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Monday, January 12, 2004



MAKING CENTS
How your money management plans
reflect your goals and personality
are key to their success


Change for Change

You can cut the bottom line
and turn pennies into profits
by making a few small, customized
spending changes daily

SECOND OF THREE PARTS


Six months ago, Anne Deschene, president and chief executive of Better Business Bureau Hawaii, decided to quit eating fast food for lunch and started brown-bagging it at work.



ABOUT THIS SERIES

Yesterday: Palatable financial planning starts with knowing your own fiscal personality.

Tomorrow: Socially responsible investing lets you put your money where your mouth is.



That small change, which was reflective of her desire to lead a more healthy lifestyle, netted so much cash that this month, she was able to join a spa with the returns.

It was a budgetary change that made sense because it allowed Deschene to replace a bad habit with something that was more aligned with her goals, she said.

"It's been a motivating decision," Deschene said. "It's given me the idea to keep doing something healthy."

Saving pennies by making small changes can add up. And when those changes reflect personal values and desires, it can led to greater empowerment, said Judy McCorkle, senior financial planner for Financial & Investment Management Group Ltd., based on Maui.

"Making a budget that does not reflect values is the most common error people make," McCorkle said. "If their budget doesn't reflect their lifestyle, they won't stick with it."

For instance, a couple who wants to save a large chunk of money for their children's education might elect to eliminate dining out. However, if dining out together is crucial to keeping them in a nurturing relationship, then that's not the right budgetary change for them to make, McCorkle said.

People who desire to see a net change in their budget need to look for the small changes that fit their desires. Forgoing the $3.25 coffee or not buying cigarettes can add up to healthy changes, McCorkle said.

"One of my pet peeves is smoking, for health and financial reasons," McCorkle said. "It's an extraordinarily expensive habit. It's about a $140- to $150-a-month habit. If a person quit smoking, it could improve both their health and finances."

The secret to turning pennies into profits is exchanging instant gratification with discipline, said Paul Loo, senior vice president of the Morgan Stanley brokerage on Bishop Street.

"When you get your paycheck, pay yourself first," Loo said. "Put whatever you can afford to aside and invest it. But don't gamble; invest in the good stuff."

The choices people make now can make a huge difference in their financial future, he said.

"I once knew a kid who inherited $7,000 45 years ago and bought a beautiful Chevy Corvette," Loo said. "If he had invested that money, it would probably be well over $100,000 today."

People shouldn't deprive themselves, Loo said, but everyone gets old sooner than they'd like and the little changes can add up to a bigger retirement.

Stuart Yamane, Deschene's husband, saves $200 to $300 a year just by putting all of his change into a fishbowl at the end of the day.

"Every January, we take a trip to the Big Island, and that change has paid for our air fare," Deschene said. "We've actually gotten into the fun of not knowing how much it will be."

Most anybody can learn to be more frugal if they identify the habits and the items that they could do without, said Heather Morrill, a Pearl City resident who is known among friends and family for being able to stretch her dollars.

Morrill's family of four likes to dine out frequently, but she's learned to save money by using coupons, declining to order beverages and taking advantage of the many kids-eat-free deals around town.

If she takes the children to eat fast food, they order off the value menu, and, whenever possible, they bring their own popcorn and candy to the movies.

"If we all order soda, it costs as much as another meal," Morrill said. "We've learned that it's something we can do without."

She added: "My husband, Glenn, used to blow $20 just on popcorn and soda. A quick trip to pick up candy at the drugstore can save a whole lot of money."

Glenn, who is more of an impulse buyer, is also discouraged from buying soda at work. It's far more economical to take a 2-liter and a cup to work, she said. She saves money at the grocery store by using coupons and by passing up name-brand items.

"I don't buy the children $5 boxes of cereal," she said. "They don't know whether they are eating Lucky Charms or an off brand."

She also buys cheaper cuts of meat, marinating them with lime or lemon juice to make them more tender.

When Morrill finds a great deal at the grocery store, she tries to buy in bulk or get extra coupons so she can use them later.

At the retail stores, Morrill asks salespeople when they plan to post their sales and if something she wants is likely to be discounted.

"Heather's got this uncanny knack for finding that random, freaky deal hidden in the back of the store," Glenn said.

She is also not afraid to ask for a discount on an item that she likes.

"Many stores will routinely cut their prices up to 30 percent for customers," she said. "It pays to ask for kamaaina or military discounts."

Morrill also shops at consignment stores or buys clothes and other items direct from people.

She saves on car and renter's insurance by calling and asking how to reduce the bill. It also saves money to comparison-shop for services like phone, cable and Internet access, she said.

"And always check your bank statements," she said. "You'd be surprised by how many mistakes that get made."

Since the Morrills have a tight budget, making all of these small changes over time has enabled them to establish an emergency savings account and recently to fund a trip to Texas to see Glenn's family. But the concept works for anyone at any stage, said Susan Olson, editor of ihatefinancialplanning.com.

"Budgeting is not rocket science," Olson said. "It's just a matter of looking at how your dollars are going in and out. Making small concessions over time is one of the best ways that people can find dollars to save for the future."

It's a lot like dieting or quitting smoking, but budgeting can become a healthy habit and the small changes do add up, she said.

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