This article is part 2 in a series of articles meant to help scientists take control of their finances.

Last month, we introduced this series. We outlined what, exactly, we were going to discuss, and why it was important for scientists to start thinking about financial planning and their retirement as early as possible in their careers. We saw how starting to save at an earlier date would mean big differences in how much someone had put away by the end of their career.

This isn't necessarily news. ... Most people can see the inherent logic in the theory of "save more, start earlier." And being smart scientists and all, most of us can do the necessary math. But you're probably thinking, "That's all well and good, but I'm having trouble just paying the rent every month! How can I possibly start saving!" This month's article is all about that--tips on taking control of today's finances so that you can save and start taking control of tomorrow's.

The Bank Account

Let's start with the basics. We've all got a bank account, right? And some sort of paycheck (be it grant money or money from TA'ing, or that job you've got on the side). That paycheck is usually put into your bank account automatically a couple of times a month. And every time you need money you pull it out of the bank machine. Or you write a check. Your rent isn't something you worry about because you get paid on the first, so you've always got just about enough to pay that. And all of your other expenses (the subway ride, groceries, or that occasional beer after work) get paid with money you take out of the bank machine, as you need it. You know how much you have left in the account because the bank machine slip tells you. And at the end of the month, you're stuck eating Kraft dinners because the ATM says you've only got $10.00 left.

Sound familiar?

Then it's time to take control!

That can be hard, I know, so we'll start with the basics. ...

First, do a "theoretical" budget. (Don't worry--everyone cheats on their budgets. But you should at least have some kind of look at what's going on every month.)

Start with how much you're getting paid. After taxes. Subtract rent, cable, heating, and all those things you get bills for every month. Divide the rest by 4.25 to determine how much you have to live on each week. Not much, I expect. But this amount represents your theoretical budget--your available spending money each week. Don't forget that it has to include funds for big purchases (i.e., clothing, shoes, etc.) as well as the vending machine goodies. And this is what your savings should come out of as well!

The next step is to examine the amount. Is it something you can live on? (I hope so, because you're going to have to!) But the real question is, can you live on 90% of it? Your goal is to save something, and 10% of your theoretical budget is a good place to try to start.

If you think you can't save any of it, the next step is to look at what, exactly, you're spending the money on. Not theoretically, but in practice. For 2 months or so, keep a spending log detailing every dollar spent, and what it was spent on. You might even consider tracking this information by using a commercial financial planning program for your computer. At the end of the 2 months, categorize your spending into key headings (e.g., entertainment, food, dining out, etc.). Then think about what category is least important to you, and where you can cut back. Are you really using that cable TV? Can you bring lunch to work once each week?

Nobody sticks to a budget. That's just life--emergencies come up, things happen, and drunken people, for some reason, never forget their bank machine PINs. But there are a couple of tips you can use to start saving today:

  • Instead of setting a limit on the amount you can pull out of the ATM, limit the number of times you can go to the ATM. Say, twice a week--once for the week, once for the weekend. Or even better, once a week. Controlling the number of times you take money out is better than saying, "I'll go to the machine, but only take out $20." You can't budget that way because it's hard to remember how many times you've pulled out $20. Controlling the number of times may save you money on bank service charges, too.

  • Get a second bank account and automatically transfer an amount (any amount you think you can afford) to it each time you get a paycheck. Most banks will do this for you free of charge. You won't notice that the money's gone if it was never there in the first place. Oh--and don't get a bankcard for this account, either. If you do need the cash, it's there for you, but it's just a little more inconvenient to get at.

  • Credit Cards

    We'll talk about credit cards a little more when we discuss investment options in a couple of months, but I wanted to say a quick word about them now. Credit cards are convenient and wonderful things, but they can also be evil in what they can do to both your budget (because you can use them any time whether you have the money or not) and your ability to save (because those interest charges add up). They'll ruin a perfectly good budgeting strategy. And when they're not paid every month, they'll rack up interest at between 15% to 29% per year. One of the soundest investment decisions you can make is paying these cards off--I can't think of another investment that can make you a guaranteed 15% to 29% per year. But the first step is to not use them in the first place. I know. It's hard. And there's no transdermal patch to help out. But one way to wean yourself off gradually is to never spend more on your card this month than you paid on your card last month. That way, your balance will always be decreasing.

    Hopefully, this article will get you started saving. Next month, we'll examine "saving goals" and building realistic targets to work toward, whether they may be a condo in Florida at the end of a long career or a vacation in Thailand next winter.