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You're just out of school, perhaps you’ve moved into your first apartment. Maybe after a few years in the workforce, you are the proud owner of a new condo. Or perhaps after years of married life, you’re on your own and, for the first time, having to handle your own money.

The habits you form in the first few years of managing your own finances will help determine whether you will have a life of financial victory or whether you will be behind the 8-ball.

Brokerage and mutual fund companies often make up mythical comparisons of two people with similar income. One of the mythical pair saved and invested (with their company, of course) and is doing well. The other also made a lot of money, but did not plan and still goes from payday to payday.

While no one brokerage firm has the corner on financial success, their ads do bring out an important principle: Start good financial habits early and you’ll be glad you did. Spend every cent and then some and you’ll be setting yourself up for years of financial anxiety.

Here are some steps you can take today to plan for financial independence tomorrow.

Become a Saver

You’ll want to save for a variety of reasons. Three of the most important are retirement, emergencies, and major purchases.

Retirement

When your parents were growing up, the paradigm for a bright career person went something like this: Early in your career you would find that General Conglomerate would be the place for you to work. You’d stay there a long time, work hard, and then assume that General Conglomerate would take care of you in your retirement with a generous defined benefit retirement plan and possibly lifetime medical benefits. This paradigm worked for a lot of people and many are benefiting today from it.

The current trend looks a lot different and experts say the future will look something like this: You find a job with Dotcom Inc. There you have great opportunities to use your skills and gain some new ones. Unlike General Conglomerate, however, you can’t assume that Dotcom Inc. will provide for you in your retirement. You will probably outlive Dotcom Inc. and work for as many as a dozen different companies before you retire. Therefore, you can’t count on any one of your employers to provide you with retirement. You will have to participate.

Fortunately, the government is beginning to realize that reality and has begun providing vehicles for retirement savings. 401(k) and 401(b) plans are workplace-based programs. IRA’s come in a variety of forms. Which variety may be for you depends on your individual circumstances.

If you haven’t done so already, check at work to see what is available. If no vehicle is available at work, check out IRA’s. Sites like msn.com and quicken.com will explain the basics to you. Don’t feel that you need to put in the maximum if you can’t afford to. Start with something, however.

A Reserve for Emergencies

You’re driving along and suddenly your car starts making a new noise. You go into your mechanic and you find out that noise is a symptom of a $500 problem.

The more you get into adult life, the more situations like this you will find yourself in. Once you become a homeowner, not only the car, but the water heater can blow as well.

Financial experts say that you should have from two to six months in a reserve to cover unexpected expenses. Even if you can’t build that all up at once, start with a little bit each paycheck.

This money should be in a savings account and not in the market. Your car may not be considerate enough to wait for the makret to rise before it goes out.

Savings Toward a Goal

Once you’ve begun putting a little away for retirement and have set up a fund for emergencies, start saving toward a goal. Want a new car? Want to go on a cruise? Start putting away a little each month.

This money should not be in stocks, though a short-term bond fund may be okay if your goal is more than four or five years away. Money market funds, CD’s, and savings accounts are good vehicles for this type of savings.

Try To Avoid the Debt Habit

You’ve been in your new apartment for a month and you’re tired of eating dinner on snack tables because Mom and Dad didn’t have an extra dining room table to pass on. You see a furniture store offering a dining room table with low-cost financing. You go there and see not only a dining room set, but a bedroom set that looks good. You figure you can afford the payments. Then you have a need to take off three weeks of work without pay because of a family emergency and you’re behind the eight ball.

Another common trap is this: You are full of optimism for your prospects at work. You are "sure" that in your next review which is a month away you are going to get a hefty raise, so you take on a loan for that great new car--a little tight on the budget now, but not to worry because you're going to be making the big bucks later. Later doesn't turn out to be quite as rosy as you projected. Maybe you lose your job or some unexpected expense comes your way. Guess who's back to having to pinch pennies.

That’s how it often starts. People get in the habit of borrowing thinking that they can pay it off easily. Then they hit a bump in the road and what they thought was going to be a small payment becomes overwhelming.

Few of us can buy new cars for cash and even fewer of us can become homeowners without a mortgage. Sometimes it does make sense to finance a purchase, but look for other ways of getting money for purchases before you borrow.

Take that dining room set. Rather than borrowing, put aside a little each paycheck for a home furnishings fund. Then when you have enough to go out and start looking, start with the classifieds to see if there is a gently used set for sale. Look at a number of furniture stores to see if there is a good set on sale. Local shopping columnists with spots on TV shows or columns in newspapers often know where the deals are.

This approach may mean a little more work and putting off your purchases for a few months, but down the road you’ll find the financial freedom extremely satisfying.

Cut Costs To Reach Your Financial Goals Faster

It’s amazing how fast money can slip through our fingers. Get in control of some of that spending and you’ll be able to reach financial goals sooner. Here are a few ideas that might help

• Avoid the fast food trap. At my workplace, there are a couple of people who do fast foods almost every day for lunch. When I buy gas early in the morning, I often see people spend $3 or $4 in the convenience store for breakfast. Do this every day and the cost can easily be $120. Eat breakfast at home and bring your lunch and you can easily save half of that leaving more money for eating with friends at real restaurants and saving toward goals.

• Use grocery coupons A single person can easily save $80 a month on grocery coupons.

• Buy when on sale Almost everything in a department store goes on sale. Need clothes or something for the house? It will probably go on sale somewhere in a couple of weeks. Your local newspaper (a valuable tool for saving money) will announce those sales boldly. Also, consider alternate sources, such as outlet malls, closeout stores, and other nontraditional retailers when you have purchases to make.

• Consider buying gently used item Experts say that if you buy a 2 or 3 year old car in good condition and keep it through its useful life, you will save 40% on car costs over buying new. Used furniture is available at consignment stores or in the classifieds. Used books and CD’s are available at online auctions. It often makes sense to buy used items and that can save a bundle over time.

As you begin your financial life, you have the opportunity to form habits that will last you a long time. Save, stay out of debt, and become a wise consumer and the freedom you experience will be worth the little bit of extra effort and sacrifice necessary to stay in the black and stick to your goals.

Copyright 2001 by Larry Wiener

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