The usual thing happens when you get paid. After you get over being shocked by how little you have left after taxes, you divide it up between all your bills and plan to put what's left into your savings.
But it seems like you never have any extra money and your savings don't grow.
Paying yourself first would be a better plan. Don't take the money for yourself.
You might find that your savings grow much faster if you do it this way.
If your employer offers a 401K plan, the first thing you should do is put as much money as you can into it. If you can't do that, at least put in enough to get your employer's full matching contribution.
Before taxes, this investment is made. Your investment is bigger, and when you add the money from your employer, it grows quickly.
Then, have a brokerage firm or mutual fund company take money out of your bank account every month. This money should first go into an Individual Retirement Account (IRA). If you have at least five years until you retire, it should be a Roth IRA.
Next, have a few more dollars taken out of your account to go into a mutual fund that doesn't charge any fees. The younger you are, the riskier you can be when choosing a fund.
After that, figure out how to pay your bills and other costs of living. If money is tight, cut back on your living costs and use the extra money to pay down your debt.
Start with the account that owes the least. Once that debt is paid off, add the amount you were paying toward that debt to the amount you were paying toward the next debt with the lowest balance. If you keep doing this, you could be debt-free in 5 to 7 years.
Another way to do this is to pay off the debt with the highest interest rate first. The main idea is the same, but with the first method, you see more progress, though it could cost more depending on how your debt is split up.
(If you don't believe me, get the "Debt Reduction" module for Microsoft Money Premier or Quicken. You'll be surprised by how much money you save and how quickly you can pay off your debt this way.)
The idea is to cut back on your current way of life so that your savings can grow and your debt can go down.
I know that many people who read this will scream that this plan can't work.
But you can do it if you have a little bit of willpower and can wait a while to feel good.
The problem is that if you don't do this, your future could be very bad.
