Your 5-minute guide to saving money

By MSN Money staff

Saving money is as much mental as fiscal. With an attitude adjustment and perhaps a few tricks, you truly can get ahead -- one step at a time.

First, stop making excuses. "I don't make enough" and "I'll do it later" just hold you back from potential good fortune. Remember, the sooner you start saving, the more you can save. (See "6 (worthless) excuses for not saving money")

You'll need to lay some groundwork. Like so many financial decisions, saving starts with a plan. How much money is coming in? Where does the money go? Where would you like it to go? Write it all down. For help, see MSN Money's Managing Your Budget Decision Center, especially "A simpler way to save: The 60% Solution." If you're 20, don't miss "Retire at 40? Here's how."

Daydream

Now set some savings goals. Write down your short-term dreams, like travel or a down payment on a house, and your long-term goals, like retirement. Make sure they're attainable or you'll just get discouraged. For short-term goals, MSN Money's Savings Calculator can help you figure out how much and how long you'll need to save. (See "Put a price tag on your dreams.") Two things to remember:

• Pay yourself first. Savings should be your priority. Don't try to save whatever is left at the end of the month. Decide how much you're going to save, then set up an automatic deposit from your paycheck to your savings account.

• Start an emergency fund to cover three to six months of living expenses (not salary). You might use a tax refund or a bonus to jump-start your emergency fund. (Read "Why you need $500 in the bank" and watch the video "Build an emergency fund.")

Unload your debt

Even if you're carrying debt, try to put something into savings each month. When you're debt-free, take the money that was going toward debt and put it toward your savings. To see where you stand, see MSN Money's Debt Evaluation Calculator.

• Pay off your credit cards. You may have heard that you should first pay off the credit card with either the highest interest rate or the lowest balance. Also consider tackling any card that's near its limit, because maxing out cards hurts your credit scores and can trigger penalties. Put as much as you can toward the first debt. When that amount is paid off, take the total amount you were paying and add that to the minimum payment of your next debt. (See "16 favorite money rules of thumb.")

• Cut up your credit cards and pay with cash. This forces you to spend only money you actually have. Keep one card for emergencies. (See "7 radical ways to save money.")

• Pay bills as soon as they come in or have them paid through automatic deduction.

Where does it all go?

The less you spend, the more money you'll have for savings and debt reduction. Take a hard look at your expenses. Depending on how much you want to save, you may need to make some difficult decisions. Think about what's truly important to you, and make cuts you can live with -- cable TV, perhaps. Family safety, definitely not. (See "10 times you can't afford to skimp.")

Continued: Savings tips

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