| As a father of five, I have experienced first-hand the | | | | advance. You can actually have a comfortable |
| joys and pains of watching my kids grow up and learn | | | | retirement by starting an Individual Retirement Account |
| to manage their money. For some of them it was hard, | | | | when you are in your early 20s. Saving just $2,000 a |
| but they limited borrowed from the Bank of Dad. They | | | | year for five or six years now and then letting the |
| stood on their own and learned how to manage their | | | | laws of compound interest put your money to work |
| money. For a couple of them, the Bank of Dad has | | | | for you. Don't touch that $10-12,000 you've saved in an |
| been the lender of last resort with free interest rates | | | | IRA, and at retirement, it could be worth hundreds of |
| and easy repayment terms. It can be tough to learn | | | | thousands of dollars. The longer you wait to start |
| how to manage your money, but here are ten rules | | | | funding a retirement account the more you'll have to |
| that will make it easier not to borrow from Mom and | | | | save. |
| Dad, or dig yourself into a financial hole that you have | | | | Company-sponsored retirement plans like a 401(k) fund |
| to struggle to get out of. | | | | is a great choice because you get to put in pre-tax |
| Personal money management might not be something | | | | dollars and the contribution limits tend to be higher than |
| you learned from Mom and Dad. It is also not a | | | | an IRA. If your company offers matching contribution, it |
| required subject in high school or college, so you might | | | | is like getting free money. |
| not have a clue about how to manage your money | | | | 6. Get a grip on taxes. |
| the first time you are out on our own. If you think that | | | | It's important for you to understand how income taxes |
| understanding personal finance is way above your | | | | work before you get your first paycheck. When a |
| head, think again. All it takes to get started on the right | | | | company offers you a job, you need to know how to |
| path is the willingness to do a little reading-you don't | | | | calculate whether the salary offered will provide you |
| even need to be particularly good at math! To help | | | | with enough money after taxes to meet your financial |
| you get started, let's take a look at ten rules to | | | | goals when you are starting out, like perhaps a new |
| understand about money if you want to live a | | | | car, your first home, or other expenses. There are |
| comfortable and prosperous life. | | | | plenty of online calculators to help make this easy. To |
| 1. Avoid the temptation of credit cards. | | | | determine how much your deductions like payroll taxes |
| Learn to delay gratification with easy money. If you're | | | | will be, go to a site like These calculators help you |
| lucky, your parents taught you to save your money for | | | | figure out your take home pay. Just provide your |
| what you want, rather than charge it. While it is easy | | | | gross pay, answer a few other questions, and in a |
| to purchase on credit, it's better to wait until you've | | | | flash you will know how much goes to taxes and how |
| actually saved up the money. If you charge $1,000 on | | | | much you'll be left with. |
| your credit card and then make the minimum | | | | Also, you'll be better off in the long run if you learn to |
| payments, you will still be paying on that debt three | | | | prepare your annual tax return yourself, as there is |
| years later. If you want to keep your credit cards for | | | | plenty of bad tax advice and misinformation floating |
| the convenience or the rewards they offer, be sure to | | | | around out there. Use free tax filing software from the |
| pay the balance in full when the bill arrives. Don't carry | | | | free-filing alliance. The Free File Alliance is a coalition of |
| more cards than you can keep track of. It would be | | | | 20 tax software preparation companies that work |
| best to limit yourself to one credit card and a debit | | | | with the IRS to provide free tax filing to people who |
| card that has rewards similar to what you get with a | | | | have an adjusted gross income of less than $52,000. |
| credit card. American consumers have racked up | | | | 7. Take care of your health. |
| billions of dollars in credit card debt. This is one area of | | | | If meeting monthly health insurance premiums seems |
| your life in which you don't want to follow the herd. | | | | impossible, what will you do if you a visit to the |
| 2. Don't put your financial future in someone else's | | | | emergency room? If you're uninsured, don't wait |
| hands. | | | | another day to apply for health insurance. You can |
| Instead of relying on others for advice, take charge | | | | save money by getting quotes from different |
| and read a few books on personal money | | | | insurance providers to find the lowest rates. If |
| management. Understanding how money works is the | | | | necessary, get a policy for at least major medical |
| first step toward making your money work for you. | | | | expenses. If you are in college, the health center at |
| Once you are prepared to manage your money, do it! | | | | your college might be able to provide care for less |
| Don't listen to the advice of friends, unless you are fully | | | | significant health problems like getting a flu shot, an |
| informed and can trust their advice. Don't let anyone | | | | annual physical, or treatment of a minor illness. Your |
| catch you off guard! If your friends want you to go out | | | | parents' health coverage only extends to you if you |
| and blow lots of money on parties every weekend, | | | | are under 18 or are a full-time student. Be sure you |
| you are likely to find that when you aren't spending | | | | update the records at your parents' insurance |
| money, they'll move on to the next party leaving you | | | | company if you are in college, so your coverage does |
| without your money or those friends. If that is the case, | | | | not get dropped. |
| invest in a better class of friends. | | | | Also, take steps now to keep yourself healthy, like |
| 3. Pay attention to where your money goes. Create a | | | | eating fruits and vegetables, maintaining a healthy |
| budget and stick to it. | | | | weight, exercising, not smoking, not consuming alcohol |
| The only way to know how much money you have to | | | | in excess, and driving defensively. |
| spend is to keep track of your spending. Once you do | | | | 8. Get the right insurance. |
| that, you'll realize how important it is to make sure your | | | | If you want to make sure all your hard-earned money |
| expenses aren't exceeding your income. That means | | | | doesn't vanish, you'll need to take steps to protect it. If |
| creating a budget and sticking to it. Once you see how | | | | you rent, get renter's insurance to protect the contents |
| you realize how much that stop at Starbucks is | | | | of your place. Disability insurance can usually be part of |
| costing you, you can cut back on unneeded expenses. | | | | your benefits at work and protects at least some |
| The effect of making small, manageable changes in | | | | income if you ever become unable to work for an |
| your expenses can be just like getting a raise. In | | | | extended period of time due to illness or injury. |
| addition, keeping your recurring monthly expenses as | | | | 9. Get Professional Advice. |
| low as possible will also save you big bucks over time. | | | | If you want help with managing money, consider a |
| There are only two ways to save money, reduce | | | | fee-only financial planner over a commission-based |
| your expenses or increase your income. If you don't | | | | financial planner or insurance agent. A fee-only financial |
| waste your money now, you will be able to afford the | | | | adviser will provide unbiased advice that's in your best |
| things that are really important to you in the future. | | | | interest; whereas a commission-based financial advisor |
| 4. Start an emergency fund. | | | | only earns money when you buy investments from his |
| This might be rule number one "pay yourself first". No | | | | or her company. |
| matter how much you owe and no matter how low | | | | 10. Beat back Inflation. |
| your salary, it's wise to put some amount of money | | | | You'll want to protect your money from the effects of |
| from your budget into an emergency fund every | | | | inflation. If you don't save at least some money, every |
| month. Start with five percent, increase it to 10% and | | | | year you will have a little less due to the effects of |
| you will be on the way to protecting yourself from a | | | | inflation eating away at your spending power. You can |
| financial meltdown in the event of an emergency. | | | | make sure your savings and investment dollars are |
| Having money in savings to use for emergencies can | | | | earning the best interest rate by creating an |
| really keep you out of financial trouble and get you into | | | | investment pyramid with products like high-interest |
| the habit of saving money. If you treat the "pay | | | | savings accounts, money market funds, and CDs as |
| yourself first" concept as non-negotiable, pretty soon | | | | the base; and stocks, bonds, and mutual funds as the |
| you'll have more than just emergency money saved | | | | middle tier; followed by investments that are |
| up-you'll also have money for a vacation or a | | | | considered more risky like options and currencies at |
| semester abroad. | | | | the peak. If the base is the largest amount of your |
| Don't make that emergency fund an envelope in your | | | | savings, then investing a small amount in higher risk |
| desk drawer. It is too easy to get to and spend. Put | | | | products allows you to take a risk without risking all of |
| your emergency fund into an online savings account | | | | your money. |
| (for a higher interest rate) or a money market account. | | | | Creating Financial Security |
| Otherwise, inflation could erode the value of your | | | | Remember, you don't need a special background or |
| savings. | | | | special training to become an expert at managing your |
| 5. Start saving for retirement as soon as you can. | | | | own money. Just take the time to get a firm |
| You need to prepare for your retirement well in | | | | foundation at the start and the rest will be much easier. |