This Week In Your Wallet: Treat Money Like A Tool

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February 23 – aka yesterday – marked the beginning of America Saves Week. This annual effort organized by the American Savings Education Council rallies corporations, schools, not-for-profits and financial institutions to spread the message that we all need to save a little more. It seems to be working. A survey conducted for this year’s initiative shows 52% of Americans say they’re saving at least 5% of their income. That’s up from 47% last year.

If you’re not one of them, one way to get yourself to save more is to join my 52-week Savings Challenge on Today.com. If you’re already on board, you should know it’s Week 8. That means you’re saving $8 for a total of $35.

Another way? Stop thinking about your money emotionally and start thinking about it like a tool. This is akin to look at food as fuel necessary to meet your body’s energy needs rather than something you consume for pleasure. It’s a way to make your food decisions less emotional and more logical. This week in The New York Times, sketch guy Carl Richards challenges us to do something similar with our money.

It’s no secret that we’re brought up to categorize our actions with money as either good or bad. Saving is good, and spending is bad. But steer too far in either direction, and you can drive yourself right into an unhealthy relationship with money. For example, if you’re a such die-hard saver that you feel frightened to spend money (or guilty when you do), it doesn’t bode well for your happiness. Richards flips that logic by suggesting that money is something meant to be used to pursue your plans and goals. In other words, you save for something, then use your money to fund that something, then move onto the next. I like the concept and think you will, too.

The winter blues winners

Before we jump to the news of the week a big thank you to everyone who emailed and tweeted me their winter survival tips last week! The winners are Lisa Weed, Faith Efird and Kristin Clarke. (Note to Faith: I make soup, too!) Your Money Rules books are on the way.

The window of opportunity

The “yikes” news of the week (at least for those of us who’ve passed 40 and even 50): The window of opportunity for wealth might not be as wide open as we’d like to think, especially if you’re knocking on the door of your 30s. New research from the Federal Reserve Bank of New York suggests that if you’re going to get rich, age 35 might be your last chance. (MainStreet recaps the research here.)

Here’s the deal: After looking at the Social Security Administration’s data for American men between 1978 and 2010, researchers found that the average worker can expect his salary to increase by 38% between ages 25 and 55, but that the majority of this growth happens within your first decade of employment, between ages 25 and 35. What’s more: This initial 10 years of your career seems to establish your earning power for the rest of life. Once you hit the 45 mark, earnings start to decrease. (Though the researchers note this can be attributed to people starting to work less too.) The one and only age-defying group happens to be the wealthy. Earners in the top 10% continue to see a rise in salaries after age 35 — and those in the top 2% can look forward to salary increases after age 45. Enter: The importance of knowing what you’re worth.

Don’t sell yourself short

One thing that salary research doesn’t mention – but should – is the importance of negotiating your salary. The problem is, many people don’t! More than 8 in 10 employers say they expect applicants to negotiate (according to Salary.com), but CareerBuilder finds only half of applicants actually do. It’s worth the nerves and discomfort. Negotiating — or presenting a counteroffer — can increase your starting salary by an average of $5,000. This week on Bankrate.com, I tell you how to go about it.

First and foremost, you have to do your research. You should walk into the office with an idea of what you might be offered, and then, what you want. If the employer didn’t include a salary range in the job posting, then search to see what other jobs requiring the same skill set and level of experience are offering. Know your number, but also know your words — it’s important to choose them wisely in a negotiation (i.e. practice with a friend or even with a mirror). Be specific and direct, but not aggressive. Express your appreciation of his/her offer, relay the requirements of the job, what you’re bringing to the table (ideally on top of the requirements), your experience and then why it amounts to you earning X amount more on the original offer. Continue reading on Bankrate.com.

Tax-filing faux pas

April 15th will be here before you know it, and if you’re tackling your taxes on your own, then it pays to knows the most common and costly filing mistakes. Silly errors can delay the processing of your refund, like entering the wrong Social Security number or incorrectly spelling your name. Other common mistakes, like these ones Money.com details, will cost you more than time. They’ll cost you money.

For example: Make sure you get the refund you’re entitled to by avoiding things like blanking on your savings. It can be easy to forget about the money you invested in an IRA last year, especially if your broker doesn’t send you the paperwork confirming your contributions (IRS Form 5498) until after you’ve filed. If you don’t report a contribution that qualifies for a deduction, then you’ll miss out on a break. Work from home? Consider the home-office deduction — or rather — don’t fear it. Some people shy away from this one, because of its reputation (i.e. tons of paperwork and a red flag for IRS auditors). However, as of last year, there’s now a less intimidating version of the deduction. You can deduct $5 per square foot of office space up to $1,500 with no documentation required. That’s a bit of cheery news for this wintery day!

Have a great week,

Jean

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