Suze Orman's new book on saving money.

Suze Orman says paring expenses is the best way to generate needed cash You know you need to save money, but you have no idea where or how to start.

Financial guru Suze Orman shares her no-nonsense approach to coping with the credit crisis. The most effective cash-generating action you can take in 2009 is to spend less. The less you spend, the more money you will have after paying the monthly bills to put toward reducing your credit card debt, building your emergency saving and increasing your retirement investing.
To get a grip on where your money is going, fill out this Household Cash Flow worksheet. To do this, you need to first pull out a year's worth of bank statements and credit card statements. The amount you put in the right-hand column should be the average cost for the past 12 months.
(Find an exercise worksheet at www.suzeorman.com.)

PROBLEM: Your expenses are more than your income.

ACTION: Circle every expense that is a"want”. It is imperative to separate expenses that are for true needs (health insurance, electric bill) from those that are not crucial (gym membership,new clothes, computer games, etc.).

If you do not have an eight-month emergency savings fund, if you have credit card debt, and if you are not saving for retirement, you have no choice but to reduce and even eliminate many of the"wants"your family is spending money on.

This is not a comfortable or easy exercise. Cutting down from four manicures a month to three is not going to get you where you need to go. Your financial security is buried in those expenses.
The more you are willing to curtail spending ,the more money you have to protect your family. The $25 you don't have mindlessly shell out to the kids every week when they head out to spend time with friends is $100 a month you have to put toward a term life insurance policy that protects them if anything were to happen to you. The $300 a month you don't spend on the second car your family can do without is your future retirement security.

Put that money in a Roth IRA for 20 years and you will have more than $157,000,assuming your money grows at an annualized 7% rate.

PROBLEM: Even after removing the 'wants' you still have no money to put toward paying off your credit card debt and building savings.

ACTION: Look for ways to pay less for your needs. You need a phone,but do you need a home phone and a cell phone? Does your family need the super-de-luxe cell plan or might you be able to spend $50 less a month with a scaled-back plan? Have you really, seriously done everything to reduce your utility bills? I am talking about the low-hanging fruits of inexpensive insulation and replacing burned-out bulbs with energy-efficient compact fluorescent lamps. I know you have heard all of this before. But you sort of filed it away under "someday I really should." That day is here.I bet you can reduce what you spend on your family's needs by 10% to 20% if you put your heart into it.

THE BOTTOM LINE: HOW TO 'INSURE' BIG SAVINGS
Health insurance, car insurance and home insurance (including renter's insurance) are three of the most important"needs" for every family. Without guestion, they are necessary expenses.
But there are ways to lower your insurance premiums. You shouldn't reduce your level of coverage, but rather, make sure you have taken advantage of every deal and discount possible. Raise the deductibles on all your policies. You can save 10% more if you agree to a deductible of $500 or $1,000 rather than just $250.

There's no need to keep a low deductible when you have a solid emergency savings fund that can cover any out-of-pocket expenses. Keep your auto and homeowner's/renter policies with one insurance company.

You will be eligible for a 10%-20%"multiline"discount. Designate one car as your"low mileage"car. If you keep annual mileage below 7,500-10,000 miles, the premium discount can be 10% or so. Keep your FICO score above 700.

Some insurers base the premium rate you are offered on your credit score,the more likely you are to get the best terms on all your insurance. Excerpted from"Suze Orman's 2009 Action Plan"by Suze Orman. © Suze Orman, a Trustee of the Suze Orman Revocable Trust.