David Bach, author of "The Automatic Millionaire" of Oprah fame, suggests that you sock away one hour of pay every workday before taxes. That works out to be about 12.5%. He takes the idea of "pay yourself first" to a whole new level. This makes sense, because as you earn more, you save more.
So where should that money go?
- First and foremost into your 401(k) plan or 403(b).
- If retirement savings are of primo concern open a Roth IRA and put in the maximum contribution of $4,000.
- Start a fund for your next big purchase and depending on when that may be create a high-yield savings account or open a CD where returns are higher, but the time commitment is longer.
To find your Latte factor track your expenses for one week. You'll really get a good picture of where your money is going, and it may shock you.
Other ideas to cut back are to limit eating out to once a month (like the NET's monthly dine-outs) or looking at your cable. Do you really watch all 150 channels? Perhaps there some money hidden in your cell phone bill. Can you switch to a better plan and save? In addition, many times just by calling your utility providers you can lower your bill. It's a competitive market out there, and if you're a good customer, the provider will want to keep you. This has worked from newspapers to cable bills.
And limit your impulse buying. Remind yourself that by purchasing that book, shirt or gizmo you are preventing yourself from getting something you really want, like a house. Ultimately you have to decide what's important to you.
For more tips and tricks on how to save go to David Bach's website.