Save First

IT'S A TOPIC WHERE I always seem to be in the minority. The controversy: Should you save first and then spend what remains���or, instead, prepare a budget which then determines how much you can ���afford��� to save?

Budgets are scary and stressful. Go ahead, make a budget if you like. But if you conclude that you can���t afford to save, there���s no progress in that.

A Northwestern Mutual survey found that 49% of U.S. adults say they don���t have a clear idea of how much they can afford to spend now and how much they should be saving for later. Need greater clarity? I���ll clear it up: Start by saving 15% of your gross income.

���Afford to spend��� is an interesting phrase. My contention: You can afford to spend what���s left after you save a significant portion of your gross income. What you can���t afford to do is spend more than that.

What if you save 15% of gross income and you can���t support your lifestyle with what���s left? You have to look at your spending and determine what needs to change���fewer lottery tickets perhaps, a smaller car payment, dine in rather than out, leave more of the junk food on the grocery shelf. In general, what you need is a little less discretionary spending.

You���re living paycheck to paycheck, you say? So does Elton John, I hear. For all but the lowest-income Americans, that problem reflects the amount of their spending, not the size of their income.

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