Don't despair. There's plenty of time to get back on track. Here are a few suggestions:
First, make a budget. Compare what's going out with what's coming in. If your expenses exceed your income, you'll never get ahead.
Track what you spend. For the next few months, write down every penny you spend on rent or mortgage, utilities, groceries, meals out, parking meters, allowances, gas - the works. Don't forget to add in monthly amounts for periodic bills like your car and homeowner's insurance.
Review your list for non-essentials you can trim. A $5-a-day coffee habit costs $1,800 a year; buying a $10 lunch every day will run about $2,500. You could save a fortune by brewing your own coffee and packing lunch a few days a week. Put those savings toward paying off credit cards and you'll save even more, since you'll reduce the amount of interest accrued on those loans.
A few other money-saving ideas:
Consolidate errands to save gas
Try generic brand groceries
Investigate using generic drugs and ask if there's a discount for ordering multiple-month prescriptions by mail
Raise insurance deductibles
Pay down higher-interest credit cards first
Balance your checking account regularly to avoid overdraft charges
Avoid using out-of-network ATMs; take cash back on debit card purchases to avoid foreign ATM fees
Quit smoking - a pack a day habit costs over $1,500 a year
Weatherproof your home and buy energy-efficient appliances
Check out books and DVDs from the library instead of buying them
Start saving for retirement. Now. Thanks to compound earnings (where interest earned on your savings in turn generates more earnings) the sooner you start saving, the faster your account will grow. Here's an example:
Say you're 22, earn $30,000 a year and put aside 6 percent of pay until age 65 at an 8 percent average annual rate of return. Your $77,400 investment will grow to $619,000 by 65; but wait until 32 to begin saving and you'll only accumulate $274,000 - a huge difference. If you increase the percentage of pay saved and factor in annual raises, your savings will skyrocket.
Probably the easiest and most tax-effective retirement savings method is your employer's 401(k) or similar plan. Money is deducted from your paycheck before being taxed, which lowers your taxable income and thus, your taxes. You aren't taxed until the money is withdrawn at retirement, when your taxable income and tax rate may be much lower.
Most companies match a portion of your contributions - commonly 50 percent of your first 3 percent of pay saved, or better. That's a 50 percent rate of return, so be sure to contribute at least enough to take full advantage of the match. Practical Money Skills for Life features a complete guide to 401(k) plans and other employer-provided benefits (www.practicalmoneyskills.com/benefits).
If a 401(k) plan isn't available, try a Roth IRA. Although initial contributions are taxed, you'll never pay taxes on the earnings. The earlier you contribute to a Roth, the bigger your tax savings. Consult a financial professional regarding your personal situation.
You've still got several months to end the year on a high note, so start saving now.
Jason Alderman directs Visa's financial education programs. Sign up for his free monthly e-Newsletter at www.practicalmoneyskills.com/newsletter.