The 3-Letter Word That Can Transform Your Finances

Portrait of a young woman holding American dollar bills
Alamy
By Jane Bianchi

Can you guess what it is?

We love this quick behavior-change trick from Daniel H. Pink, author of "A Whole New Mind."

Most of us, he says, fill our lives with excuses in the form of: "I would, but ..." (Sound familiar?)

Changing your mindset -- not to mention, how you behave -- Pink says, is as simple as switching out the "but" for an "and." It works because it moves you out of excuse-making mode and into problem-solving mode. In fact, it's grammar's way of saying, 'Let's make a plan.'

Want to see what change this could bring to your financial life? We chatted with a financial expert to help you tackle whichever money issue is currently causing you to make excuses.

1. I'd like to save for retirement, but ("and"!) I don't know how to start.

When you insert "but" in that sentence, it gives you an excuse not to get started saving: not today, and not tomorrow. And the biggest mistake you can make when it comes to your retirement savings is procrastination.

Drop in "and," on the other hand, and it's a whole new ball game: Not knowing how to start saving is O.K. In fact, it's common. "People often come into my office feeling guilty.
But most people don't get a great financial education in school, so lots of bright adults have unrealistic ideas about what retirement means," says Barbara Chown, a certified financial planner based in Santa Rosa, Calif. "There's no reason to feel discouraged. You can learn."

The first step is knowing how much money you make and spend each year. "Most people know their income offhand. But most don't know how much they're spending, and underestimate," says Chown. (You can track your spending in the LearnVest Money Center.)

Once you've found ways to free up more cash for priority goals like retirement, you'll need to figure out how much you need to save, and which type of account -- such as a 401(k) or IRA -- is right for you. Want to learn everything there is to know? Take our free Retiring in Style Bootcamp.

2. I'd like to buy a house, but ("and"!) it seems like I'll never have enough for a down payment.

The "but" here isn't necessarily a bad thing: It takes a lot of time to save up a down payment. After all, a house is one of the most expensive purchases you'll ever make.
And one of the biggest mistake many homebuyers make is underestimating how much it costs to own property.

Beyond coming up with a down payment, when you own real estate, you also have to be able to pay for property taxes, home insurance and any maintenance fees. "All together, your housing expenses shouldn't be more than 30 percent of your income," says Chown. "That's tough to do these days unless you have a high income."

That said, if buying a home does make financial sense for you, it's time to drop in your "and" and get serious about saving. Try setting up an automatic deduction from your checking account to your savings account each week or month. When you don't see that money, you won't miss it or be tempted to spend it. In the LearnVest Money Center, you can set a goal to see how long it will take you to reach the amount you need.

3. I'd like to budget, but ("and"!) I don't have time to figure it all out.

Bad news: If you don't have a budget, you're not likely to make much progress on your money. That's because most people don't know exactly how much they earn, or where it goes. The good news is, thanks to digital tools, like the free LearnVest app, budgeting is now easier (and less time-consuming) than ever.

Replace your "and" in this sentence, and you'll be pleasantly surprised how automated budgeting can be. You can see how much you spend in certain categories of your life, set a priority goal to see how fast you can save up money, or pay down debt. In fact, in this example, you have nothing to lose but inertia.


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