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There are two hardcore numbers you need to know before you can hope to save for anything. One is called income and the other is called outgo. If your outgo exceeds your income, the situation for a majority of Americans, you cannot save anything.

The solution is to increase your income or decrease your outgo. Doing both would be even better. Increasing your income is generally the more difficult of the two. It can happen through a raise/promotion, changing jobs, or taking on a part-time job. Reducing outgo is probably the more doable of the two.

Where is Your Outgo Going?

Most of us don't actually know what we're spending money on or how much we are spending. The first step in decreasing outgo is to look at your monthly expenses. If you use a credit card, tracking your expenditures is pretty easy. Otherwise, you just need to make a note of your purchases and add it all up at the end of the month.

If you're like most people, you will be surprised at where some of your money is going. Gas for the car may be a bigger chunk than you realize. Going to the movies or eating out may be taking a big bite out of your income.

Where Can I Cut Back?

Having seen where your money is going, you need to bite the bullet and decide where you can reasonably cut back. In these times of economic crisis, Americans are going to have to learn the difference between a need and a want. Food on the table is a need. A bigger TV is a want.

Americans don't like to go without. But it is better to cut back now and save for your retirement than to end up old and destitute. Changing your buying and spending habits may require that you change your values. It's a healthy thing to do anyway. Decide what's really important to you. Spend more time with family and friends doing things that cost little or nothing. Find more things to do that feed your soul rather than your ego.

What About Debt?

Being short on cash is one thing. Being in debt is somewhat worse or maybe a lot worse. Saving for retirement absolutely requires that you minimize debt. If you can cut back on your spending and start saving money in a savings account, Money Market fund, or Certificate of Deposit (CD), it will do you little good if you are paying 20% or higher on your credit card debt while bringing in 2% or less in your savings account.

Before you start saving the money you have freed from your old spending habits, use the money to pay off your credit cards and any other high interest debt. Pay off the highest interest debt first and

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