Spend Less Than You Make

Following this advice might be the most fundamentally sound financial decision you ever make.

The cheapskate's mantra is that you should save at least 10% of your pretax income. That said, the prospect of saving money often seems impossible. Many of us feel like we're barely making ends meet as it is. But if you look at how and where you spend your money, you'll probably find that you could scrape up more than just the change in your couch.

Whether you're an obsessive saver or a happy-go-lucky spender, one way to save more is by keeping track of where your money is going. Carry a little notebook for a couple of weeks and write down your expenditures, everything from your morning cup of joe to your rent check. The idea is to estimate what you spend in a given month, so scour your credit card bills and bank statements -- and don't forget to average in to these monthly costs the bigger things like house and car repairs or tuition.

Here's a look at some of the categories you'll probably have to cover in your journal:

Cashing In Make sure you consider all your many expenses
MONTHLY INCOME (Before Taxes)
Salary:	_______________
Freelance work:	_______________
Investment income/bank interest:	_______________
Other:	_______________
TOTAL:	_______________
MONTHLY SPENDING
Taxes (check your pay stub):	_______________
Mortgage/Rent:	_______________
Monthly savings (excluding company retirement plan):	_______________
Groceries:	_______________
Gas/Electric:	_______________
Telephone:	_______________
Restaurants/Bars:	_______________
Clothes:	_______________
Laundry/Dry cleaning:	_______________
Tuition:	_______________
Student loans:	_______________
Car loans:	_______________
Car expenses (gas/repairs):	_______________
Public transit:	_______________
Home repairs:	_______________
Bank fees:	_______________
Movies/Theater:	_______________
Cable TV:	_______________
Music:	_______________
Gifts:	_______________
Vacations:	_______________
Haircuts:	_______________
Magazines/Newspapers:	_______________
Health Club Fees:	_______________
Child Care:	_______________
Pet Care:	_______________
Insurance Premiums:	_______________
Health:	_______________
Home/Renter's:	_______________
Car:	_______________
Disability:	_______________
Long-term care:	_______________
Life:	_______________
Total:	_______________
Average Monthly Cash Flow:	_______________

To get your monthly cash flow, subtract your monthly spending from your monthly income. If you're spending more than you make, you need to slash your spending pronto. On the other hand, if your average monthly cash flow is positive, you have that much to save or invest. If you scan your expenses, particularly how much you spend on eating out or nightlife, you can probably find a way to top or equal that 10% savings goal.

10 Things You Should Do Before You Invest

• Figure out what you're worth.
• Set your goals and figure out how much they cost.
• Spend less than you make.
• Build an emergency savings fund.
• Pay off your credit card debt.
• Insure yourself against the unexpected.
• Contribute to tax-deferred retirement plans like 401(k)s and IRAs.
• Consider using software to keep track of your money and help with your taxes.
• Be your bank's thriftiest customer.
• Check out your credit report.

>To order reprints of this article, click here: Reprints