Have you ever heard someone say, "If I could only make more money, then I could really start to become a saver, or maybe even an investor"? Perhaps you’ve even said something like that yourself.

If so, you may have been mistaken. The truth is, if you spend more than you make, you always will be in debt, always stressed, rarely happy, and eventually poor or bankrupt. In addition, no matter how large your paycheck is, if you don’t save, you will never live a life of financial abundance. The best way to save is when you receive your earnings, before you pay anyone (the IRS for income tax, your mortgage, your utilities, etc.), you need to pay yourself. If the government expected to be paid first, it wouldn’t have enacted laws that allow us to put part of our earnings into retirement accounts such as IRAs and 401(k) plans before the tax man takes his cut. This is called "pretax" investing, and it is the single smartest thing you can do to build wealth.

Now where is this money going to come from? Take the $5 you spend a day on your double latte, your Diet Coke or your glossy magazine, and you will be saving roughly $150 a month, or almost $2,000 a year. This $2,000 could be put into your retirement plan at work, where it can grow tax-free until you retire. With the magic of compound interest, by the time you cash in, you surely could have more than a million dollars sitting in your account!

So where do you begin? The hardest part of any undertaking is getting started. With that in mind, here are six exercises that should help you get your spending under control... and ultimately make it easy for you to pay yourself first.

Exercise No. 1: Know What You Earn.

On a piece of paper, write down both your gross and net income.

Exercise No. 2: Estimate What You Spend Each Month.

Estimate how much you spend each month on everything from food and shelter to lipstick and movie tickets and write it down too.

Exercise No. 3: Track What You Really Spend.

For the next week, write down every purchase you make, how ever small. This includes highway tolls, video late fees, pay phone calls... everything. But don’t change your spending habits just because you are recording them. The idea is to recognize them and then decide where it makes sense to cut back.

Exercise No. 4: Start Paying Cash.

The easiest thing you can do to reduce your spending automatically is to start paying for everything with cash. That’s because cash makes you think more about exactly how much you are spending and what for.

Exercise No. 5: Give Yourself a Credit-Card Haircut.

Now, take a pair of scissors and cut up one of your credit cards. Go through all your credit-card bills, pull out the biggest one, and then cut that card into about ten pieces. If possible, cut up more than one card. Remember, if worse comes to worst, you can always order a new one!

Exercise No. 6: Never Spend More Than $100 On Anything Without Taking 48 Hours To Think About It.

To get a handle on impulse purchases, set yourself a ceiling. Do not permit yourself to buy anything for $100 or more without first leaving the store and giving yourself a 48 hour "cooling-off" period. This way you can give yourself a chance to decide rationally whether the purchase is really necessary.

The basic point of getting your spending under control is, of course, to allow you to save more. Ultimately, your goal should be to get your savings rate to at least 12 percent, if not more. But after practicing these exercises, you will find that you have a lot more money that is worthy of saving than you thought. If 12 percent seems high to start with, try saving at least 6 percent of your gross income and commit to raising just one percent per month for the next six months. And remember, no matter what size your paycheck is, if you don’t save, you will never achieve a life of financial security and abundance!

©1999 David Bach, Orinda, CA. All Rights Reserved.

This article is excerpted from David Bach’s book, Smart Women Finish Rich: 7 Steps to Achieving Financial Security and Funding Your Dreams (Broadway Books). David is one of the country’s leading financial advisors and educators. A senior vice president of a major New York brokerage firm, Bach is a partner of The Bach Group in Orinda, CA, which manages more than $600 million for individual investors. To learn more about how you can take control of your financial destiny, read Bach’s book, Smart Women Finish Rich, or call him toll free at
877-ASK-BACH.