In Your 20s

TIGHTEN UP ON SPENDING, RATCHET UP SAVINGS. Establish good money-management habits now, and they'll serve you well for decades. A personal-finance program such as Quicken makes it easier and will help you make good choices.

PUT SAVINGS ON AUTOPILOT. Having savings directly debited from your bank account or paychecks prevents extra cash from disappearing.

LIVE BENEATH YOUR MEANS. That Bimmer might look awfully tempting, but a Toyota will get you to wherever you want to go just as well, and the difference can go into savings.

START AN "ESCAPE FUND." Most individual retirement account and 401(k) dollars are not available until age 59 1/2, at least not without penalties. If you want to retire sooner, you'll need to build an escape fund with taxable dollars. Equities give you the most bang for the buck over long periods.

REVEL IN THE ROTH. With a Roth IRA, you don't get a tax break on the contributions, but the withdrawals are tax-free. And there's more flexibility getting the money out.

WATCH THE FEES. Those 1.4% expense ratios on mutual funds will add up to a bundle over 30 years. Low-cost index funds, some of which charge less than 0.20% a year, are a better bet.

By Lauren Young

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