By Hollis Colquhoun

Before holiday shopping is in full force, think about your New Year’s resolutions and 2011 financial goals. What you do and buy for the holidays will have a direct relationship to your ability to save after the celebrations are over.

The first order of business is to know what your basic monthly budget is and how it relates to your average monthly income. This may sound like drudgery but if you understand what money you have, where some of it needs to go and then where you want the rest to go, you can devise a short and long-term plan. Otherwise you’ll just be spending today and hoping money will magically appear tomorrow.

Money isn’t a line on a credit card; it’s an asset. Budgeting isn’t hard, it’s just math. Take control of this asset and know where it’s being used. List all monthly income sources on one side of your ledger and on the other side write down the essential bills (rent, mortgage, utilities, food, car loan, etc.). Then include debt payments such as for student loans, credit cards, and finally miscellaneous expenses. Don’t forget to pro-rate the bills that only come once or twice per year (like taxes and car insurance).

Can you make small changes in your spending and come up with $50 per week that could go towards achieving an important financial goal? Perhaps you could track and lower your food and/or miscellaneous spending? Get a cheaper phone/cable plan? Increase your car insurance deductible?

When you think you’ve found a way to get extra savings from your budget, the next question is where should the $50 go – into a special purpose savings account for a summer vacation, more presents, a new car, an education savings account for your child, or into a retirement savings account for yourself?

This may sound trite, but the holidays don’t revolve around store-bought presents. Donating time to do a chore, making a gift, writing a poem, promising babysitting time, baking special cookies are all worthy expressions of the holiday spirit. Being with family and good friends makes the memories..

If someone really does need a store-bought item, (maybe a laptop for school) one great way to get family and friends involved is to open up a special purpose savings account at and have everyone link to the account to make contributions. Of course it helps if this is set up months in advance. Additionally, part-time jobs open up during the holidays so if the budget is tight and you or your older children need to find extra money, you can apply for a job for those four weeks.

Speaking of friends and family, food can be a big expense during the holidays, so instead of racking up a huge grocery bill, make a dinner or two potluck, having each person bring a dish. Then everyone’s a chef and the meal is more of a family affair.

In terms of New Year’s resolutions, one of the top financial priorities for everyone, if not THE top priority, should be securing enough money to live comfortably in retirement. The only person who can save for your retirement is YOU. Even if you are a stay-at-home mom or non-working spouse, your working husband can and should set up a non-wage earning spousal IRA for you. Realize that there are a variety of ways to finance or save for a vacation, car and college tuition, so retirement comes first.

If you take that $50 per week or $200 per month and put it towards retirement savings, starting right now, what could you have when you’re ready to retire at 65?

There are calculators that you can use at,, and a variety of other financial information sites. Plug in the age you start to save for retirement, assume a monthly savings amount, and the expected annual percentage increase in the investment value of the account. For simplicity’s sake we are leaving out inflation and income tax assumptions.

When you put money into a qualified retirement account you can use pre-tax dollars like with an IRA or 401(k) and pay taxes when the money is taken out of the account; or after-tax dollars like with a Roth IRA and withdraw the money tax-free. In any case the money grows tax-free while it is in the account.

I did the exercise for you and assumed that you are 25 years old, or maybe 30, or 35, that you will contribute $200 per month and won’t ever increase that amount. I assumed an annual return of 7 percent, compounded annually. If you start saving at age 25, you will have $512,000 at age 65. If you wait to start saving until you’re 30, you’ll have $355,000 at retirement, and if you don’t start saving until you’re 35, your total account value at retirement will be $242,000 (using my assumptions and pre-tax amounts at retirement).

The conclusion is, saving for your retirement as early as possible will allow you to experience the miracle of compounding. If you start at age 25 and contribute $2,400 per year, compared to starting at age 35, you will contribute an extra $24,000 for beginning your retirement savings plan 10 years earlier but will have an extra $270,000 at retirement. If you haven’t started saving for your retirement and you’re older than 35, it’s not too late to start. Spending and saving can work hand-in-hand.

When opening a retirement account, or any investment-related account, consult with a financial professional to determine which investments are appropriate for your situation, goals and risk-tolerance.

About the Author: Financial survival counselor Hollis Colquhoun is an expert in “financial self-defense” for women and author of the new book, Women Empowering Themselves: A Financial Survival Guide. Hollis wrote the concise, pocket-book manual to help women take charge of their finances and overcome money anxiety disorder (M.A.D.). Hollis, who holds black belts in Karate and Taekwondo, combines martial arts principles with over 20 years experience on Wall Street and with her work as a financial counselor to help women of all ages and situations achieve financial security and independence. Contact Hollis at