Financial advisor and author Jesse B. Brown.

It’s important to find ways to save money, especially in your twenties and thirties, because as financial advisor Jesse B. Brown says, time and compounded interest will help you build secure wealth more quickly. Brown is the president of Krystal Investment Management in Chicago, Illinois, and oversees millions of dollars in mutual funds, stocks, and bonds for his investor clients.

Brown is nationally syndicated personal finance columnist, and his money management advice appears in 240 newspapers across the country. He is a money makeover expert for the ABC News website feature Money Scope and a contributing analyst for NBC News.

Brown is the author of several books, available at Amazon.com, including:

Pay Yourself First

101 Real Money Questions

Investing in the Dream: Personal Wealth-Building Strategies in Search of Financial Freedom

Pathway to Your Dreams, now available on audio cassette.

He publishes a monthly newsletter and answers all types of financial questions on his website, Invest in the Dream.

Jesse Brown Shares Ways to Save Money

LoveToKnow Save (LTK): In your experience, why do many people view savings as a chore, rather than a reward?

Jesse Brown (JB): Procrastination. The American spirit is optimistic. There is always a tomorrow. America has always been prosperous. Even during the Depression, Americans were better off than many other parts of the world.

We just do not have a savings-happy attitude. Look at the numbers: American has always been in the middle or dead last as worldwide savers. It is just not in our DNA. We are consumers. But we need to make a change. In the lightning-fast world of high finance, things are a bit different.

LTK: Many young people think that having money is only a means to buying anything they want. When you talk to young people about “paying yourself first,” what do you have to say about this?

JB: Have you ever taken an airline trip? What does the pilot say? He says to cover yourself with the oxygen first before helping your spouse or child. Why? The reason is simple. If you are not in control, you cannot help anyone else.

Young or old, you need money. Wealth by definition is mental and financial security. With money and not wealth, you have no security. Without security, you cannot have progress.

In order to “keep up with the Joneses”-to have the nicest house, the most luxurious car, the most elaborate or exotic vacation-we could be shortchanging our futures. Evaluate what can do the most for your future security. Is it a fancy luxury car, with its big debt and high monthly payment, or $30,000?

If you choose savings or investments of $30,000, you’d have no debt and over $67,000 in long-term savings at the end of twenty years. If you choose status and purchase a luxury car, you’re relying on something transient that will last a much shorter time and, in the long run, will have to be replaced.

Let’s say, beginning at age 25 until retirement, you could save a mere $5 a week. Could you find a way to save even more? The more you can manage to comfortably save, the more effectively time can work in your favor. This is a significant factor that holds great influence over the growth of your money.

Look To the Future and Set Goals

LTK: People who feel they’re living paycheck to paycheck already can’t imagine taking another $20-$100 a month out of their pay to participate in an employer’s retirement program. Please tell us why this action is an important way to save money and how they can make it happen.

JB: I tell those young people to look in the mirror. Then close your eyes, and picture this in your mind: old, sick, and broke. The only way to avoid this is to save and invest now.

How much does a fast food combo meal cost? Usually about $5. Okay, now skip that combo meal and save $5 a day. Over the course of a week you save at least $25. At the end of the month you will have $100. If you do this starting at age 25, by age 65, you’ll have about $40,000.

But if that young person put the money into a growth mutual fund, what started off as $100 a month would turn into $1,300,000!

The easiest way to save is through payroll deduction. Have it taken out of your check before you see it. Remember, live off your net income, not your gross income.

LTK: In order to build a better financial future, how can we establish goals to see positive results?

JB: Make this determination: Why do you go to work every day? A lot of people come up with a lot of answers-to buy a car, to pay rent, buy a house, send kids to school. All good answers, but wrong.

The real answer is this: I go to work each day so that I do not have to go to work. What that means is you have to set goals immediately so that you know exactly how much you have to work (and make money) so eventually, you do not have to go to work.

Assuming you can’t find money to save is the biggest financial mistake most people make. The truth of the matter is that almost everyone with an income can find something to save. It doesn’t have to be a dramatic amount of money, but it does require desire and discipline.

Goals are simple. What do you want? Write it down. Achieve it.

Learn How to Pay Yourself First

LTK: Describe your philosophy of “paying yourself first.”

JB: The foundation of financial success is built on four basic points that can help you control your money. Being in control makes your money work for you, not against you. There are many “fine points” of money management, but following these basic guidelines will, by themselves, lead you to the path of financial success.

In order to build financial security, you must first take a good look at where your money goes, then decide on some specific goals. Once you have these answers firmly in your mind, you are ready to develop a plan by implementing the following four basic building blocks toward success.

Building Block #1: Always Pay Yourself First

Put yourself first before everyone else. That’s right! For once in your life, it’s going to be positive to be selfish! Paying yourself first will reap rewards for your entire family. This means before you pay your landlord, your utilities, or consider any other demands on your money, put your family’s future first.

A basic rule of thumb is to save a minimum of 10 percent of your income. Each time your income increases, remember to adjust this amount up to 10 percent of that new amount. If you can save more than the 10 percent minimum, that’s great. But this simple investment will start you moving in the right direction.

Building Block #2: Time is Power

It is said that “the only two things life gives you are opportunity and time.” You may not be able to control opportunity, but more often than not, you can control time.

Time is probably the most underrated commodity when creating a financial plan. The correct use of time can overcome issues that might be considered shortcomings: modest income, modest rates of return, even poor habits. However, with time, what was previously considered a disastrous financial situation can be righted. Combined with an adequate rate of return and consistency, time is a powerful tool to achieving the financial security that we all desire.

Consider this simple example: Suppose the day you were born, your parents deposited $1,000. Let’s further assume it was invested for a modest 6 percent rate of return. If that investment was untouched until you turned age 65, that initial investment would have become $44,000 - without ever having added another penny!

Unfortunately, many didn’t have parents with such financial foresight or ability. Just remember, no matter when you start saving, time can still work to your advantage.

Building Block #3: The Advantage of Compounding

Let’s return to the example of the parents who deposited $1,000 at 6 percent interest when their child was born. The annual interest would be $60, based on that 6 percent rate. If we multiplied that rate by 65 years, the $60 would have grown to $3,900. How, then, could their child have $44,000 to withdraw at the age of 65? This is the advantage and power of compound interest-one of the most important keys to attaining wealth. Here’s how compounding works.

During the first year of the initial deposit, if the 6 percent, or $60, was added to the $1,000, the investment would change to $1,060. During the second year, the 6 percent rate of interest would then be calculated on the new balance of $1,060. This would bring the interest credited to $63.60, making the total balance $1,123. Each year, as the account grew, the interest rate would be calculated on the new account total, including all interest payments. Based on compound interest, the $1,000 would grow to $44,000!

With the power and advantage of compound interest working for you, you now understand how quickly an initial saving of a few hundred dollars can become thousands.

Building Block #4: Rate of Return

The rate of return is another critical key often overlooked when building financial security. Rate of return and interest rate are inter-changeable terms. The impact of the rate of return combined with time may initially seem minor. However, when considering the difference of a few percentage points over time, the impact is significant. It can be difficult to realize what a dramatic effect a higher rate of return can have.

You’d logically think if you earned a 10 percent rate of return instead of 5 percent, your money would merely double. This isn’t so. Once again, taking into account the power of compound interest, that 5 percent difference, adding up over time, can add thousands of dollars to any investment made for you and your family.

Let’s go back once more to the example of the parents who deposited the initial $1,000 for their child at the rate of 6 percent. What could their child have withdrawn at age 65 if the account had earned a higher rate of return? If we consider the difference between a 6 percent and a 9 percent rate of return, the parents would have built $226,000 in financial security. At 12 percent, the difference would be over a million dollars!

Since your main objective in saving is to accumulate as much cash as possible, understanding the rate of return you receive on your savings or investment is crucial.

Investment Advice

LTK: If someone saves $1,000, and would like to invest it, what recommendations do you have?

JB: A complete savings program has two types of basic accounts: one for emergency funds and another for long-term funds.

Establish the emergency fund first, because many things happen without warning. It’s wise to set this account up before you consider any larger investments. A good rule of thumb is to have three month’s salary in this emergency fund.

It’s important to harness the desire to use this account as a checking account. Make vacations, fun activities or luxury purchases part of your budgeting process. Also, make sure it’s easily accessible. Long-range investment plans are not good for emergency funds because there are heavy early withdrawal penalties.

To establish a long-range investment fund, talk with a financial advisor and select the type of investment that is best suited for you. Risk tolerance is a question many have. But, within a year, you’ll start to learn the value of compounded interest, and can make more decisions about investing from there.

And whenever you can take advantage of direct deposit, do so. It’s pretax income, and your savings or investment is assured upfront. The beauty of this is that you don’t have to rely on your discipline. You can arrange for your employer to set aside a certain amount from your payroll each month and direct the deposit into the fund of your choice.

LTK: If you could shout from the rooftops one key factor for all of us to remember about paying ourselves first, what would it be?

JB: Old. Sick. Broke. Still not a pretty picture.

When the government first came up with Social Security, the average life expectancy was age 60, and it was decided to hand out money at age 65. Now that our life expectancy is much older, the possibility of getting a Social Security check is far, far less.

Additional Resources

Here is a brief list of resources Brown recommends:

The Future Is In Your Hands

While Jesse Brown has many specific tips and lots of advice, it all boils down to taking charge of your own future. His message is simple: your financial future is in your hands, so take steps now to ensure that you’ll be financially secure for the rest of your life.