15 Ways to Never run out of Money

1. Live Modestly
For those millions of Americans currently out of work or underemployed, that is not a choice. But even when times improve, living within your means has its benefits. Retirees in our survey who were most satisfied with their situation credited living modestly as among the best steps they'd made earlier in life. "Since we never were extravagant people, we live just fine," says Pancho Garcia, 67, of Mebane, N.C., a retiree who participated in our survey.
And self-control has its rewards. Mary-Jo Webster, 39, and her husband, Jamey, 37, bought a house four years ago in Arden Hills, Minn., that was significantly smaller and less expensive than what they could afford. And they resolved to try to live on just one income. That decision paid back with interest when Jamey quit his job in computer technology to stay at home with their twins, Benjamin and Madeline, 2.
2. Keep to a Budget
As the Websters and other young couples we interviewed found, financial discipline is essential. Ensuring your money will last your lifetime begins with knowing how to make your paycheck last the month.
Toward that goal, create a basic spending plan or budget. At its simplest, a budget involves splitting your expenses into have-to's and want-to's, and paying the have-to's first. Start with tracking your spending for a couple of months. You can use free budgeting applications on websites such as Mint and Google Docs, or a pencil, paper, and a calculator. Setting some short- and long-term spending goals may make it easier to stick to your plan. Include payments into an emergency fund until you have at least enough for six months of household expenses set aside.
3. Start Saving Early
Retirees who began saving and planning early -- say, in their 30s -- had greater net worth: $1.1 million on average, compared with $868,000 for those who waited until their 40s, and $651,000 for those who started later, our survey found. Thirty-nine percent of retirees said they regretted waiting to save.
Most young workers today don't have access to traditional, defined-benefit pensions funded by employers, so they have to put enough money away during their careers to generate a comparable income stream. To do so, they need to take advantage of options offered by their employers. A growing number of employers automatically enroll new workers in a 401(k) or other retirement savings plan, typically deferring 3 percent of pretax income into a mutual fund targeted to an expected retirement date. The good news: Most new workers don't opt out of contributing once they're automatically enrolled. The not-so-good news: They also don't raise that contribution beyond the initial 3 percent. For the best results, they should eventually boost their deferrals to at least 10 percent of their income.
The young workers we interviewed appear to be heeding that message, contributing at least enough to their retirement accounts to earn the free money their employers offer in matching contributions. And the benefits of the Roth version of IRAs, 401(k)s, and 403(b)s are gaining attention. If you're single and under 50, and your modified adjusted gross income is less than $120,000 (less than $177,000 for couples filing jointly), you can put up to $5,000 of after-tax income into a Roth IRA and avoid any additional federal tax on that money and its gains if you have the account for five years and wait until age 59 1/2 to begin taking it out. It's a potential boon for lower-income earners who fall into low tax brackets now but may face much higher rates when they retire.
Young, on a Budget, and Planning Ahead
After racking up $8,000 in credit-card debt two years ago from their wedding and a move to Portland, Ore., Claire and Chris Angier, both 30, started tracking their expenses. Claire, a teacher, and her engineer husband follow a simple plan: They put aside money in their bank account toward debt, rent, utilities, and other essentials, and split a set amount to spend as they like. Using cash rather than credit for discretionary spending helps keep them on track. "You physically see the pile getting smaller," Chris says.
The Angiers apply discipline to their leisure pursuits -- he's a marathon runner and she teaches exercise classes -- and to their finances. Chris puts 11 percent of his pretax income into a 401(k) plan, reaping a generous company match. Claire, who's eligible for a pension, puts 5 percent into a 457 retirement plan. They're whittling down their educational debt while paying off a higher-interest car loan. And they're building equity in a rental property in Syracuse, N.Y., purchased on the cheap during their grad-school days.
They frequently discuss their finances. "Talking about money is not a taboo subject," Claire says. No doubt that will help when they welcome their first child this spring. "I think we'll continue to budget," Claire says. Chris adds, "It's a habit now."

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