During these tough times, few people are being given an increase in pay, and if they are, it usually amounts to just a couple of percent. Fortunately for them, inflation is also quite low, so it appears they may be able to avoid losing ground. Nevertheless, with all the government stimulus and spending, it’s not hard to envision high inflation and higher interest rates not too far down the road.

Statistics show that few Americans have given much thought to retirement. According to the website www.cnnmoney.com, the average net worth for an American 55-64 years old is about $180,000. And, that includes real estate. If you consider that a generally-accepted rule says that you can draw about 4% (adjusted for inflation) from your retirement portfolio, annually, to meet retirement needs, the average 64 year old could draw a starting amount of $7,200 at age 65. The actual amount could be much less when that $180,000 also includes the value of one's home.

The bottom line? It’s obvious from these statistics, that few have saved enough. So if you need to save more and you’re unlikely to get a significant raise anytime soon, what can you do? The answer: Give yourself a raise. How might one do that you ask? You can give yourself a raise by taking a serious look at how you are spending your money today and eliminating discretionary items. And, if you are in the 25% Federal tax bracket, each dollar you avoid spending has the same impact as if you earned another $1.33. What a deal! (Actually, when you consider that you would not have to pay State, Social Security and Medicare taxes, it would be much more than $ 1.33).

So how can you cut your spending? First, you need good data. If you don’t know where your money is currently going, we suggest you track it for a few months. You might want to check out the online site www.Mint.com, recently purchased by Intuit, the provider of the Turbo Tax and Quicken software packages.

There are also hundreds of ideas on the internet. Just do a search on “How to spend less” and a number of lists pop up. Some ideas that come to our minds:

- Cut out that daily latte
- Pack a lunch for work
- Mow your own lawn
- Learn how to do some of your own repairs
- Buy a car instead of leasing, and keep it longer
- Cut back on the cable package (read some books)
- Reduce your cell phone bill (Do you really need the data package?)
- Increase insurance deductibles
- Eat out less

We’ve written before about how simplifying our lives can make a lot of sense (See our blog “Is Simplicity the Answer”, dated May 13, 2010). We’ve all become accustomed to all the new gadgets and technology available to us. Yet, do we really need all of these things? The answer depends on your priorities. How do some of the items on the list above compare to having adequate funds for retirement? Or, having enough to send your kids to college? Regardless of the answer to that question, we are certain that some items can be cut form your budget so that you can give yourself a raise and save more for other, higher priority needs.