How much ARE you supposed to save?
Unfortunately, there is not a silver bullet for retirement.  There is no “magic number.” Everyone’s formula, so to speak, is dependent on a number of factors like current age, intended retirement age, life expectancy, risk tolerance, inflation and—most of all—health.  Generally, the savings target for retirees should be between 80 to 90 percent of your pre-retirement income.  Statistics show that a healthy retirement savings nest egg is one for which your annual withdrawal is 6 percent or less.

What does that mean in real dollars a month?
Again, this depends on your current income and the lifestyle you desire in retirement.

Let’s assume you’re 30, you earn $50,000 a year, and you want to retire at age 65. You have zero saved so far. You’re comfortable living on 80% of your pre-retirement pre-tax income when you retire (which is $40,000 per year).

To reach your goal, you’ll need to amass a nest egg of $1,563,000 by the time you retire. That may sound like a lot, but remember: 35 years from now, one and half million dollars will be worth far less than it is today, thanks to inflation. Also, remember, that money needs to last you for a long, long time—my example will take you through age 90.

So how do you reach your goal? If you’re a 30-year-old with $0 saved who wants to live on today’s equivalent of $40,000 per year in retirement, assuming you invest at an 8% rate of return, you’ll need to save 13.1% of your yearly salary, or $545 per month.

I know it’s something I talk about a lot, but retirement is the MOST important thing Americans will ever save for—more important than home ownership or their kids’ education and definitely more important than summer vacation.

More important than education?
Absolutely. It’s funny to me how many people are surprised by this, but you MUST make your own retirement a priority above paying for your kids’ education. Here’s the reason: While there are a multitude of scholarships and loans available for college students, there are no scholarships for retirement. Your children will have their whole careers ahead of them to pay off loans, whereas you may putting yourself at financial risk—and ultimately, your kids—if you delay saving for your own retirement.

I like to describe it like being on an airplane when the flight attendant explains how to use the air mask, and that you need to secure YOUR air mask BEFORE you attend to a small child. First, get on track for retirement, then you can think about funding little Johnny’s college plan.

It’s time for some financial Spring cleaning?
That’s right.  And I’m not talking about dusting your keyboard. Take a break from clearing the gutters and attacking all those bathroom nooks and crannies with a toothbrush and some bleach—It’s time to do some Spring cleaning of your finances.

Why is it so important?
A nationwide study conducted by LearnVest and Chase Blueprint found that about 50% of adults worry about money and 40% feel they lack control of their finances. That’s a lot of stress—and everyone is in a position to make it better. Taking stock of your finances is like purging your closet: An afternoon of hard work pays off. At the very least, it will help you get a handle on where you stand financially, giving you a better sense of control and a clearer vision about changes you need to make to reach your financial goals.

How do we go about doing it?
I suggest this five-step plan.

Step One: Check Your Credit
A Federal Trade Commission study of the U.S. credit reporting industry found that five percent of consumers had errors on one of their three major credit reports that could lead to them paying more for things like auto loans and insurance. Five percent doesn’t sound like much, but some studies quote as many as 70% of credit reports contain errors. It comes down to how you define “error.” Some things, like an incorrect address, will have no bearing on your score. Other things, like missed payments that never happened, could cause major trouble.

What kind of trouble? Higher interest rates and disqualification on loans and apartments, not to mention higher insurance premiums and in rare cases, even being disqualified for jobs.

This is why it’s so important to request a copy of your credit report from each of the 3 bureaus (Equifax, TransUnion, and Experian) on annualcreditreport.com. That is the only official site, so don’t fall for an impostor. If you’ve been denied credit, you can also get a free copy of your report from the bureau used by the lender who denied you. Should you find any errors on your reports, get to correcting them.

I hate to be the bearer of bad news, but the Urban Institute just released a new study about wealth building and younger generations, and the findings show that Gen X and Gen Y Americans have accumulated 7% less wealth than their parents did at that age over 25 years ago.

Hasn’t the average wealth of Americans doubled over that same period of time?

That’s true, and the American dream of working hard, building wealth, and saving more than one’s parents has held true…unless you’re under 40. It makes sense if you remember that wealth compounds over long periods of time, which is where young people are at a relative disadvantage. Less time saving means less compounding, and a lower bottom line.

But how do you account for the discrepancy that their parents had saved more by the same age?

It’s a number of factors that are greatly out of the individual’s control: Stagnant wages, fewer job opportunities and lowered home values among them.

Don’t people end up in debt because they spend more than they earn? It’s pretty simple, right?
Yes and no.  To explain debt in the past, we’ve pointed to poor decision-making and values gone astray in a culture that encourages instant gratification. But what’s interesting is that recent research shows that scarcity by itself is enough to cause financial self-sabotage. It’s called the “scarcity effect”—a basic economic principle that something in low supply becomes higher in demand.

So you’re saying that having a lower income causes people to go into debt?
Exactly! And it’s not just because a lower income means it’s harder pay the bills—It’s a poverty trap. When facing financial turmoil, people start to borrow at high interest rates they know will hurt them, taking on loans and making bad financial decisions they avoided before they felt desperate. Being in debt robs us of our sense of security and control, and these less quantifiable psychological effects can cause a very concrete fallout—reckless borrowing and deeper debt.

But isn’t that counterintuitive—to borrow if you’re already in debt?
It’s the way we’re wired. A few researchers from the University of Chicago’s school of business published a paper recently that detailed a series of related experiments. Their results showed that scarcity by itself—independent of personality or any other factors—fuels a drive to borrow recklessly.

In one experiment, participants competed in rounds of the game “Family Feud.” One team was “poor,” allotted only 15 seconds per round, while another was “rich,” with a budget of nearly a minute per round. Both groups could borrow time against future rounds, but the “poor” team borrowed far more, progressively shrinking their future paychecks while the rich mostly avoided debt.

So this is a common problem?
Unfortunately, it’s all too common.  I have some pretty grim statistics for you.

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The USDA says grocery prices may rise as much as 4% this year. Last year’s drought led to a grass- and corn-feed shortage, resulting in higher prices for beef, poultry and grain-related products. So unless you plan to stick to that New Year’s resolution to eat just salad and carrots, your grocery bill is going to be more.

What are some basic ways to save?
First, if you don’t have a list, you’re shopping blind and will end up having to throw away things you don’t need and can’t use. Make a list of two weeks’ worth of groceries and shop from it.

Next, don’t be impulsive. Just because it’s on sale, that doesn’t mean you have to buy it. That said, don’t overlook the items in the bargain bin. Generally those items can be great deals, but you need to be careful with canned goods. Any canned product that’s compromised in any way can make you sick. That ten cent can of peaches isn’t a bargain if it means a case of botulism!

How about those big club stores? Are they worth the fee of joining?
It really depends how big your family is and how much room you have in your home to store things. The deals mean buying in bulk. But either way, don’t go crazy in big club stores. Club shopping is very good for certain kinds of items, including toilet paper, paper towels and detergent, but you can actually waste your hard-earned money if you buy bulk sizes of items that you won’t use.  If you live alone, a five-pound bag of apples for $7 isn’t that great of a deal unless you plan to bake a pie, because odds are you’ll be sick of eating them before they go bad. No one likes a mealy apple.

Now what about coupons? Have you seen those “extreme couponing” shows where people somehow end up getting paid to shop?
That’s pretty rare. They call it “extreme” for a reason. The first coupon was issued in 1888 by the Coca-Cola Company, and today coupons remain a popular way to save at the grocery store. The Internet has absolutely revolutionized couponing. Forget inky fingers clutching a pair of scissors while huddled over the Sunday newspaper. It’s all online now.

In 2011, we redeemed 3.5 billion coupons—saving consumers $4.6 billion—up over 6 percent from 2010. What’s even more stunning is the savings that were left unclipped, so to speak. That same year, 305 billion coupons—valued at $470 billion—were distributed via all mediums.

My favorite  website for groceries is coupons.com. It usually has the biggest selection, is easy to navigate and has a section just for grocery coupons. When you find the coupon you like, simply print it and take it with you to the store. Another great site is retailmenot.com. It’s the largest online coupon site in the United States and also has a section just for grocery shopping. Both sites have free apps for iPhones and Androids. Once you find the coupon you want, it will be displayed either as a numeric code or a scannable image that can be entered at the store’s register.

Another surprising coupon source is Facebook. Facebook exclusives and coupons are awarded in exchange for “liking” a particular brand. Keep in mind that brands you “like” may be able to access some of your basic personal information when you opt to download a coupon via an app, but you can remove them from your account as soon as you nab the coupon, preventing retailers from accessing that information in the future.

How about all the jargon that goes along with couponing?
If you want to get in the game, the first order of business is to learn the lingo.

There should be a course! Here’s a quick cheat sheet to the acronyms: OYNO is On Your Next Order, MIR is Mail-in Rebate and BOGO is Buy One Get One (free). Another thing to know is if your coupons are stackable, meaning you can use a manufacturer’s coupon in tandem with a store coupon. Also, find out if stores in your area offer double coupon deals, meaning at certain times you can use a coupon and it will be worth twice its face value.

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Last week we talked about how fear of losing money keeps people from making good long-term investments in the stock market, but this week I want to talk about the other side of the coin: Instead of being overly fearful about losing money, millions of people are unreasonably hopeful that an unexpected windfall is going to make them rich. What I’m talking about is the lottery.

People love the lottery!

They sure do. Worldwide lottery sales were almost $262 billion in 2011. And listen, I get it. The lottery sells hope. A dollar seems like a small price to pay to dream big. But that’s what makes playing the lottery so insidious. It’s like smoking. There’s damage happening, but you can’t see it in the day to day. Just like one cigarette doesn’t give you lung cancer, one scratch off ticket doesn’t make you go broke. But if you add up ticket after ticket after ticket, you’re looking at real money going the drain. And for what? So people can fantasize about lying on a beach somewhere?

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I’m no therapist, but I know money, and it’s really interesting that we can look at people’s behavior patterns and see pretty clearly that psychology plays no small role in people’s investment decisions. The danger is that it can lead to severe missteps that end up costing people countless dollars.

How does that happen? Do you have an example?
The most common mistake we see when people allow their heads to rule their pocketbooks is giving into FEAR. Fear is without question the primary culprit when it comes to emotions getting in the way of sound financial decisions.

Can you elaborate on that a little?
Absolutely. A certain degree of what psychologists call “risk aversion” is good. It’s risky to jump off a cliff, so most people choose not to do it and avoid serious injury.  That’s true of money decisions as well: It’s risky to put your entire retirement nest egg into one stock. Just like in life, a healthy amount of trepidation is wise when it comes to managing your money.

Unfortunately, what we see more often is people overwrought with fear. No one wants to lose their money—it’s a very scary prospect—so a common mistake is to play to too safe. The irony is that you end up LOSING money if you play it too safe.

How do you mean?
The national average on savings accounts is about 0.2% right now. Zero point two! That is NOTHING. You may as well pay the bank to keep your money there, because that’s basically what you’re doing. Inflation is about 2% right now, but historically it’s around 3%. Either way, zero point two doesn’t begin to keep up with it, much less outpace it.

There are many savings programs available from various sources that can help develop a savings plan tailored specifically to your situation. There are 529 savings plans available through state and federal institutions, as well as all sorts of grants, financial aid plans and even life insurance packages that provide college funding options. The issue for many parents is choosing an option and taking action.

“The important part is that parents do something, anything. Sometimes there’s this paralysis by analysis,” says Sedrik Newbern, an Allstate Insurance agent based in northern Illinois.

“I recommend to just do something. Sticking the money under a mattress or getting a savings account, or really having a conversation with your insurance agent or financial specialist to figure out ways that you can accumulate money in a way that doesn’t put much of a tax burden on you and allows you to grow your money, so when your child is of college age, you’ll have money to pay for it.”

Newbern notes that while having a plan in place and taking action is important, the dramatic increases in the cost of college may be exceeding the amount of assistance available through traditional financial aid vehicles.

Costs Are on the Rise
The Washington Post recently reinforced Newbern’s assessment, as it reported that financial aid is not keeping pace with the rising cost of college, citing a study by the College Board Advocacy and Policy Center.