How much should you save? As much as possible.

While the government says we’re out of the recession, it sure feels different for those of us who live on Main Street.

Here, according to the Pew Research Center, as many as 55 percent of working Americans saw their income decline over the past couple of years. And, with up to 20 percent unemployment (depending on where you live), dollars are tight.

It’s hard to save money even if you have your full income to work with. But if your family income has declined, finding places in your budget to save will be tough.

But, you can do it. In fact, the national savings rate is higher now that it’s been in some time. Americans are actually spending less than they earn and saving the rest.

Saving Smarter

If you want to save money each week, you’ve got to look at all of your expenses, both big and small, and make meaningful cutbacks.

Start with the small stuff you spend every day, including gourmet coffees, vices (cigarettes and alcohol), newspapers, meals out, dog-walking, baby-sitting services and other child-related expenses, packs of gum or candy or other items you purchase more than once a week.

Add up the total. For every $20 per week you drop on these items, it adds up to roughly $1,000 per year you could be saving.

Are you even aware that you make these purchases? You might find that picking up a newspaper on the way to work has become so much a habit that you’re hardly aware you’re making the purchase.

Try to make substitutes that will give you the same pleasure and enjoyment that you get from these daily purchases, but cost less.

For example, instead of picking up a newspaper in the morning, try reading the headlines online. Set up a Google reader account or RSS feeds from your favorite sites and have them fed directly into your email box.

Make coffee and bring it along, or buy a small one-cup coffee pot to keep at your desk. Cook more, eat out less, and make sure you bring your lunch to work as often as possible.

Small Savings Each Week Add Up

With all the saving you’re doing, it’s important to step back and look at how much money you’ve set aside and how well the pot is growing.

I’ve kept a big glass jar (it was an old jar belonging to my grandmother) in my home office for at least 20 years. Every time I have some loose change in my pocket or wallet, I empty it out into the jar. Over the years, the jar has held at least hundreds of dollars worth of change that I dumped in there just because I didn’t feel like carrying it around.

Each day, simply take the change out of your pocket and put it in a jar. If you don’t have any change from the day, then take your lowest denomination bill and stick it in the jar.

If you save $1 per day, that’s $365 you’ll have “saved” at the end of the year.

This is truly the beauty of what I call “found savings” – it adds up each week and you’ll never miss spending it.

Setting Savings Goals

How much should you save each week? That depends on what goals you’re saving for. If you’re trying to save up for a down payment on a home, you’ll need at least 3.5 percent of the purchase price in cash (for an FHA home, and more if you’re using conventional financing), plus cash reserves and cash for closing costs. You’ll also need cash for your move.

(These days, if you are planning on buying a home, the more cash you have on hand, the easier time you’ll have obtaining a loan and having the money you need to close on the purchase.)

Let’s say you need a total of 10 percent cash to pay for all of these things, and you’re interested in buying a house for $150,000. You’ll need to save enough each week so that it adds up to $15,000.

Over three years, you’ll want to try to save at least $5,000 in after-tax cash (and don’t raid your 401(k) account; you should try to save there as well in addition to your after-tax savings).

Write down everything you spend each day, each week, and each month for two months. Then, add in annual expenses, like a vacation or if you had a big car repair.

Start “trending down,” which means substituting more expensive items for those that cost less. Instead of eating out 6 to 10 times per month, eat out only once or twice a month. Offer to exchange babysitting services with friends instead of hiring a babysitter. Instead of going out to the movies, watch free movies on cable or exchange DVDs with your friends. Instead of paying for concerts, try attending free concerts and events put on in your local community.

If you want to save big dollars, concentrate on the little expenses you have each week and soon your savings jar will be filled to the brim.

On a final note, I’ve received some letters from readers who tell me that now is the wrong time to save money. These folks believe that now is the time to spend money and help the economy.

While that advice might be reasonable for those that have the money to spend, for a large number of American families, these families need to have cash in hand to buy homes, need to reduce their debt to raise their credit scores, need cash on hand in case they lose their jobs and need to save for future expenses, kids’ college educations and retirement.

I wonder if those people that believe that more Americans should be spending money now are the same people that think the US government should control its spending. Post a comment on this story at and share your opinion.