A Suze Orman exclusive

Where to Find the Money to Save
I know many of you are staring at that one paycheck and thinking there is no way you can afford your everyday living costs and still put away money for your retirement. Sure you can. It just takes some of that discipline I mentioned earlier, along with some strategizing. Consider some of these paycheck-stretching moves:

• Don’t get a tax refund. I know many of you are getting all excited waiting for your federal tax refund, which typically averages more than $2,000. Here’s a newsflash for you, though. If you are getting a refund you are making a mistake! In effect, you have loaned the money out to Uncle Sam interest-free for the year. Besides, a lot of folks tend to go crazy with their refund and spend it on a vacation or some indulgence. It’s far smarter to adjust your withholding so you don’t have so much of your paycheck siphoned off to the I.R.S. during the year. That will increase your paycheck, which means you’ve got some extra cash to earmark for retirement fund investing.
  
  
• Reduce your credit card interest rate. Actually, my best advice is to not have any credit card debt at all, but I know that’s not dealing with “reality” for many of you. So if you carry credit card debt you should at least do everything possible to snag a low rate. First, check your FICO score. If you are in the top range of 720 or higher, you should either be able to talk your current credit card issuer into a rate below 10 percent, or do a balance transfer to a new card that is offering you a great introductory rate. The trick with the transfer is to make sure the “normal” rate you will pay after the teaser period expires is still a good deal. And be super-careful about making all your credit card payments—even if it is just the minimum amount due—on time. Screw up and be late on any card, and you can probably kiss your sweet balance transfer rate goodbye. Once you move to a lower rate card, you can either increase your payments to get the balance paid off faster (typically a good idea) or just save the money you no longer have to fork over for the high interest rate, and use it for something more constructive—such as your retirement fund. Check out the Yahoo Finance Credit Card Center for the best deals on balance transfers.
  
  
• Don’t save (or save less) for your kid’s college education. I know we have discussed this one before, and I know you may hate to hear it, but this is such a crucial point: you cannot afford to save for your kid’s college education if it means you will be shortchanging your retirement investing. Your child can get aid and loans for college. No one is going to be ready to help you in retirement. I have recently had the opportunity to talk to thousands of young adults in their late twenties and early thirties, and I can tell you that one of the biggest financial frustrations they voiced to me was that their parents weren’t straight with them about the money situation. Mom and/or Dad thought they were being Superparents by paying for a big chunk of school, but now the kids are realizing that their well-intentioned parents are in horrendous financial shape and basically can’t afford to retire. Even worse, many of the parents try to deal with their problem by taking out big home equity lines they can’t afford, or charging up frightening balances on their credit cards. Please don’t do this to your kid. If it’s a question of college fund or retirement fund, the most responsible parenting move is to choose the retirement fund.
  
  
• Love your children; don’t indulge them. Look, I totally get that kids want to have the same wardrobe and gizmos as their friends. That’s just human nature. But this is one of those places where the hard work of parenting needs to be done. Take a look at your credit card statements for the past three or four months. I bet some months there are easily a few hundred dollars spent on indulgences for your kids. Well, that’s got to stop. It’s never about telling your kid you are poor, or making them feel bad. That’s not fair to a child. But you have to start teaching them about being fiscally responsible. A $150 pair of jeans or an iPod is not some monthly birthright; it’s something to be reserved for a birthday. And if they really want to keep up with the high school Joneses, then they can get a part-time job. Again, that’s not punishment. That’s stand-up parenting.
  
  
• Watch those self indulgences too! You and I both know it’s not all about the kids. You have a bad day at work and reward yourself with a new pair of fancy shoes. Or you go out to lunch with the gang at work five days a week and instead of maybe a $10 takeout salad you end up spending $20 at a nice restaurant. That’s a $40 difference a week, which is more than $150 a month. Cut back and you are looking at an extra $1,800 a year for savings. Bring lunch to work once in a while and you’re looking at having even more money to invest in your retirement fund. These kinds of small sacrifices are crucial to the success of any savings plan.
  
  
• Get smart with insurance deductibles. If you have a low deductible of just a few hundred dollars, call up your insurance company and see how much your premium will fall if you increase your deductible to either $1,000 or $2,000. I know this one seems counterintuitive, but the reality is that insurance is best used for big-time accidents; you really shouldn’t be making small claims. It tends to aggravate the insurance company, and in response they will boost your premium or even, in time, deny you coverage altogether. So it makes sense to get a policy with a higher deductible. In return you can see your premium cost drop 10 percent to 20 percent or more. While you are at it, also look into the premium reduction you can get by having your auto insurance and home insurance with the same company. That’s typically good for another 10 percent premium reduction.
  
  
• Consider making a move. This one is admittedly a very big step, but it can make all the difference for you and your family. If you live in a very expensive region, or one where you feel compelled to enroll your kids in private school, I think it makes a lot of sense to consider moving to a new area. It may even be just a few miles away—somewhere that has a more affordable housing market, or a stronger public school system, or both. Just think of the financial breathing room it could give you.
  
  
• Drive your car for five years, not three. If you bought your car with a three- or four-year loan, make yourself a promise to keep driving the car for at least one year after you have finished paying off the loan. And if you can stretch it to two or three years of loan-free driving, you are going to be in even better shape. The strategy here is that you can take the monthly payment that previously had to go to the car lender and now just pay it to yourself each month. For example, let’s say your car loan cost $300 a month. Well, once you get the loan paid off you now have an extra $300 a month to put toward your retirement savings. If you do that for two years you’ll have $7,200 saved up. If you then keep that $7,200 invested for another 20 years, and earn an average annual 8 percent return, you will have built a nice nest egg of more than $35,000. Now that’s putting yourself in the driver’s seat when it comes to finding ways to stretch a single paycheck.