10 Steps to Starting Off Your Financial Life

When you're in your 20s and early 30s, financial decisions and responsibilities seem daunting. But take heart. Getting your financial life on track can be as easy as setting goals and dividing your objectives into 10 steps. You'll be surprised how quickly you can tackle all 10.

The Top 10

1. Commit to keeping track of your finances

Keeping track of what you spend can be easier said than done. Fortunately, with a simple setup of file folders and a place to store them you can divide up all your bills and keep track of any receipts and paperwork from major purchases. That way you'll have them if you need them for tax purposes and you'll have warranty information for any big purchases you've made.

If file folders aren't your thing, then use whatever system works for you -- as long as you have one that works.

Watch Video: Smart Financial Moves


2. Read the business page (more than occasionally …)

The better educated you are about the business community, the better you'll feel about making your own financial decisions. Read and learn as much as you can, both on general financial topics and on specific investments that interest you. The more you know, the better investment choices you'll be able to make. Check the iVillage boards and past columns for quick study on a variety of financial topics.

3. Put yourself on a budget

Now's the time to work out a budget that takes into account all your expenses, and matches your income.

Start by making a chart with your take-home pay in one column and your expenses in another column. Include things you pay for every month, such as rent, transportation expenses, insurance and utilities, and also things that ebb and flow each month, such as gifts, clothing and travel. Do your best to come up with an average cost of living for each month and make sure it's within your budget. If it's not, make adjustments -- even small ones, such as forgoing that daily $4 coffee, will make a difference.

4. Get out of debt

That includes paying off student loans and credit card bills, not necessarily in that order. Take inventory of the debts you have, and allocate as much from your monthly budget as you can to paying them off.

Tackle the highest-interest debt first -- that's most likely to be the credit card monster. Think of the money you'll save by avoiding expensive interest payments. When you've got your debts under control, keep setting aside money each month -- only use it to begin saving and investing.

5. Begin a savings plan

When you're busy writing out the details of your budget, remember to allocate some money each month to a savings plan. Sometimes it's called ''paying yourself'' -- that is, you include yourself in your list of monthly expenses. Consider setting up an automatic payment plan, which you can do with just $50, or writing a check to your savings or investment account each month when you pay your other bills.

6. Establish a short-term emergency fund

Much as we don't like to picture those times when the car needs four new tires immediately, or your computer's hard drive crashes once and for all, those emergency situations do arise, generally at the most inopportune times. It's times like these when an emergency stash can save the day.

It may take you a couple of months -- or even longer -- to save up the emergency funds, but once you've got your stash together, you can let it earn some interest in a money market fund. That way, you're protecting yourself against financial pitfalls while earning a few bucks at the same time.

7. Think about tax planning

You don't have to pay your life's savings to an expensive accountant to get good tax advice. But as you begin earning more and setting up more complex investment goals, it's important to think about the taxes you'll pay and the methods you may be able to employ to reduce them. Make sure you have a good adviser who can help you navigate all your tax issues.

8. Set realistic financial goals

This is important whether you're committing to investing a certain amount each month or figuring out how much you can realistically afford to pay in rent each month. Start with modest goals and accomplish them. Then get more aggressive with your savings and investing targets. Soon you'll be reaching your goals.

9. Start a retirement investment fund

Whether your abbreviation of choice is IRA, 401(k) or Roth, it's time to start spelling retirement savings. This doesn't have to be a hugely taxing proposition. You can contribute up to $2,000 to an IRA or Roth each year, which comes out to just over $150 a month toward building a nest egg.

10. Have some fun

You'll feel a great sense of accomplishment when you've taken control of your finances and set up a savings and investment plan. But don't forget to take a little bit out now and then and give yourself a reward. That way all the financial planning will seem well worth it.

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