Develop a Spending Plan

• Working with a budget implies that you must give up something you want. If you turn it around and think about the things you want to spend money on, you can begin pursuing your goals. Your spending plan begins by honestly assessing your financial priorities. Once you define goals, such as an annual vacation, a new house or retirement, you can set spending priorities to achieve them. To make your goals a priority may mean eliminating some of the other things you spend money on. Begin by tracking your everyday purchases. Do not omit small purchases. Chances are you fritter away more money than you realize on inconsequential purchases, such as your daily cup of coffee. You can't do much about fixed expenses like the rent or mortgage, but if you add up all the small expenses, you can choose to divert some of those dollars toward your goals.
  
  

Save Money

• If your spending plan uncovers just $25 per week, you have $100 each month to save toward your financial goals. Only you can decide if it's worth giving up that daily pack of cigarettes to save for retirement. Trim your entertainment costs, such as eating out or going to movies. We're not talking austerity measures, just eliminating a few fast food meals each month. Financial success depends on regular, consistent savings. If you set up a regular payroll deduction that moves directly into various savings vehicles, you'll barely notice the dollars. Build up a cash reserve for emergencies and to purchase items you need within the next two years.
  
  

Use Credit Wisely

• When you carry a running balance on your credit card, you create a high-interest loan that you may find difficult to repay. Paying the minimum balance due each month will stretch the interest out for years. You'll likely pay more interest than the cost of your original purchases. Try to charge only what you can pay off each month, and reserve your charge card for genuine emergencies, such as an unexpected car repair.
  
  

Pay Less Taxes

• For longer-term goals, such as retirement, add the power of tax-deferral to the power of compounding. Participate in your employer's retirement plan, especially if your employer provides a matching contribution. Start your retirement savings when you are young. Standard & Poors shows the effect of saving $100 per month in taxable and tax-deferred accounts. Assuming an 8 percent annual growth rate, a 25-year-old's disciplined tax-deferred savings plan grows to $260,400 by age 65. In a taxable account, assuming a 30 percent tax rate, the monthly $100 savings would grow to $179,645. The illustration also demonstrates the effect of compounding over time. If you delay your savings until age 35, by age 65 the same plan would grow to $115,821, tax-deferred. Missing 10 years of compounding represents a difference of $144,790.