Exactly how much depends on how secure your income is. A two-income family would probably not need as big a cushion as a single parent. The advice to set aside some money regularly assumes you aren t spending every penny you take in or, even worse, living beyond your means. You may be held back from saving by steep monthly payments on consumer debt such as credit cards. Hold a garage sale if you have to, she said.
Mortgage debt is a different matter.
If you re free of credit card debt and you still can t salt any money away, you have to figure out why you re spending too much. Pat Jennerjohn, an Oakland, Calif., financial planner, suggests trying to go two months using cash for most of your payments except the few, such as mortgage and insurance, that must be paid by check. The routine can be an eye-opener, she said. Investing wisely As soon as you set up your tax-deferred account at work, you ll be asked to make some investment decisions. You can choose just one of these or spread your money among several.