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I am interested in investing. My husband and I are in our mid-30s and have very little savings. My employer is helping me with retirement (the bare minimum), but my husband's is not. We have a two-year-old and would like to put aside money for her education. Right now, we live pretty much from paycheck to paycheck, and this makes me very uncomfortable. What is the first step I need to take to start saving? -- Kirstie Szlasa


I can relate.

At the beginning of every year, I resolve to get my finances in order, eradicate my debt, cut back on my spending and start saving and investing.

Usually, my plan is a distant memory by the time of the

Super Bowl


What we both need is a firm strategy that will help us get organized, reduce our expenses and build our savings.

Create a Budget

First, sit down and figure out how much money is coming into your household every month and how much is going out. This means identifying all your expenses, says Ron Roge of

R.W. Roge & Co.

in Bohemia, N.Y. Break down your expenses into categories, whether they're food, transportation, mortgage payment, car payment, etc. Roge suggests that you also include a savings category in your budget.

I know. This sounds a lot easier than it really is. But by compiling a detailed list of daily and monthly expenses, you will be able to see where you are wasting dollars. "Sometimes people are looking for a quick fix," says Jay Shein of

Compass Financial Group

in Lighthouse Point, Fla. But "it could take a year to get it running smoothly."

Larry Waschka of

Waschka Capital Investment

in Little Rock, Ark., suggests that you carry a piece of paper with you and record every dime you spend over a week's time, "a month if you can stand it." That way, you'll discover exactly what you are spending each week or month.

Pay Down Credit-Card Debt

After budgeting, your first priority should be to pay off any high-interest debt, otherwise known as your credit cards. "High interest rates are causing you to have additional expenses. It is a drain on your budget," says Roge. (Auto loans or home loans don't fall into this category. They're part of your ongoing expenses.)

Say you are paying 18% annual interest on your credit-card debt. As you start reducing your card balance, you are reducing your interest expenses every month. That is a pretty good return on your investment. Plus, there is certainly some psychological value you reap from reducing your debt load to naught, says Shein.

In your budget, you will have to see where you can get that money to pay off this debt. You may have to cut expenses in other areas, and I will cover that below.

If credit-card debt is a problem or even an issue, you may want to reduce the number of cards you have. Keep one for emergencies, but cut up the rest. Make sure that you define "emergency" reasonably, says Shein. For me, that does not mean a new pair of shoes for that upcoming cocktail party. And when you get new credit-card applications in the mail, throw them out.

Start an Emergency Fund

Shein thinks it's a good idea to set up an emergency fund.

Once you get your credit-card debt paid off, try to save up three to six months' worth of living expenses for emergencies.

If your car's engine suddenly catches on fire, you don't want to have to use your credit cards to pay for repairs. With an emergency fund in place, you can avoid incurring more debt.

Reduce Your Expenses

I have a good friend who always tells me, usually as I am about to make an extravagant purchase at


, "Your spending habits inevitably move up to meet your income level." To start saving, that means trying to do two things: reduce your expenses and increase your income. If you can do both, you can save the difference, Waschka says.

Your budgeting process is "not only to see what you spend and need but to see where you can cut back," says Roge.

Paying off your credit-card debt is a grand first step to reduce your expenses, but here are some smaller, less noticeable budget items to examine. All of these may not apply to you, but hopefully they will help you pinpoint your own extraneous expenses.

Cable TV

: Some people are spending as much as $70 or $80 a month for cable, loading up on premium channels and pay-per-view movies, says Shein. For some, this hefty monthly expense can easily be reduced or done away with completely. How much does TV mean to you anyway?

Dining Out

: Eating in restaurants always is a huge siphon on your assets. You can save money by taking your lunch to work and cooking at home more in the evening.


: This is my own vice. I buy a lot of magazines. I can reduce this expense by, well, not buying as many, but also by subscribing to the ones that I absolutely must read every week or every month.

The Little Things

: "I recycle paper at my office and at home," says Waschka. If you start with small items, you may wind up thinking that way all the time. Consider using email rather than making long-distance phone calls or checking out a book at the library rather than buying one, says Waschka.

Increase Your Income

You may want to think about ways to increase your income, says Waschka. One possible source is your current job. Perhaps you can "ask for a raise or ask for more responsibility that would include a raise," says Waschka. You might consider supplementing your income by starting a business on the side or looking for a higher-paying job.

Maximize Your 401(k) Benefits

It doesn't sound like your employer is very generous in its retirement program. But as a general rule, you want to get the maximum matching available in your 401(k) plan. As I have said before, matching contributions are basically free money.


Once you have gotten your finances in order and have taken care of your high-interest-rate debt, then comes the time to start investing. "You might want to go a Roth IRA or a tax-deferred investment vehicle," says Shein.

Your goal is to get in the habit of putting away money every month. You should start by making automatic contributions to an IRA or mutual fund every month, suggests Roge. You can have a specific amount of money taken out of your checking or savings account and deposited directly into the investment vehicle of your choice. "Once you start doing it automatically, you forget about it," says Roge. "It gives you the discipline to save."

You may be starting to invest with small amount of money, so look for mutual funds with low minimum-investment requirements. The Fund Forum covered this very

topic back in October. You also mentioned that you want to start investing for your child's education. Read Vern Hayden's column on

Saving for College for more information.

Most important, stick to your savings and investing program. It's probably harder than staying on any diet, but the rewards are endless. I am telling myself the same thing.

TSC Fund Forum aims to provide general fund information. Under no circumstances does the information in this column represent a recommendation to buy or sell funds or other securities.