Saving money can be a tricky proposition for many people.  The first step to saving is creating a budget  –   a detailed budget.  This is not a guestimate based on your recollection of prior month expenses; this needs to be an exact science.  First figure out your monthly income and then take out the taxes (payroll and income taxes).  If your withholding doesn’t cover your tax liability each year, consider changing your withholding so the monthly withholding covers all your taxes for the year.  From there I like to set aside savings.  Retirement may be 40 years in the future or it might be just around the corner, but saving for retirement is always one of my top priorities.

The tax code allows you some choices when saving for retirement.  Most employers offer a 401(k) plan and at least a partial match of your contributions.  If the employer is willing to match 6% of your salary, then the first place to save is 6% of your salary.  If you don’t, you are leaving money on the table right off the bat.  Nowadays many employees can choose between the Roth and traditional 401(k)s  –   the Roth/traditional works like the IRAs.  For a traditional you get a tax deduction when you put the money in, but it is taxed when you take it out in retirement.  For a Roth, the money is not deductible when it goes in and then it is not taxed when it comes out in retirement.  I prefer the Roth for most people, but to each their own depending upon the circumstances.  Keep in mind that you can make both a 401(k) and an IRA contribution.  Sometimes people think it is one or the other, but you can do both. Read More