Carrie Schwab Pomerantz

Dear Carrie: I'm 28 years old and not quite sure how I can save -- for either buying a home or something personal. Where do I begin? Do I still have a chance? --A Reader

Dear Reader: First, kudos for some smart -- and timely - thinking. Starting to save in your 20s will give you a huge leg-up. That's not to say it will always be easy. But by starting now, you definitely have a chance to buy a house or another big-ticket item!

There's no magic bullet when it comes to saving. It's about setting realistic goals, prioritizing how you'll manage your money--and sticking with it. Here are some ideas to get you going.

COVER THE BASICS FIRST

Whatever your personal savings goals, I believe it's important to first set a financial foundation. To me, that includes three important things: retirement savings, getting out of debt and creating an emergency fund -- in that order. Here's what I suggest:

-- If your employer offers a 401(k) or similar retirement plan with a company match, start contributing at least enough to get the match. Let's say your company offers a 5 percent dollar-for-dollar match. If you contribute at least that much of your annual salary, you'll be doubling your savings. It's like getting paid to save. Plus, you won't be taxed on that money until you withdraw it. And because it automatically comes out of your paycheck, it's pretty painless.

-- Pay off credit cards or other high-interest, non-deductible debt. While credit cards make life easy, carrying a balance costs you money. Do your best to pay off your debt now -- and save yourself the 13 percent or whatever interest rate you're paying. You'll then be able to put that extra money toward savings. (Note: Student loans generally don't fall into this category since they tend to be low-rate and the interest can be tax deductible; just make sure you never miss a payment.)

-- Create an emergency fund. You never know when you'll hit a bump in the road, so try to keep at least three months' living expenses in a savings or money market account. This way you won't get financially derailed should you get sick or lose your job.

FOCUS ON YOUR PERSONAL GOALS


Carrie Schwab Pomerantz

Carrie Schwab Pomerantz is a Motley Fool contributor.

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