A Suze Orman exclusive

Finding the money to save on a single income can seem like an impossible task. Here are some tips to help you:

Forget the Joneses
You need to focus on you and your family’s needs—not what everyone else is buying or where they are shopping. When you rely on one paycheck you need to make every penny count, and that means you have no wiggle room to try and keep up with the Joneses. This is where that perspective comes in: you need to focus on making smart decisions with your money rather than spending money you don’t have on goodies you don’t need to impress people you don’t know. Come on, you know exactly what I am talking about. Maybe it’s that fancy new $35,000 SUV, rather than the reliable $20,000 car that is going to get you where you need to go just as fast. Or perhaps you can never say no to the $150 pair of designer blue jeans in favor of the $45 pair. And I’m sure there are plenty of you who routinely shell out $75 for dinner for two, even when you know there’s no way you will be able to pay off the credit card bill at the end of the month.

That sort of indiscriminate spending needs to stop. This doesn’t mean you can’t buy anything, or ever enjoy yourself, but it does mean you need to be realistic. Less needs to be more.

You Can’t Not Afford to Save for Retirement
Okay, look. I know how things tend to go out there. Most of you truly want to save for your retirement, but somehow it always turns out that there’s just no money left at the end of the month. So many of our savings plans end up as good intentions that go nowhere.

Unfortunately I am here to tell you that this lack of resolve is really dangerous. In personal finance, it doesn’t get any more important than this issue. You simply must save for your retirement! Why? Because, as you’ve heard me say many times before, while you can get loans for just about anything else, there is no loan for retirement. You are on the hook to pay for it yourself. Oh sure, you’ll get some assistance from Social Security, but no matter what happens with the proposals for Social Security reform, the bottom line is that the program was never meant to be the centerpiece of any retirement plan. It is a safety net. At the most you should merely think of it as a side dish to your retirement, not the main entrée.

Which means you’ve got to come up with the bulk of your retirement “meal” by other means. Let’s start with the essentials. I don’t care how cash-strapped you are (we’ll talk about some ways to find money in a sec), you must take advantage of the two following retirement moves:

• Contribute to your 401(k) if your employer offers a matching contribution. That matching contribution is like an annual bonus to you. And when would it ever make sense to turn down a bonus? You want your annual contribution to be enough to qualify for the maximum company matching contribution. Check with your employee benefits department to make sure you’re putting in enough every year to get the max company match.
  
  
• Fund a Roth IRA. If you are single and your income is less than $95,000, or a married couple filing a joint tax return whose combined income is below $150,000, you are eligible to contribute up to the maximum of $4000 this year to a Roth ($4500 if you are 50 or over). For those of you who qualify, a Roth is simply the best investment option out there. You contribute with after-tax dollars—so it’s true there’s no initial tax break—but your money won’t be taxed while it is invested, and if you meet a few basic rules (the account must be at least five years old and you must be at least 59½ years old) you will pay no tax when you withdraw the money. Zippo tax, my friends. Even better is that the money you contribute to your Roth can be withdrawn at any time without penalty or tax. That’s right; there are no strings attached. Remember, the money you invested was already “taxed” money. The only money you can’t touch until you are 59½ without penalties and tax are the earnings on the money you invest. While I certainly hope you don’t ever need to raid your Roth, the reality is that this retirement investment can also do double duty as an emergency cash fund. When you are trying to make the most out of one paycheck, having a retirement account that can be pressed into action as an emergency fund is a great bit of flexibility.