Financial Planning 101: How much should I save?

OK. So you've officially decided that you are going to buck national trends and save. Good for you! What a great New Year's resolution. But how much should you really save? Good question.

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).

Then it depends on your financial situation and what your priorities are.

• If retirement savings are of primo concern open a Roth IRA and put in the maximum contribution of $4,000.

Building an emergency fund for a rainy day isn't a bad idea. Experts suggest saving for 3 months of living expenses. Some say you should save so that you wouldn't have to change your lifestyle at all, if god forbid you or your spouse looses their job suddenly. Others say just the essentials like food, housing, utilities, car etc. You decide what you're comfortable with.

• Build an emergency fund in an accessible high-yield savings account like Emigrant Direct.

Save for the next big thing. Whether it be a car, house, project, vacation or new business venture we all have financial goals we need to reach to get there.

• 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.

If saving just seems too out of grasp for you, re-examine your expenses. As Bach would say, "Find your Latte factor." We all have those guilty pleasures that we spend our money on that could be better spent on our financial goals, or not spent at all. Bach calls this our Latte factor. Many of us grab that morning coffee and don't think twice about spending that $1.50 for it. If you just cut that small thing out of your routine and grab your coffee at home, you'll save nearly $550 a year! (Not to mention interest.)

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.