VALLEY/PERSFI/30 INCHES/1stjc/mark2nd It’s wise to save at least 10 percent of your pretax income so you can adequately provide for your retirement and meet other financial goals. To get started, here are 20 ways to boost your savings and increase the return on your savings. 1) Pare down your debt. Unless you can find an investment with an after-tax return that’s higher than what you’re paying on your debt, reducing your debt is the first step toward smart saving. 2) Track your spending. If you don’t know where your money goes, try monitoring your spending for a few months. Then look for ways to cut back spending and increase your savings. 3) Pay yourself first. As long as your debts are under control, set aside a pre-determined amount in a savings plan each month before you make big-ticket purchases. 4) Make it automatic. Authorize your bank to transfer a set amount each month from your checking account to a savings account, mutual fund or another investment vehicle. 5) Maximize your 401(k) contribution. Remember that every dollar you invest in this qualified retirement plan reduces your gross income by the same amount. 6) Save the small stuff. Rather than cashing small checks you receive for dividend payments, insurance reimbursement, birthday gifts and the like, deposit them in your savings account. 7) Bank “extra” checks. If you get paid biweekly, two months out of the year you’ll get three instead of the usual two paychecks. Save those two checks and you’ll boost your savings significantly. 8) Revise your W-4 form. If you received a large tax refund last year, reduce your withholding for 1997. You’ll get a bigger paycheck and you can save or invest the extra cash so that you, not Uncle Sam, earn interest on your money. 9) Save your raise. Resolve to save the extra money you get in your paycheck after receiving a raise. Do the same with bonuses and you’ll really come out ahead. 10) Make it painless. If your adjustable rate mortgage adjusts downward, plan to save not spend your monthly windfall. 11) Reach for higher yields. To compete with money market mutual funds, some banks offer penalty- free Certificates of Deposit (CDs). But watch out for hidden charges. 12) Put found money away. If you’re earning more than the Social Security withholding cap on payroll taxes, your Social Security deduction will stop before year-end. Take the portion of your salary that you previously turned over to the government and put it toward your personal retirement savings. 13) Switch credit cards. With a credit card that charges less interest, you can pay off the balance faster and free up money for saving. 14) Open a “think twice” account. Every time you decide not to buy something, write a check for the amount you would have paid for the item and deposit it into a separate account. Before long, you’ll forget what you gave up and have a tidy sum to invest. 15) Pay down your mortgage. Send an extra $50 or more with your monthly mortgage payment to pay off your mortgage earlier and save thousands on interest. 16) Make the most of emergency funds. Don’t keep all of your emergency funds (typically three to six months worth of living expenses) in a low-yielding savings account. Put a portion of it in higher-yielding liquid investments, such as short-term CDs or money market mutual funds. 17) Use a discount broker or buy direct. Unless you need professional advice, consider buying and selling stocks and bonds through a discount broker. You can also cut costs by buying stock directly from a company. 18) Consider investing in municipal bonds. Any interest earned on these bonds is free of federal and sometimes state income tax. That feature can boost the yield on your investment significantly. 19) Refinance your mortgage. Consider looking into refinancing if the interest rate on your existing mortgage is two or more points higher than today’s rates. Then invest the money you save on your monthly payment. 20) Commit to planning. Keep more of your money when you take advantage of opportunities and make tax planning a year-round event. Helping your children Whether you’re helping your children finance their college education, buy their first home, or just build their savings, there are some tax-smart ways to give them assistance. Here are some strategies for sharing the wealth. – Make large gifts of cash If you’ve had a good year financially, you might consider parting with some of your hard-earned assets in exchange for a lower tax bill. The easiest way to make a gift is to set up a custodial account under the Uniform Gifts to Minors Act or Uniform Transfers to Minors Act. You and your spouse can each give up to $10,000 a year to each of your children without paying federal gift tax. – Become your college student’s landlord If you have a student in college, you may be able to turn non-deductible apartment rents into valuable tax advantages by buying a house or condo for your child to live in while he or she is away at school. If you don’t already have a second home, you can treat the college town house as a second home and deduct mortgage interest and property taxes, while giving your child a free place to live. – Put your kids on the payroll. If you have your own business either full or part time you can reap a double tax benefit when you hire your children. First, their wages are considered earned income, which is taxed at the child’s low tax rate, regardless of age. Second, the wages you pay the children for work they perform are deductible as a business expense. Mel Poteshman is president of Los Angeles-based Poteshman Consulting International & Co.