Chapter 1: Crib Notes: A Cheat Sheet for Time-Pressed Readers Who Need Help Now 1 CRIB NOTES A Cheat Sheet for Time-Pressed Readers Who Need Help Now IF YOU''RE OVERWHELMED by the idea of diving into a whole book on personal finance, this chapter is for you. It cuts to the chase and sets you on the path to a solid financial life. Adopting even one or two of these strategies will put you ahead of the game and--I promise--make a big difference sooner than you think. Of course, as someone''s mother once said, cheaters only cheat themselves. While this chapter is a good launching pad, ignoring the remaining nine chapters is a little like relying on an AI summary of Hamlet : You''ll get the basic plotline but never understand what all the fuss is about. That said, the following crib notes will give you the "need to know" basics. I''ve tried to list the advice in rough order of importance, but your priorities will depend on your own situation. 1.

Insure yourself against financial ruin. You need health insurance. It''ll help protect you if you have an accident or illness and guarantee that you don''t bankrupt yourself--or your family--if you run into any serious medical problems. For these reasons, health insurance should be considered your number one financial priority. If you work for a company that offers its employees health insurance, you''re lucky; participating in a plan at work will almost always cost you much less than buying a policy on your own because your employer pays for part of it. Your company may offer more than one type of plan; make sure you consider not only the price but also the extent of the coverage. You''ll want to find out exactly how much you''ll be expected to pay out of pocket before insurance kicks in (this is known as the deductible ), the rules for seeing specialists, and what happens if you want to visit a doctor who doesn''t participate in the plan. If your job doesn''t offer coverage, if you work for yourself, or if you''re looking for a job, you''ll have to pay for it on your own.

First, see if you can get coverage through a family member. Federal law says you can be covered by your parents'' or legal guardian''s insurance until you turn 26; some states will let you stay on even longer. If you''re married and your spouse is insured through work, see about being added to that policy. Many companies also cover unmarried domestic partners. If all else fails, you''ll need to purchase a policy on your own. You can comparison shop at healthcare.gov or go directly to individual health insurance companies. For additional tips on the insurance you need--and the kinds you should avoid--see Chapter 8.

2. Pay off your debt the smart way. One of the smartest financial moves you can make is to take any savings you have (above and beyond money you need for essentials like rent, food, and health insurance) and pay off your high-rate loans. The reason is simple: You usually can "earn" more by paying off a loan than you can by saving and investing. That''s because paying off a credit card or high-rate loan that has a 20% interest rate is equivalent to earning 20% on an investment, guaranteed--an extremely attractive rate of return. (Actually, it''s even better; it''s the equivalent of earning 20% after taxes .) If you want a full explanation of this concept, turn to p. 28.

Otherwise, take my word for it. The first step in attacking high-rate debt is to try to reduce your interest rate. Start by calling your credit card company and asking for a lower rate. (Seriously, this often works.) Next, see if you can qualify for one of the lower-rate cards listed on sites like CreditCards.com or WalletHub. If you have several different types of debt--say, a balance on a credit card with a 24% interest rate, another credit card balance with a 16% rate, and a student loan with a 4% rate--pay off the debt with the highest interest rate first. One way to make this easier is to ask your federal student loan servicer to stretch out your payments for longer than the standard number of years by switching to a different repayment plan.

This will reduce your monthly student loan payment, leaving you with extra cash, which you can use to pay off your credit card balances faster. Once you''ve gotten rid of your 24% card balance, increase the payments on your 16% balance. After you wipe out that one, increase your student loan payments to at least their initial levels. The only time it doesn''t make sense to kill your debt is when the interest rate you''re being charged is lower than the rate you can receive on an investment. If, for example, you have a student loan with only a 4% rate and no other debt, you''d be better off maintaining your usual payment schedule on the loan and putting your cash into an investment that pays you an after-tax rate greater than 4%, assuming you can find it. One such place would be a 401(k) with matching contributions, which is coming up in the next point. For detailed information on credit cards, auto loans, and student loans, see Chapter 3. 3.

Start contributing to a tax-favored retirement savings plan. This one might strike you as nuts at first. Why would you think about retirement now? But here''s the reality: Saving money in a retirement plan is one of the smartest (and easiest) things you can do when you''re young. If you''re fortunate enough to work for a company that offers a retirement savings plan like a 401(k) , you should take advantage of it. The big attraction here is that many employers will match a portion of the amount you put into such a plan. That means the company contributes a set amount--say, 50 cents or a dollar--for every dollar you contribute, up to a specified percentage of your salary. That''s free money, equivalent to an immediate, guaranteed 50% or 100% return. There''s nowhere you can beat this.

(In fact, if your company offers such a fabulous matching deal, you should probably contribute to the plan even before paying off your high-rate debt.) In addition, the federal government allows the money to grow tax-free. (See p. 121 for an explanation of how this saves you even more money.) At this point in your life, it may seem crazy to lock up your money in a retirement savings plan. Ignore that feeling. While it''s true that you won''t be able to withdraw your money from a traditional 401(k) until you reach age 59½ without facing a penalty, the benefits of matching and tax-advantaged growth are so huge that this is still the best deal out there. If you switch jobs, you may be able to move your 401(k) money into your new employer''s plan (or transfer it into something called an IRA; see below).

Also, most plans allow employees to borrow against their retirement savings in an emergency. As of 2026, the maximum someone under 50 can contribute annually to a 401(k) is $24,500, which may be more than you can manage, but try to at least contribute the maximum percentage for which you''re eligible to receive matching funds. If you don''t work for an employer who offers a 401(k) or a similar retirement plan, you should start investing in an individual retirement account (IRA) . The most someone under 50 can contribute to an IRA as of 2026 is $7,500 annually; if at all possible, contribute the maximum amount every year. IRAs don''t provide matching contributions, but certain IRAs known as Roth IRAs do offer one special benefit: There''s no penalty for withdrawing the money you contribute to them at any time. This is an appealing escape hatch if you''re afraid of tying up all your money. You''re not allowed to freely withdraw the interest you earned on the money you contributed until after you turn 59½. (Note that some companies offer something called a Roth 401(k); see p.

123.) Bottom line: Max out your company''s 401(k) up to the matching limit if you have one. If that''s not an option, go with an IRA. For all your questions on tax-favored retirement savings plans, see Chapter 6. 4. Build an emergency cushion using an automatic savings plan. The rule of thumb: Put away three to six months'' worth of living expenses to cover any unexpected cost that crops up in life, whether it''s a broken AC in the summer or a trip to urgent care. The easiest way to do this is to have the money automatically withdrawn from each paycheck and funneled into a federally insured, high-yield online savings account or something called a money market fund .

(For more on this, see Chapter 4.) That''s a relatively painless way to force yourself to accumulate your emergency savings. Mathematically speaking, it''s wisest to max out your 401(k) with matching and then pay off your high-interest credit card debt before you start putting money into emergency savings. But you might feel more secure if you start putting a small amount toward your three-to-six-month cushion before you wipe out your high-rate credit card debt. To figure out how much you need to save per month to meet your goal, use the worksheet (Figure 2-1) on p. 13. 5. Consider investing in stock and bond funds.

Once you have your savings cushion in a federally insured, high-yield savings account, it''s time to get more aggressive with your investments and start paying attention to stocks and bonds , which have tended to earn more for investors over long periods of time, yielding higher returns that stay ahead of inflation. (For a discussion of inflation and why it matters, see Chapter 5.) The downside of stocks and bonds is that they''re riskier than savings accounts or money market funds. In other words, you can lose money by investing in them. So for money that you absolutely need to be there--say y.