Basic advice on starting your savings
By Tyrone Mitchell

A penny here, a hundred dollars there. The more you spend, the less you can save.

Each of us wants a secure retirement or the best college education money can buy for our children, but not everyone succeeds in achieving this. Creating a successful financial plan begins with setting goals and then saving enough on a regular basis so that the money can grow over time.

Most people hate the idea of having to budget. So, don’t think of planning as budgeting; think of it as finding some extra cash that will help you reach your financial goals.

Working with your finances in this manner may be tedious at first, but in time it becomes second nature — and when your kids are ready for college or you’re looking to retire, you’ll be very glad you gave up a latté or two to make sure you could afford what is really important.

1. Identify where your money goes. Begin by finding out where you spend money by keeping a record of expenses — both fixed expenses (such as mortgage payments, electric bills, and commuting costs), which you cannot avoid, andvariable expenses (such as clothing, travel, and entertainment), which offer opportunities for saving.

To figure out where your money is going, first go through your checkbook and credit-card receipts and make a list of your expenditures. (A sample work sheet is provided.)

Then try to record your out-of-pocket expenses for a week, as well. You might be surprised to learn how much of your paycheck is going to things you don’t really need — such as the daily coffee, the newest recording, or gifts you don’t need to buy.

(If you can save an extra $50 to $100 a month, you could be well on your way to financial independence.)

2. Consider savings a fixed expense. Does your list of expenses include savings, such as your contributions to your retirement plan, plus any regular savings programs you participate in. The best advice for saving is “pay yourself first.” Consider your savings a fixed expense, just like your car payments. Every month, put a portion of your paycheck into savings — or better yet, have the bank do it automatically. If you don’t see it, you’re not as likely to miss it. Experts suggest that you earmark at least 5 percent of your total gross monthly income for savings.

3. Assess where you can cut expenses. Then look at your variable expenses. Where can you save? Do you eat out in restaurants often? Could you save money by bringing a bagged lunch? Do you give gifts that are more expensive than you can afford? Remember, every penny you save today can mean more when you really need it. Isn’t it worth it to give up buying another pair of shoes in order to have a comfortable retirement?

4. Set reasonable spending limits. Don’t set spending limits that are impossible to meet. If you try to do too much, you’ll get frustrated and give up your savings plan. Start with small items that are easy to do without. Once you’ve achieved success in one area, you can try to find other areas where you can pinch a penny or two without feeling much pain.

SIDEBAR:
Expenses worksheet

Tyrone Mitchell offers securities through AXA Advisors, LLC and offers annuity and insurance products through an insurance brokerage affiliate, AXA Network, LLC and its subsidiaries. He can be contacted through his Web site, www.tsmitchell.com, or at 516-877-1881.

Disclaimer: AXA Advisors, LLC does not provide legal or tax advice. Please consult your tax or legal advisor regarding your individual situation.