Starting Out: Begin Funding for Your Financial Security

Congratulations! You've graduated from school and landed a job. Your salary, however, is limited, and you don't have much money (if any) left at the end of the month. So where can you find money to save? And, once you find it, where should this cash go?

Here are some ways to help free up the money you need for current expenses, financial protection, and future investments -- all without pushing the panic button.
For most young adults, paying down debt is the first step toward freeing up cash for the financial protection they need. If you're spending more than you make, think about areas where you can cut back. Don't rule out getting a less expensive apartment, roommates, or trading in a more expensive car for a secondhand model. Other expenses that could be trimmed include dining out, entertainment, and vacations.

If you owe balances on high-rate credit cards, look into obtaining a low-interest credit card or bank loan and transferring your existing balances. Then plan to pay as much as you can each month to reduce the total balance, and try to avoid adding new charges.

If you have student loans, there's also help to make paying them back easier. You may be eligible to reduce these payments if you qualify for the Federal Direct Consolidation Loan program. Though the program would lengthen the payment time somewhat, it could also free up extra cash each month to apply to your higher-interest consumer debt. The program can be reached at 07060910268
How would you pay the bills if your paychecks suddenly stopped? That's when you turn to insurance and personal savings -- two items you should "buy" before considering future big-ticket purchases.

Health insurance is your first priority, as hospital stays can be extremely costly. If you're not covered under a group plan, see if you can join any trade associations, which often offer group-rate policies. Otherwise, start obtaining quotes on individual policies by calling the major insurers in your state.

Life insurance is the next logical step, but may only be a concern if you have dependents. In fact, at the age of 25 you're statistically more likely to become disabled than to die prematurely, according to a 2004 report funded by the nonprofit Actuarial Foundation. Disability insurance will replace a portion of your income if you can't work for an extended period due to illness or injury. If you can't get this through your employer, call individual insurance companies to compare rates.
If you should ever become disabled or lose your job, you'll also need savings to fall back on until paychecks start up again. Try to save at least three months' worth of living expenses in an easy-to-access "liquid" account, which includes a checking or savings account. Saving up emergency cash is easier if your financial institution has an automatic payroll savings plan. These plans automatically transfer a designated amount of your salary each pay period -- before you see your paycheck -- directly into your account.

To get the best rate on your liquid savings, look into putting part of this nest egg into money-market funds. Money-market funds invest in Treasury bills, short-term corporate loans, and other low-risk instruments that typically pay higher returns than savings accounts. These funds strive to maintain a stable $1 per share value, but unlike FDIC-insured bank accounts, can't guarantee they won't lose money.

Some money-market funds may require a minimum initial investment of $1,000 or more. If so, you'll need to build some savings first. Once you do, you can get an idea of what the top-earning money market funds are paying by referring to imoneynet.com, which publishes current yields. Many newspapers also publish yields on a regular basis.

So what are you waiting for.