Author: Don Obrien

Small steps can lead to financial security

A reader recently asked me to write an article for young people who want to get started on a path toward financial security.

The following advice is appropriate for people in their 20s or 30s. Of course, the six tips could be helpful at any age.
Donna Skeels Cygan

Let’s assume you are 28 years old and you are working hard at a full-time job. Every paycheck seems to be consumed immediately and there is nothing left over to save. You are not alone! This 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 typical expenses. Do not keep this money in a checking account because you must avoid the temptation to spend it. It is there in case of an emergency. An emergency may be if you (or a family member) gets sick and cannot work, or if your car breaks down, leaving you with a significant repair bill.

Educate Yourself: If you want to learn more about investing, tax planning, retirement, estate planning, or even long-term care insurance or term life insurance, there is a wealth of free information available online. I do not have an affiliation with Vanguard, but I have always found their educational information to be high quality. You can go online to and access articles.

Start Funding a Roth IRA: Once you have your emergency fund set aside, start funding a Roth IRA. My recent articles were about 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. It is more important than ever that you save for retirement, and a Roth IRA has long-term tax benefits.

You can open and fund a Roth IRA at a brokerage firm and contribute up to $6,000 per year (in 2021 for persons under age 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 are under age 50. You can even fund 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 swept automatically to the retirement plan each time you are paid. It does not appear in your paycheck. You can set up similar instructions for other accounts. If you are funding a Roth IRA ($6,000 per calendar year), you can establish instructions so $500 per month is transferred from your checking account to your Roth IRA. Brokerage firms and banks allow this. Once you have funded your emergency fund, your employer’s 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 is wise to save in a taxable investment account.

Beware of Credit Cards and Cars: Credit cards should always be paid off each month. If you cannot pay them off, this should alert you that you are living beyond your means. The concept of credit cards (buy now, pay later) is detrimental to attaining financial security. Make certain 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.

Establish Goals and Write Them Down: Some say that when we write down our goals, our chances of achieving them increase ten-fold. If you are 25 years old, what would you like to have saved by the time you are 30 or 35? Your investments can increase quickly if you save and invest at least one-half of every tax refund, every salary increase and every bonus. If a relative gives you money, save and invest at least half of it.

If necessary, fine-tune (and improve) your attitude toward money. Many people have a negative attitude based on never having enough or painful “money messages” they learned as children. For this, I recommend the book “The Psychology of Money” by Morgan Housel.

Finally, try to avoid pressure to “keep up with the Joneses” and focus on a life “well-lived” with friends, family, pets and nature. If you can do this, you’ll soon find your paycheck stretching 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-only financial planner in Albuquerque for over 20 years and is branch manager for the Mercer Advisors office in New Mexico. Contact her at


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