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Getting Started (part 2)
If you read Getting Started (part 1) a few months ago, you should be on your way to understanding your spending habits. If you don't know where your money is going each month, there's little you can do to control the spending.

Now, it's time to look at your options for saving. Does your employer offer a 401(k) account? Does it offer any matching deposits? This is the place to start. If, for example, the first 5% of your income will be matched by your company, maybe dollar for dollar, that's money you don't want to lose. On an income of $50,000, you put in $2500 and get $2500 in matching funds.

Next, you want to hack away at any credit card debt, highest interest rate cards first. Some suggest to pay the lowest balance first, to which I reply, "nonsense." You'll find as you see those balances shrinking faster that you'll be motivated to find that next item to cut back.

Then, if you are in the 25% bracket or higher, deposit to a pretax, traditional IRA. If you are in the 15% bracket or lower, use a (non-deductable) Roth.

If you have more savings available, go back to the 401(k) until it's topped off.

Understand what tax bracket you are in by taking at peek at the Fairmark website.This is important for a number of reasons, the first of which is to determine whether to favor the pre-tax savings accounts such as the 401(k) or traditional pre-tax IRA, or to go with the Roth, funded in post tax dollars. It will also give you an idea of what benefit you can expect from the tax deductibility of mortgage or property tax when buying a home.

I'd not be doing my job if I didn't mention the writing of a will. It's inexpensive enough and important enough that it has a place on any "Getting Started" list. A will will save your heirs from much grief when you pass. There may still be some hurt feelings depending how exactly you divy up your stuff, but it's best that your intentions are in writing and not left to the laws regarding intestate estates. Keep in mind - IRAs and other retirement accounts much have beneficiaries listed on the account for proper planning. Last month's "Inheriting or Bequeathing an IRA" talked about this in greater detail.

Until next month, JOE