The May issue of The Writer should give you some help.
In my article, I recommend the OpenOffice.org office suite. It's free, and can save in Word format. Nobody will be able to tell that you used a free program instead of dropping a pile of cash into Microsoft's coffers. Plus, you can easily create templates for short stories and novels to give you the formatting you need right from the start.
The article covers other free software for planning your work, working with your writers group, and tracking submissions.