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Savings Guide 2006

Savvy savers

  There's more to saving than stuffing your extra cash in a mattress.
Are you financially flummoxed?

Just like your fashion tastes, your money management skills have to keep pace with your lifestyle. The same financial strategies that helped you survive college and your 20s don't work as well when you hit your 30s and 40s.

At this point you have (hopefully) more money and (unfortunately) more responsibilities. But if you're still playing by the same rules, chances are you're just as broke as you were in college.

"Personal finance is 80 percent behavior," says Dave Ramsey, author of "The Total Money Makeover: A Proven Plan for Financial Fitness." His prescription: First, pay the minimums on the credit cards and sock away $1,000 in an emergency fund -- fast -- "in one to two months," says Ramsey.

Next, Ramsey recommends paying off unsecured debts in order from smallest to largest to gain a sense of accomplishment. (Other experts say tackle the debt with the highest interest rate first, then move to the next highest.)

Third, when the debts are paid, increase that $1,000 rainy day fund to three to six months' living expenses, says Ramsey. And once you have that, start putting at least 15 percent of your salary into your retirement plan -- especially if your company provides matching funds, he advises.

The next steps on the list: Fund the kids' college accounts and pay off the house. "Then you can really save some money," says Ramsey. And, last but not least, "become very wealthy and give a lot of it away."

If you're already doing all that, you probably don't need a financial makeover. But if you're one of us that might have skipped a step or two, take this quiz to find out just what you do know about managing your money.

-- Posted: Oct. 1, 2006
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