be given to a younger child for a period before the whole asset is transferred.

It is also important to compile a Lasting Power of Attorney so that in the event of mental incapacity, your financial and non-financial affairs can be handled by someone you trust. - business.asiaone.com

Are You An Investor Or Speculator?

From an early age, we are instinctively driven to ask “Why?” Likewise, we have all been taught that "you can't judge a book by its cover."

Through further training, we learn to research and analyze situations to find the root cause. However, too often we skip the research and analysis and just take things for face value. The 24-hour news stations don’t help, as they provide a daily one-liner on why the market rose or fell.

We don't deserve all of the blame though. Economics and financial markets are fraught with circular references and feedback loops. It's not as simple as one cause and one effect. There are literally thousands of potential inputs into a financial model, so we are left to pick certain ones and go from there.

Performance: A Book’s Cover

Potentially due to the overwhelming amount of information available, investors often fall on the most straightforward and readily available piece of information on an investment—recent performance. We would equate making decisions primarily based off of recent performance to judging a book by its cover.

If judging primarily based off of recent performance, it would be easy to overweight U.S. stocks and underweight international stocks and other diversifiers. U.S. stocks have outperformed international stocks in the last one, three and five years by a significant margin. That is like five straight world championships—hard to bet against that at face value.

In this article, we will explore two root causes for recent disappointment in diversified portfolios and frame some thoughts for decisions going forward. We will focus on:

1. The strong U.S. dollar
2. Historically low oil prices

Are You An Investor Or Speculator?

Many investors would agree that speculating on short-term currency and oil prices is a loser’s ballgame. However, we see investors reducing exposure to many asset classes that have underperformed importantly due to the strengthening in the U.S. dollar and significant drop in the price of oil.

This leads us to ask, "Are you an investor or speculator?”

5-Year Trailing Results

Diversified portfolios have trailed the S&P 500 for several years. Understandably, investors are questioning diversified exposure.

However, all else being equal, if currencies would have stayed stable over the last five years, diversified portfolios would be largely in line with domestic results.

Source: Data through 9/30/2015. Bloomberg.

Let’s focus on the last three years’ trailing results. The MSCI EAFE Index has trailed the S&P 500 by 6.76 percent annualized. However, during that same time period, the U.S. dollar (USD) has appreciated by 8.09 percent a year versus a world currency basket. Therefore, adjusted for currency movements, international stocks may have actually outperformed the S&P 500 over the last three years.

We recognize that weak currencies may have helped underlying international economies disproportionately to the negative impact of the strong dollar on S&P 500 companies. However, we are simply pointing to an impactful observation of a root cause.

Trying To Predict Commodity Prices

As investors have found in the last few years, predicting interest rates is incredibly difficult. If losing at predicting interest rates isn’t challenging enough, try predicting commodity prices.

A survey by Reuters of 27 top energy analysts at the end of 2013 predicted that the price of Brent crude oil would average $104.10 for 2014. Brent finished the year at about $65 a barrel and was below $60 a barrel a week later.

Prices for Brent are down more than 50 percent in the past 12 months. The drop in oil prices has had several byproducts. Obviously, natural resources stocks have been negatively impacted. However, low oil prices have also had a significant impact on emerging markets stocks and ETFs such as the Vanguard FTSE Emerging Markets (VWO | C-88) and the iShares MSCI Emerging Markets (EEM | B-100).

Many analysts would agree that a main driver of the oil price decline is a current supply glut. While overall demand is not down significantly, global demand is trailing supply growth. Particularly impactful to emerging markets, however, is that their biggest customer (China) is slowing. China is the 800-pound gorilla of commodities markets.

Source: VisualCapitalist.com

Strong Dollar & Cheap Oil Impact Returns

How do you explain to clients that a strong dollar and lower oil prices are costing them returns? When we hear the term “strong dollar,” we picture Uncle Sam holding a greenback high in the air in a pose representing American spirit and dominance. What an encouraging image. How could that be a bad thing?

Many global investors have lost exponentially more money in their investment accounts—due to the 50 percent-plus drop in oil prices in the last year—than they have saved at the pump from lower fuel costs. Likewise, many global investors have lost more money recently in their investment accounts—due to the strong U.S. dollar—than they have gained in other ways.

It is important for investors to remember that their short-term expenses typically pale in comparison to the impact that efficient-market global forces can have on their life savings. This is a difficult thing for many of us to digest: Lower gas prices and cheaper European vacations are simple bird-in-hand rewards.

Risk & Performance

Let's say that you are considering two different investments that have long-term expected return distributions in the following ranges. For technical purposes, let's say these ranges represent two standard deviations:

• Investment A: -5% to +5%
• Investment B: -10% to +10%

Investment A would be considered by most to be a less risky investment since the standard deviation would be lower than Investment B.

Let's assume that, in a given year, oil drops significantly, causing Investment A to perform toward the bottom of its range, with a return of -4 percent. 

Investment B was less sensitive to oil, and returned 1 percent for the year.
What now changes? Do the long-term expected return distributions change? Not likely, and if they do, they would likely be adjusted upward for Investment A, given the low valuation for oil.

Investment A is still inherently a less risky investment than Investment B. Likewise, the fact that the combination of Investments A and B are not 100 percent correlated can have diversification benefits for a portfolio made up of Investment A and Investment B.

We would argue that a decision to reduce exposure to Investment A based on recent performance would be a speculation.

What Should Investors Do?

While adjustments may be necessary to reflect current market environment, it is important not to be surprised and overreact when an investment performs within its expected range.

In investing for longer-term cycles, it is important not to spend each day playing the role of judge and executioner, presiding over your portfolio like a small-town sheriff in the Old West.

We would remind investors to not be surprised when things happen that are statistically normal. If you understand the cause-and-effect relationship, and don’t purport to be able to predict the cause, don’t be surprised by the effect.

Most investors don’t have a strong conviction on the direction of oil prices or currencies. We suggest sticking to a well-thought-out strategic allocation, designed to perform over multiple market cycles.

Taking a shorter-term viewpoint without short-term conviction can leave investors disappointed, and leaves the door open to making several mistakes within the same shorter-term cycle. - etf.com

10 Habits That Could Help You Save Thousands

There is a good chance you have resolved at some point in your life to kick a bad money habit. Maybe it is shopping when you are bored, making impulse purchases or even trying to time the market.

Instead of taking the negative approach of trying to eliminate a behavior, try to make a positive change by adopting a good money habit. That’s what these money experts did. Here are 10 money-saving tips they have incorporated to spend less, take control of their finances and save thousands of dollars.

1. Put Purchases in Perspective

Michelle Schroeder-Gardner, creator of the Making Sense of Cents blog, asks herself before making a purchase how long she would have to work in order to pay for it.

“Thinking about a car, a house or even small purchases such as clothing this way can really make you debate how badly you need an item,” she said. “This has helped me save thousands of dollars.”

A similar approach is to ask yourself whether a purchase will take you closer to or away from your goals, and whether it’s the best value for your money. “This question-habit eliminates any need for budgeting or self-discipline by replacing it with awareness that occurs at the point of spending,” said Todd Tresidder, financial coach at FinancialMentor.com. “Your spending will drop and your savings will increase automatically without any sense of deprivation or scarcity.”

2. Pay Yourself First

To save money, you have to make it a priority to pay yourself first, said Barry Choi of the Money We Have blog. Getting into this habit is “incredibly easy if you simply set up automatic withdrawals and sync them with your pay cycle,” he said. “This way, your money will go right into your savings account without you even noticing it’s gone.”

3. Brown-Bag Your Lunch

When Grayson Bell of Debt Roundup was knee-deep in debt, he stopped eating out at work and started bringing lunch from home every day — something he still does now because it’s become a habit. Bell calculated that he saved about $125 a month by brown-bagging his lunch, and he put that money toward his debt, which is paid off now.

4. Walk Everywhere

Walking is a great way to get some exercise and save money. This is a frugal living habit of Amanda Abella, author of Make Money Your Honey, who has never owned a car.

“I learned at an early age how to get around walking or with public transit in a city, and it saves me a ton of money,” she said. According to AAA, the annual cost of owning and operating a vehicle is $8,698. So walking rather than driving can save you thousands.

5. Carpool

If walking to work isn’t an option, you still can save money on transportation by carpooling. Esther Kim, who lives in the San Francisco Bay Area, joined a carpool with her colleagues at ForUsAll, which offers 401k plans for small companies. With everyone pitching in for gas and parking, carpooling is cheaper than public transportation, Kim said.

6. Eat Leftovers

Americans waste a lot of money on uneaten food that gets tossed — about $28 to $43 a month, according to the National Resource Defense Council. That’s why it pays to learn to love leftovers. Julie Rains, founder of the Investing to Thrive blog, said that her habit of repurposing leftovers for lunch has saved her $5 to $7 a day.

7. Get Cash Back

Paying only with cash is a good way to make sure you don’t spend more than you have. But if you’re responsible with credit, you should make it a habit to get cash back on your purchases by using a cash rewards credit card or shopping on websites that let you earn back a percentage of the money you spend on purchases, said Brent Shelton, a shopping expert with cash-back site FatWallet.com.

“Cash back adds up much faster if you just make sure it’s part of your purchasing routine,” he said. Motivate yourself to make it a money-management habit by setting a goal to earn a certain amount of cash back each year.

8. Refuse to Pay Full Price

One way to save money is to refuse to pay full price for anything, said Karen Hoxmeier, owner of deal site MyBargainBuddy.com.

“Make it a goal to get some sort of discount on everything you purchase, whether it is groceries, a haircut or the latest tech gadget,” she said. “Taking the time to research pricing, compare options and looking for ways to get it cheaper will save lots of money.”

9. Give Yourself Time to Think About Purchases

To avoid impulse purchases, Jim Wang of personal finance blog Wallet Hacks said he has gotten into the habit of making himself wait 48 hours after seeing something before actually purchasing it. This gives him time to go home, research the price and decide how much he really wants the item.

“About half the time I end up buying it online where it’s cheaper; the other half, I forget about it,” Wang said. “If I forget, then I probably didn’t really want it that badly.”

10. Challenge Friends to Come Up With Cheap Fun

If you’re trying to save money, you don’t have to give up going out with your friends. Instead, challenge them to come up with free or cheap activities, said Tana Gildea, author of the “The Graduate’s Guide to Money.”

“Peanut butter sandwiches on the top of a mountain one summer evening after a hike is about as cheap as it gets, and you’d be surprised how great a PBJ tastes after you have climbed a mountain,” she said. You could also fly a kite in the park or have cheap beers around the neighborhood pool rather than pricey drinks at a nightclub.

“I promise, the crazy things you end up doing will be more fun and more memorable than another burger at another joint,” Gildea said. - gobankingrates