Question for the Money Doctors
Question submitted on Apr 26, 2012.
Questionmy name is lucretia rogers i am tired of pay check to pay check and need some financial advice i have a problem in saving i gross 4,200 a month and i just move in a apartment 1,800 month 300 utilities how can i save and live comfortable at the same time im disable with a injury and my only income i want to save 20,000 a year is it posible and how please help im willing to listen
The first thing you should do is analyze where you are currently spending your money. You mention your gross income, but your starting point to see what you have to spend should be your take-home income. Make a list of your expenses and determine (1) which ones are absolutely necessary and can't be decreased (for example, your rent and utilities, (at least in the short-term), (2) which ones are necessary but possibly can be trimmed by being more careful (food usually comes in this category), and (3) which ones are completely discretionary (such as entertainment, travel, that extra pair of shoes or handbag). Any savings will have to come from categories 2 and 3, so you have to be tough when it comes to deciding which expenses you can cut.
Find out if your employer has a 401K plan that you can participate in. This is a good way to save each month, because it will reduce your taxes and will be automatic. Also, your employer might have a matching provision which can increase your nest egg.
Your desire to save is admirable, but given your income and rent, it's not going to be possible for you to save $20,000 per year (that would be almost $1,700 per month and after your taxes, rent and utilities is probably not achievable). After you review your expenses and get a sense of what is possible to save, re-evaluate your goal. The key is to be consistent and disciplined.
For tips on how to save and more information about saving, visit http://www.feedthepig.org/
For additional information visit http://www.360financialliteracy.org/