Small steps can lead to financial security

Cathryn Cunningham/Diary

A reader recently asked me to write an article for young people who want to start on the path to financial security.

The following tips are appropriate for people in their 20s or 30s. Of course, the six tips can be useful at any age.

Donna Skeels Cygan

Suppose you are 28 years old and working hard full time. Every paycheck seems to be consumed immediately and there is nothing left to save. You’re not alone! It is very common, but it is possible to stop this cycle.

Establish an emergency fund: Open a savings account at a bank and save enough to cover up to six months of your usual expenses. Do not keep this money in a checking account because you must avoid the temptation to spend it. He is there in case of emergency. An emergency can happen if you (or a family member) get sick and can’t work, or if your car breaks down, leaving you with a large repair bill.

Find out: If you want to learn more about investments, tax planning, retirement, estate planning, or even long term care insurance or term life insurance, there is plenty of free information available online. I have no affiliation with Vanguard, but I have always found their educational information to be of high quality. You can go online to and access the articles.

Start funding a Roth IRA: Once you’ve set aside your emergency fund, start funding a Roth IRA. My recent articles have focused on Roth IRAs, and they can be found at A Roth IRA is a type of retirement account that will be tax-free when you are ready to withdraw the money. Old-fashioned pensions are now rare and Social Security benefits may be less in the future. Saving for retirement is more important than ever, and a Roth IRA has long-term tax advantages.

You can open and fund a Roth IRA at a brokerage firm and contribute up to $6,000 per year (in 2021 for people under 50). You can also fund a Roth 401(k) or Roth 403(b) through your employer, with up to $19,500 for 2021, if you’re under age 50. You can even finance both at the same time.

Put savings on autopilot: When you fund a Roth 401(k) or Roth 403(b) at work, the money is automatically paid into the retirement plan each time you get paid. It does not appear on your payslip. You can configure similar instructions for other accounts. If you are funding a Roth IRA ($6,000 per calendar year), you can set up instructions for $500 per month to be transferred from your checking account to your Roth IRA. Brokerage firms and banks allow it. Once you’ve funded your emergency fund, your workplace retirement plan, and a Roth IRA, open a taxable investment account and start funding it. Taxable investment accounts are sometimes called brokerage accounts. They are not retirement accounts and they have favorable tax rates for long-term capital gains. Rather than just saving in a bank account, it’s wise to save in a taxable investment account.

Beware of credit cards and cars: Credit cards still need to be paid monthly. If you can’t repay them, this should alert you that you are living beyond your means. The concept of credit cards (buy now, pay later) undermines financial security. Make sure that, if you use a credit card, you can afford to pay it off as soon as the bill arrives. Car purchases are also dangerous. New cars are often status symbols, and having a big car loan can derail your best intentions.

Set goals and write them down: Some say that when we write down our goals, our chances of achieving them increase tenfold. If you are 25, what would you like to have saved at 30 or 35? Your investments can grow quickly if you save and invest at least half of every tax refund, every pay raise and every bonus. If a relative gives you money, save and invest at least half of it.

If necessary, adjust (and improve) your attitude towards money. Many people have a negative attitude based on the fact that they can’t get enough of the painful “money messages” or learned in childhood. For this, I recommend the book “The Psychology of Money” by Morgan Housel.

Finally, try to avoid the pressure to “keep up with the neighbors” and focus on living a “well-lived” life with your friends, family, pets, and nature. If you can do this, you’ll soon find that your paycheck stretches further – and you’ll be on your way to financial security!

Donna Skeels Cygan, CFP, MBA, is the author of “The Joy of Financial Security”. She has been a fee-based financial planner in Albuquerque for over 20 years and a branch manager for Mercer Advisors’ New Mexico office. Contact her at

Sarah J. Greer