All value is relative, says Sutherland. All value is perceived value. This is why people think a more expensive bottle of wine tastes better, only to find out they were drinking a $3 bottle, or that the “expensive” wine and the “cheap” wine were actually the very same bottle.

Sutherland also talks about how perceived value can be used to alter personal finance behaviors. What if, for example, we replaced impulse buying with impulse saving:

If you had a large red button…and every time you pressed it it…put $50 into your pension, you would save a lot more. The reason is that the interface fundamentally determines the behavior…We’ve never created the opportunity for impulse saving. If you did this, more people would save more. It’s simply a question of changing the interface by which people make decisions.

How can this be applied to real life? Think about autopay memberships, such as your gym dues. People often pay them and never go to the gym. They’re too lazy to cancel or forget they’re even paying the fee.

When you put your savings on automatic deposit, where a certain amount of money goes directly into your savings account each month, it’s an effective way of saving more. You get used to not having the money in your checking account, and it’s unlikely that you’ll “undo” automatic deposits, which might involve a trip to the bank or your HR department.

What are some other ways you can “change the interface” to change your money habits for the better?

Maybe you want to break into a new industry, start a side business, or build your portfolio, but you aren’t making progress. Instead you waste your time designing business cards, updating your Twitter, and doing things that don’t directly help you achieve your goal. If you want to start freelancing, should you spend your afternoon designing a logo or talking to potential clients?

Besides wasting time, we also tell ourselves things like “I don’t have time” and “it’s not possible because of XYZ.” In the end, the side business never reaches lift-off. You didn’t fail exactly because you never really tried.

That might seem like a safe bet, but doing nothing is riskier than trying and failing. Susan Su wrote about the risk of doing nothing at personal finance blog I Will Teach You to Be Rich:

Doing nothing seems to be completely unrisky — it’s sort of like hunkering down in a bomb shelter. What could possibly happen to you in there? Probably nothing. But even ‘nothing’ has a cost. If you do nothing — or if you hunker down in a bomb shelter — you’re probably safe, but you’re also missing out…on a lot.

While most people create barriers…their biggest fear should really be continuing to do what they’re already doing, and nothing more.

This is applicable to every goal, not just freelancing. Think about the things you really want to do in your life, and then think about the reasons you aren’t doing them. Maybe you want to have better financial habits, but you think you’re too poor to save money. Maybe you want to pay off your debt, but you always find an excuse to pull out the credit card. Changing your habits might be scary at first (Can you not buy something when you’re shopping with your girlfriends?), but doing nothing is far scarier.

The informational interview

Let’s say you have a goal in mind and you’re stuck. You don’t know how to move forward. In this situation it’s helpful to conduct informal, informational interviews. Who do you know who could help you out? If you can’t think of anyone, ask yourself if there’s anyone in your network who is well-connected and might be able to suggest someone.

Once you have someone, ask them if you can take them to lunch or buy them a cup of whatever gets them out of bed in the morning. It can be scary to make contact, but realize that most people want to help others.

A few tips to keep in mind once you have an interview:

1. Prepare a list of questions before you meet so that you can use your face-time wisely.
2. If you’d like their help in solving a problem, think up three possible solutions yourself and ask them which option they think is best.
3. Be professional and prepared — don’t forget that you’re networking, too. First impressions last.
4. Never ask for a job during an informational interview. Stick to the agreed-upon subject matter.

After the meeting, send a thank-you note and keep in touch. Let the person know how you’re using their advice. If you happen upon an article you know they’d find useful, pass it along (do this sparingly, you don’t want to spam them). Create a professional, two-way relationship — don’t just contact them when you need something.

Finally, another major benefit to using interviews to get yourself unstuck is that you now have other people in the loop. It’s hard to slack off when you’ve told someone you respect all about your big plans. If they bump into you and ask if you landed that first client or saved your emergency fund, it’d be embarrassing to admit that you haven’t taken action yet.

Wildfires takes lives, damage crops, kill livestock and wildlife, and destroy ecosystems. They also leave people homeless.

Understanding the urgency

While homeowners are required by lending institutions to have homeowner’s insurance, renters aren’t required to to the same by their landlords. Of course the landlord has insurance on his or her property, but that insurance does not cover your personal belongings. If a fire destroys your apartment or rented home and you aren’t carrying renter’s insurance, you’ll have to start over at square one.

Renters also sometimes think that the odds are good that nothing will ever happen to their dwelling. In fact, the odds are good that something will happen. Renters are 50% more likely to be burglarized than homeowners, according to the Bureau of Justice Statistics.

How to find the right insurance policy

When you’re ready to start shopping around for renter’s insurance, make a list of potential companies. Places to start your search include the following:

• The insurance company that you use for other policies, such as your auto insurance. Ask about multi-line discounts.
• Your bank – some offer renter’s insurance policies.
• Online – almost every insurance company will have a website that offers a free quote.

Once you have your list, call each company and ask the following questions:

• Can you mail me a brochure? Use this to help compare policies.
• What could might cause my rate to increase?
• What discounts do you offer customers?
• Does your liability insurance cover both legal defense and medical expenses?
• Do you pay actual cash value (what your property was worth, minus the deductible) or replacement cost coverage (what it will cost to replace your property, minus the deductible)?

Finally, if you have a roommate, ask if they offer  separate policies for roommates. If not, you can talk to your roomie about splitting the cost of a policy.

Renter’s insurance can be found for $10-12 a month, depending on coverage, location, deductible, and the company. If price is really an issue, consider some of the following ways to lower costs:

• Raise your deductible (be sure you can cover the out-of-pocket expenses, though)
• Maintain fire protection devices such as smoke detectors, fire extinguishers, and alarms.
• If you’re a senior citizen, ask if the insurance company offers discounts for seniors.
• Inquire about a multi-line discount, given to customers who buy more than one kind of insurance policy from the same company.

Finally, if you think you can’t afford it, realize that you really won’t be able to afford replacing everything you own. It’s a small price to pay for peace of mind.

Sometimes the person pays you back as agreed, but often that’s not how it works out, and the relationship suffers. Things can take a turn for the worse in situations such as the following:

• The person hasn’t paid you back yet, but just took a vacation or bought a new car.
• He or she continues to fall on hard times, and comes to request more money.
• There was an agreed-upon payment schedule, and the person has yet to make a single payment or acknowledge that payments have been missed.
• He or she makes bad financial decisions, and you feel compelled to offer advice, which your friend sees as criticism.
• You begin to have negative feelings toward your friend or loved one and feel they’ve taken advantage of your generosity.

Generally, the best advice is to not loan the money in the first place. Unfortunately, that’s not easy to do if someone you care about is in a dire situation or if there are other parties involved. It would be hard to tell your sister, for example, that you can’t help her make rent after she lost her job. It’s even harder if she has two small children.

How to lend money

When you can’t follow the conventional advice, the next best thing is to approach the loan with some forethought. Here’s what to do:

1. Talk to your partner. If you’re in a long-term relationship and sharing finances with a partner, talk to him or her about the situation. Make sure you’re both okay with helping this person out.
2. Expect to not be paid back. Even if you want the person to pay back the loan, expect that they won’t, and then only loan as much as you’re willing or able to lose. Another idea is to ask them to pay it back in another way. If your friend is a handyman, maybe he can take care of your leaky faucet and the jammed screen door. Use his usual rate and make the compensation plan fair.
3. Try to help them identify the root problem. If possible, try to talk to him or her about the situation and some long-term solutions to avoid winding up in a similar situation down the road. If your friend says she can’t manage to save money, tell her you can recommend some resources, if she’s interested.

It’s a hard thing to accept that the person may never make good on the loan, but you’ll be less angry if you accept it as a fact before loaning the money, and you’ll be less likely to loan more than you can afford to lose.

When a button falls off of your white dress shirt, it’s more convenient to simply buy another shirt. When you need to buy a birthday gift for grandma, you might automatically think it’s time to head to the mall and buy something from a department store.

There’s nothing wrong with buying something new, but before you buy, ask yourself if there’s another solution that’s less expensive. Here are a few questions that you can ask yourself to save money or even avoid a purchase altogether:

1. Can you delay the purchase? Is it something that you have to take care of right away? If not, put the issue aside for awhile. You might come up with a better solution or realize that it’s not something you really need.
2. Can it be repaired? Clothes, some appliances, furniture, and cars are all examples of things that could be repaired instead of replaced, depending of course on the situation. Even if it’s not something you can fix yourself, check out prices to have it repaired by a professional. For example, instead of buying new dress shoes, consider whether you can take them to a shoe doctor to have the leather condition and and the shoes re-heeled.
3. Can you rent, borrow, or buy used? It doesn’t make sense to buy expensive power tools for one-time repair job, for example. Instead, try renting them or borrow from a handyman friend. It’s also worthwhile to check out sites like Craigslist and Freecycle for deals.
4. Can you plan ahead? Instead of heading to the mall to buy grandma a birthday gift, plan ahead to spend less money. Maybe you can find something on sale, find a coupon, or come up with a DIY, heartfelt option that she would appreciate more than another pair of house slippers.
5. Can you come up with a homemade solution? Let’s say you want to take your best friend out for Mexican food for her birthday, but you’re seriously strapped for cash. Instead, host a potluck dinner at your house, and you can provide the main meal. DIY is almost always cheaper.

Question the purchases you think you have to make, and brainstorm three alternatives (a Google search can help with ideas). Or, decide to do nothing for awhile and see what happens. More often than not, you’ll find that you don’t actually need the thing after all.

There’s a lot of good that comes with these advancements, but there’s also a lot of room for distraction and time sucks. Who hasn’t wasted an entire afternoon mindlessly surfing the web when there are real deadlines looming? It’s so easy to procrastinate when we have so many avenues for entertainment.

Plans vs. reality

Most people have a general idea of what they need to get done – the high-priority tasks they want to accomplish each day. For example, let’s say that you want to wake up early on Sunday to mow the lawn, go for a run, then work on the new website you’re building.

Instead, you wake up and check your e-mail. You learn that there is a sale at one year favorite retail sites so you click through to browse. Then you checked out another shopping site because you remember that you want a new pair of jeans. When you can’t find anything you like, you look on a few other websites. Then you remember you were checking your e-mail, return to that tab, and sort through your mail. Maybe you also get notifications that your friends have left comments on your Facebook post, so of course you want to see what’s going on in Facebook land. From there there’s no telling what might grab your attention next, from Twitter to blog readers to games to YouTube to Pinterest, there’s no lack of entertainment on the Web.

Once you manage to close the laptop and step away from the mouse, there are still offline time sucks, such as TV shows you’re not really that into, video games, and meaningless chores (Do you really need to organize your underwear drawer, or are you just avoiding getting work done?).

Pretty soon your day has slipped away, and you’ve yet to mow the lawn, put on your sneakers, or design your homepage. While there’s nothing wrong with things like TV and Facebook, it becomes a problem when you’re using them to procrastinate.

How to reclaim your time

You’ve got stuff to do, but you’re distracted. How do you fight the time suck and win? Try the following suggestions:

1. Write down your to-do list. Putting something in writing makes it more real.
2. Think about what you need to complete your tasks. Do you need to get on the Internet if your goal is to clean the house? Not likely. Avoid the temptation and promise yourself some online surf time after you’ve completed the things on your list.
3. If you do need to go online, block yourself from time-sucking or unnecessary sites. When you’re doing research online, for example, you don’t need to have your Gmail open – you’ll be too tempted to respond to incoming mail, which diverts your attention from the task at hand. If you can’t stay away from a specific site, try using an application like LeechBlock to add extra barriers.
4. When you stray, come back to your list and commit to doing one thing for 10 minutes. Often 10 is enough to get your focus back.
5. Conduct a mini check-in each hour. Do you spend the time as you intended? If not, what can you do right now to get back on track?

What are the top three ways you waste time? What can you do avoid those activities when you need to get work done?

In “Fatal (Fiscal) Attraction,” Rick, Small, and Finkel, professors of the Wharton School of Finance and Northwestern University, developed a survey that measured participants on a spendthrift-tightwad spectrum. The researchers wrote that every person feels a degree of “the pain of paying,” with tightwads feeling too much pain and therefore feeling less enjoyment of their money and spendthrifts feeling too little pain and therefore spending more than they would like.

According to the findings, opposites attract. In many cases we look for similar characteristics in our significant others, but that depends on whether or someone likes or dislikes a trait in themselves. The study found that if someone is unhappy about the way they handle their finances, they’ll be more attracted to their opposite. For example, a spendthrift might feel guilty that he blows all of his money and has nothing left for his savings account at the end of the month. Because his behavior makes him unhappy and he dislikes his bad habits, he’s more likely to fall for someone who knows how to manage money responsibly.

An unhappy union?

The bad news is that financial opposites usually have a bumpy road ahead of them. The study found that the greater the degree of difference in spending habits between two people, the more conflict there will be in their relationship.

The key to a successful partnership between opposites is to accept your partner, find balance, and work as a team.

• Accept your spouse as-is. It’s unlikely that he or she will make dramatic changes in spending habits, so look for ways to find common ground rather than expecting your partner to be more like you.
• Look for balance. The researchers hypothesize that one reason financial opposites might attract is to find balance. The spendthrift wants to save, and the tightwad wants to live a little. Consider whether or any positive changes have occurred in your own money habits as a result of your partner’s.
• Work as a team. Where can you make concessions and compromise so that both of you win? If one partner’s idea of a vacation is a luxury five-star resort and the other’s is a no-frills camping trip, find something in between to satisfy both parties. This could mean a more reasonable hotel or a few days camping and a few days at the spa.

What are some other ways two people with different money habits can meet in the middle?

• Why an emergency fund is critical
• Five ways to start saving
• Five more ways to find extra cash
• How and where to setup your emergency fund
• How much you should save

By now, you understand the importance of an emergency fund, and you’re well on your way to saving up for one of your very own. But all too often your initial excitement about making positive financial changes in your life begins to wane. It was easy enough to pack a lunch for two weeks or to spend more quality time at home with your Netflix queue, but eventually those things get old. Sometimes it feels like you’re not getting anywhere when you’re saving, for example, $50 a month toward a final goal of $6,000.

The truth is that good financial habits are rarely exciting. Just like diet and exercise, getting your fiscal house in order or is about the daily habits – there is no quick fix. So how do you stay motivated when you’re doing the right things, but your financial goal has lost its luster?

If that sounds familiar, try out the following tips to stay focused on your emergency fund savings:

• Set a deadline. If you aren’t clear about when you want to reach your goal, it is easy to get lackadaisical about achieving it. But when you have specific date, you’ll be more motivated to save enough by the deadline and look for ways to meet your goal on time. Maybe you’ll even beat the clock.
• Read a finance book, article, or blog post. Reading a money-related book or article can give you tips and motivation to stick with it. Just be sure to implement what you’ve learned rather than simply consuming content.
• Define your long-term goals. After you save your emergency fund, what’s next? Do you want to travel? Do you want to pay off your home, or buy a new home? Find images that represent your goals and keep them in your wallet. Remember that once you save an emergency fund, you’ll be on more solid ground and can start saving for that fun stuff.
• Seek out like-minded friends and mentors. If there’s somebody in your life who is particularly good with money, foster a relationship with them. Invite them out for coffee, tell them about your goals and your progress, and now you’ve got someone to hold you accountable and give you advice when you’re struggling.
• Plan a garage sale. A garage sale is a great way to earn extra money toward your emergency fund, but more than that, it’s a great way to clear out the clutter from your life. Selling your stuff and donating whatever doesn’t sell also can be a good reminder to not accumulate more stuff.
• Reward yourself. It can be hard to change your financial habits, so knowledge your progress and reward yourself for your efforts! Your reward doesn’t have to cost money — it can be as simple as a picnic with your spouse, a long bubble bath, or a few uninterrupted hours with that book you’ve been meaning to read.

What are some other ways you can brainstorm to motivate yourself to stay on track?

• Why an emergency fund is critical, especially if you think you don’t have the money to save
• Five ways to start saving one
• Five more ways to find extra cash
• How to setup your emergency fund, including where to bank your dough

Hopefully you’ve already started to think about where you’ll come up with the extra cash and you’ve started checking around at a few financial institutions to find the right account for your emergency fund.

But once you have the account and you’ve got a little extra cash to funnel into it, how will you know when you’ve saved enough?

It’s important to figure out exactly how much you need in your emergency fund, which means making your goals SMART: specific, measurable, attainable, relevant, and time-bound. You’ve probably heard of SMART goals before, but it’s repeated over and over for a reason — with SMART goals you have a greater chance for success.

Here’s a quick rundown of SMART goals as it applies to your emergency fund:

• Specific. Vague goals don’t provide direction, plus hitting milestones (“Hey, I’m halfway to my savings goal!”) can give you additional motivation (“Maybe I’ll pack my lunch everyday this week and save even more!”).
• Measurable. Exactly how much do you want to save?
• Attainable. Is it possible for you to save that amount of money in that amount of time? It’s great to be motivated to save, but if your chances of actually achieving your goal are slim, it can erode your motivation.
• Relevant. A $500 emergency fund for a family of four is a good start, but it’s hardly a real cushion if, say, the only working spouse loses his or her job. Make sure you look at your lifestyle and finances and don’t just set a goal based on speculation.
• Time-bound. When is your deadline for a fully-funded emergency fund? Again, this can be a big motivator if your deadline is approaching — you might be inspired to try new ways to save money.

It’s clear that to make your goals SMART, you need a relevant dollar target for your emergency fund.

How much is enough?

If you have debt, the best way to start down a better financial path is by saving $1,000 in your emergency fund, even before tackling debt. Financial guru Dave Ramsey writes, “This beginning emergency fund will keep life’s little Murphies from turning into new debt while you work off the old debt. If a real emergency happens, you can handle it with your emergency fund.”

If you don’t have debt or you’ve already paid it off, it’s time to think about how big your emergency fund should grow. Ask yourself how much money you would need to cover your expenses for 3 to 6 months, and that’s a good figure with which to start.

Get six months of bank statements and do the math. How much will you need to cover the essentials, such as: rent or mortgage, bills, groceries, insurance, car payments, and other fixed expenses?

Remember that in times of job loss, you can cut the non-essentials. You might grab a coffee with your coworkers a few times a week, but if you’re jobless, that expense is gone. Or maybe you have a nice dinner out once a week, but in lean times, you can cut it to stretch your dollars more.

Again, just the essentials. You can resume the fun extras once you’re gainfully employed again.

Putting it all together

If you’ve already thought about ways to save (here and here), you should have an idea of how much you can save per month. You should also set up automatic deposits into your emergency fund, which we talked about here. So let’s put it all together.

Complete the following sentence to put your emergency fund goal in writing:

“I will take the following actions: ___________ to save $_____ per month, which will be automatically deposited into my emergency fund account at _______ bank, until I reach my goal of $_____ in __ months.”

We’re not done yet; stay tuned while we talk about ways to stay motivated while working toward your goal!

• Why an emergency fund is critical, especially if you think you don’t have the money to save
• Five ways to start saving one
• Five more ways to find extra cash

Today we’ll talk about where to put all that money you’re saving. Here are the requirements for a good place to squirrel away emergency savings:

• It should be FDIC-insured. The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the U.S. government that protects depositors if an insured bank fails, typically $250,000 per depositor, per insured bank.  According to its website, since it began operations in 1934, no depositor has ever lost a penny of FDIC-insured deposits. You can’t say the same about money hidden under the mattress.
• It should be accessible. An emergency might not be able to wait for several days while your money transfers into your checking account. Before opening an account, make sure you know how long it will take for the money to transfer from the bank to your wallet.
• It shouldn’t be too accessible. Not to confuse matters, but this account shouldn’t be linked to a debit card, especially if you’re just starting to form good money habits. If the cash is too accessible, it’s too tempting to spend it on things that really don’t constitute an emergency.
• It should offer automatic deposits. One of the easiest, most surefire ways to steadily build your savings is with automatic withdraws — either a percentage or a flat amount of your paycheck that is automatically routed to your savings account. The old adage “pay yourself first” is repeated by every personal finance expert for a reason: it works.

So what are your options? Only you can decide which savings product is best for you, but a couple of options to explore are as follows:

• A separate savings account with your bank. Make sure this account doesn’t come with fees that will eat into your emergency fund savings, and skip the linked debit card. The con to these types of accounts is that they usually don’t come with very impressive savings rates compared with other options.
• Online high-yield savings account. The advantages to an account with an online bank like INGDirect.com or HSBCdirect.com are that the interest rates are usually better (your money will make more money just by sitting in the account) and it’s not easily accessible. The downside is that it usually takes a couple of days for a money transfer.

Make a list of at least 3 or 4 different accounts and do your research on fees, rates, and transfer times to find the right home for your emergency fund.

Next up, we’ll discuss how to determine how much you should save.