We live in a consumer-driven society in which we are inundated with daily advertising telling us how much better our lives will be if we buy a certain product or receive a certain service. Banks do not help much either; they send out pre-approved credit card offers to anyone with a pulse (and we’re only slightly exaggerating) while paying less than 1% annual interest on savings accounts. 
With so much encouragement and incentive, it is small wonder the average American household has over $7,000 in credit card debt and the average American adult has less than $25,000 saved for retirement. In other words, in the most abundant society in human history, most Americans will enter retirement with far less than they need to maintain a quality standard of living.
Successfully planning for retirement involves a major paradigm shift in the area of spending and saving. In other words, we as a society need to learn to spend less and save more. Here are four steps to cultivating better spending and saving habits:
Assess your Present Situation: Before making changes, it is important to understand where you are at currently. Many people have become so accustomed to spending on credit cards and paying monthly minimums that they are not even sure how much money goes out each month. It is time to change all that. Take out your bank and credit card statements for the past six months to a year and figure out what you are spending money on. Then decide which items are necessities and which are luxuries. Decide today that you are going to avoid luxuries until you have your financial house in order.
Set Up your Emergency Fund: Unexpected events come up and there is little you can do to avoid them. But what you can do is have a fund specially designated for emergencies. The first step is to save $1,000 as quickly as possible, then keep adding monthly to this fund until you have saved 6 to 12 months of income.
Shop Smarter: A very big part of the monthly budget is food and clothing. And although these are necessities, there are ways to cut back in these areas without starving the family. First of all, buy your groceries only once a week or if possible once every two weeks and avoid trips to the store in-between shopping days. The less often you are in the store, the less chance you have of making needless impulse purchases.
Second, make a comprehensive list ahead of time of everything you need and buy only what is on the list. For some, this is a difficult discipline to develop, and you may want to ask your spouse to take over the grocery shopping duties if you think you are too weak to do it yourself.
Third, shop with cash. You may protest that using a debit card that withdraws cash directly from your bank account is the same as using cash. But actually, it is much easier to spend with a plastic card than to take twenty-dollar bills out of your wallet and hand them to the clerk. Also, if you only bring a set amount of cash to the store, you will be certain to only buy the groceries on your list.
Finally, consider shopping at discount stores such as Aldi’s and Dollar Tree if you have them in your area. You may be surprised how much you can save on the same or similar items simply by purchasing them at a “no frills†store where you do your own bagging and return your own shopping cart.
Pay Yourself First: Now that you understand your financial picture, have your emergency fund set up and cultivated better shopping habits, it is time to fund your retirement account. The best strategy is to have some kind of automatic withdrawal from a bank account into an IRA. Better yet, if you have a 401K through work, contribute (at a minimum) the maximum amount your employer is willing to match. Whatever they match is like free money, so you best take advantage of it. Ideally though, you should try to contribute at least 10% of your gross income to your retirement account.
Your retirement account is also a great tool to minimize your tax liability. For example, a higher contribution to an IRA can often bring you into a lower tax bracket where you are paying far less in taxes. Every household has a unique tax circumstance, so it is always best to speak with a local accounting firm about how much of IRA or 401K contributions you should make to take full advantage of the tax savings.