Living on what you make

May 19 - In a special series called “Today’s Money for Women,” “Today” and Money magazine recently surveyed 500 women about their financial problems. Five concerns stood out: living within your means, affording, health insurance, getting rid of debt buying a home, and saving for retirement. Then, we asked our viewers to email us about their financial concerns, and we found five women whose problems matched the survey results. “Today” financial contributor and Money magazine editor-at-large, Jean Chatzky answers questions to help these five women solve their money problems and each day, a different national association will take your phone calls, toll free, to help you with your financial problems. Here’s some advice on how to live on what you make.

“MY MONEY DREAM is to put away enough money to be able to have a baby and stay home. We recently married and purchased a fixer upper house that has been draining most of our funds. We want to do so many things to the house that we may never be able to save enough for me to stay home for a few years and afford a baby. We make a decent living, so we are not hurting. I put away $50 every paycheck into a money market fund. It will be harder to save money on one income, and I am worried about not putting enough into my 401K — and a college fund — before we have children. What is most important?”

— Leslie K., Pittsburgh, PA

KNOW WHAT’S COMING IN

In order to live within your means, you have to know what you’re making. That means setting up some sort of record keeping process (you can do this with a software program like Quicken, but you could just as easily use pencil and paper). Record what you receive from all sources — your paychecks, social security payments, any income from real estate or investments — then subtract the taxes you owe on all of these things and that’s your monthly nut.

KNOW WHAT’S GOING OUT

First, on the same worksheet, lay out your fixed expenses because they’re the easiest. What do you spend each month on rent or mortgage, car payment, insurance, debts (student loans, installment debt), existing credit card debts, utilities and the like. Now take a look at how much you spent the last three months (your credit card statements may be helpful in tracking this) on food, entertainment, clothing and all of your other variable expenses. You may not be able to get a good grip on that number today for past months, but you can going forward by starting to track your spending. Save every receipt for a couple of months until you start to see patterns: perhaps you’re spending more than you ever intended on birthday gifts for the dozens of parties your kids are invited to, perhaps you didn’t realize that a $5 lunch each day adds up to.

MAKE CHANGES

Once you know what’s coming in and what’s going out then you can make the necessary changes in order to keep yourself living within your means — you can decide you’ll curb the amount you spend on lunches and dinners out (like Leslie) or on gifts. And then you can start to save the money that you’re NOT spending and put it away for your future. One of the best ways to do that is by signing up for an automatic investment plan like a 401(k) or IRA that will pull money out of your account before you have an opportunity to spend it.

AND FINALLY

Knowing what you want is key. Leslie and her husband have been able to make the changes in their lives because they have a goal - they both want her to be able to stay home once they have kids. That’s the big reason they’re willing to work so hard, to persevere, in order to get there.

Jean Chatzky is the financial editor for “Today,” editor-at-large at Money magazine and the author of “Talking Money: Everything You Need to Know About Your Finances and Your Future.” Information provided courtesy of Jean Chatzky and Money magazine. Copyright © 2003. All rights reserved. For more financial advice, visit the Money magazine Web site at: Money.com