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Five Ways to Face Your Finances

Are your finances looking scary?

"Early Show" financial contributor Vera Gibbons shared five tricks on the broadcast to save more and improve your finances in the months and years to come.

1) Save regularly for recurring expenses.

This is a trick that helped me break my habit of relying on my credit cards or raiding my savings account whenever a big annual or semi-annual expense came up. I set up several high-yield savings accounts with one online bank and arranged for automatic deposits into those accounts on a regular basis. For example, I have a car insurance fund, a holiday gift fund and a vacation fund. (HSBC Direct, Emigrant Direct, or ING Direct are good online bank choices.) Each account is linked to my checking account at my regular brick-and-mortar bank, and I can transfer money in and out easily online for free.

If you automatically save a little money on a regular basis, it doesn't take much to build up a good stash for when your big expenses come due. For example, if you arrange for a mere $25 a month to transfer from your checking account into your holiday gift fund each month, that's much easier to manage than coming up with $300 all at once come December.

2) Wield a stick
You may be one of those people who respond more to the fear of punishment than the promise of a prize. Well, you can make a threat work for you too.

Outline a savings regimen -- say, investing $500 a month -- with the condition that you'll incur a penalty each time you don't follow it. Maybe you can't watch your favorite television shows for a month or you have to forgo eating out. Your spouse or a friend can be the enforcer.

Or, you can up the ante even further, and make the penalty cold hard cash. A new Web site called, created by a Yale economics professor and two colleagues, allows you to create "commitment contracts" for resolutions ranging from losing weight to saving more dough. If you don't hold up your end of the deal (as verified by a designated "referee"), you pay an amount that you've agreed to in advance -- $100, $1,000, whatever.

The idea is that you'll be more likely to stay the course if you stand to lose real bucks (or suffer in other ways) for breaking your resolution. This money can go to a friend or a charity or, in a clever twist, you can stipulate that the payment go to a non-profit whose goals aren't simpatico with yours. So, for example, if you're an advocate of gun control, the National Rifle Association Foundation might get a donation each time you lapse.

3) Use cash for all your expenses.
This is a foolproof way to keep spending under control. It also prevents buying on impulse. As many as a third of all purchases are bought on impulse, and according to one estimate, we spend a third more when we pay with plastic than we do with cash. This is because we have emotion attached to cash that we just don't have with plastic.

4) Pay bills automatically.
There are all sorts of excuses for forgetting to pay your bills, but the end result, no matter the excuse is the same: All have negative effect on your credit rating, which could affect your ability to get a loan, get a job, among other problems, such as getting hit with late fees. It's best to have bills - utilities, cell phone - taken directly out of your checking account. You can make that arrangement through your bank or make arrangements through each individual biller. It takes little legwork, but once you set it up, you can forget about it.

5) Give yourself a raise.
Change the number of allowances you claim on your W-4 form. Chances are, you need to: The Internal Revenue Service processed over 120 million returns last year. A whopping 70 percent of them called for refunds. The average refund was about $2400 in 2008. This tells us we're having too much withheld. Claiming extra allowances automatically pushes down the withholding, and pushes up your take-home pay. It's better to get your money when you earn it, rather than give the government an interest-free loan.

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