May 15, 2006 issue - Every May, the voice of the commencement speaker rings in the land. What's the meaning of life? Go forth! Play to win! But even though graduates may be prepared to take up jobs and careers, they're often not ready to handle money. Young adults haven't had much life experience in consumer finance, despite all the credit cards and ATM cards in their wallets. As their elders did, they'll probably learn by doing, and make a lot of mistakes along the way.

That doesn't have to happen. With the right start, you can make money management easy-in your 20s and for years to come. So here's my own "commencement" speech, about the meaning of financial life.

It takes real live dollars to set up on your own. You might have to move to find a job. You'll need a deposit for an apartment. Parents sometimes help with setup expenses (as many as 64 percent of upperclassmen expect some sort of help, according to an online survey by Citigroup's Citi Credit-ED). But even when you're over this hurdle, you'll need cash in the bank while you stabilize your new life. Open a savings account and keep at least two months' rent on hand.

Independent life is far more expensive than you think. Add up the bills and compare them to your take-home pay. If there's more outgo than income, well ... you know what to do. (Stop eating out every night with better-paid friends? Take those electronics sites off your "bookmarks" list?) If you need a car, buy it used, not new, to hold the payments and insurance premiums down.

You'll also save money by shopping with a debit card (that's your ATM card) rather than a credit card. Paying by debit is the same as paying cash, because the money comes directly out of your checking account. Consumers always spend less when they shop with cash, and they don't get stuck with interest payments.

Many young consumers think of credit-card debt as "normal"-just like having a mortgage or auto loan. In fact, it's a total waste of money that you could be using for savings or having fun. If you're carrying debt, add up the amount (most people underestimate), check the interest rates (if you paid late a couple of times, your rate might be up to 24 percent or more) and lay out a plan for paying it off. Two Web sites that can help you chart a repayment plan: and .

Where to save depends on what you're saving for. Cash reserves belong in a federally insured bank account (online, ING Direct currently offers 4.15 percent, and Capital One Direct Banking, 4.55 percent, with no fees or minimums). Money you're saving for a specific near-term purpose-a car, a down payment on a house-should be kept safe, too.

Don't waste your money on life insurance if you have no dependents to support. If you do, buy low-cost term insurance (check quotes at and ). Finding health insurance is harder. If you can't get coverage through your employer, look into policies with large upfront deductibles, such as $5,000 a year. Costs vary from state to state. A 25-year-old in good health might pay $40 to $60 (or more) a month for a policy with a $5,000 deductible plus some co-pays on higher bills. This might not seem worth it, because you cover all your routine costs yourself. But if anything goes really wrong, the uninsured often find themselves doomed to poor medical care.

She was struck down at just 26. You need a living will, a health-care representative (to see that your wishes are carried out), a durable power of attorney (so someone can manage your financial affairs, if you can't) and a will (you may think you have nothing to leave but if, God forbid, you die in an accident, there may be a financial settlement). Also, write a live-together agreement, if you have a roommate, and share expenses or purchase property jointly. Do-it-yourselfers can try or .

You can't fix everything at once, but here's a step-by-step approach. (1) Sign up for an automatic savings plan-even just 2 percent of pay, if that's all you can afford. (2) Bring your spending under control. (3) Get rid of consumer debt. (4) With your debt gone, increase your automatic savings, both for ready cash and other goals, such as a down payment on a house. (5) Raise the amount you're adding to your retirement plan. Generally, 6 percent of pay will capture the full employer match, if there is one. By your 30s, you should be saving at least 10 percent.

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