(MONEY Magazine) – YOU CAN BE PRETTY sure that Mick Jagger, one rock relic the Gen X crowd really digs, wasn't crooning about personal finance when he sang, "Time is on my side." But time is one of the two things twenty- and thirtysomethings really do have going for them. It can work magic over 25 or 30 years on savings and investments, partly by helping you ride out the inevitable dips in the markets. The other thing you have going for you is the financial awareness that comes from having had it pretty rough lately.

You worked your way through college or took out loans, then graduated to an insecure job market and wages that have been flat for 20 years. The notion that you and you alone have to take care of your financial future fits right in with your experience so far. Cliff Coady, 35, of Norwalk, Conn. and his fiancee, Cindy Sutherland, 34, are planning an October wedding. "I almost feel like I should be saving for my kids' tuition now, and we don't even have kids yet," Cliff says.

Meanwhile, there are the immediate pressures of mushrooming credit-card debt and obliga- tions to repay hefty student loans. If you think there's a chance that you are losing your handhold on financial adulthood, take comfort from the fact that ultimately your problems are manageable. The trick to getting a financial life is to take it one step at a time. Some of what follows you may have read before, but pay attention anyway. This time we're talking to you.

Step one: Before you chip away at debt or start investing, build an emergency fund to get you through a job loss or some other crisis without having to borrow from your parents. Your stash should be equal to at least three months of living expenses--including rent, groceries, phone bills and car payments--or more if you are a freelancer. For instance, Tim Ewald and Sarah Shor of Nashua, N.H. have diligently squirreled away $6,400, about two months' worth of living expenses. But because both 26-year-olds freelance, they shouldn't stop saving until they have at least six months covered.

Put the money someplace where it is immediately accessible in a crisis. (That's why you call it your emergency fund.) You don't want it tied up in a CD with an early-withdrawal penalty of up to six months' interest. And you surely don't want it in a bond or equity mutual fund where a bear market could swallow your stash just as you were about to draw on it.

The best place for your emergency cache is a money-market mutual fund offered by any of the major fund companies such as Vanguard, Oppenheimer or Fidelity. Banks have souped-up savings accounts called money-market accounts, which are insured by the government but typically pay rates of about two percentage points lower than money-market funds. For example, Vanguard's taxable money-market fund was recently earning 5.5%, compared with Chase Manhattan Bank's Money Market Maximizer account at 3% for a deposit of less than $10,000. You can write checks on your fund, but there's usually a $250 to $500 minimum and there's no fast-cash service such as an automated teller machine. This is actually good because it makes it harder for you to raid the fund for impulse purchases. But it means you'll still need a checking account at a bank for day-to-day business.

To make sure you do save, when you open your account with the fund, fill out the form (usually part of the fund's normal application) that authorizes your bank to route a specified amount from your checking account to your fund account automatically every month. "That way, after a couple of months, you won't even know the money's gone," says Marilyn Capelli, a financial planner in Bloomfield Hills, Mich. "It'll be painless."

Step two: The next thing you need to do is buy disability insurance. (You figured insurance was coming, didn't you?) Otherwise, an accident or illness that prevents you from working for several weeks or months could turn into financial disaster. "I can't stress how important this is," says Philadelphia financial planner Joann Bay. "If you're not properly covered, you could go from having a healthy amount in savings and earning a nice income to being destitute and on welfare."

Take out a disability insurance policy that provides you with 60% of your annual income until you can go back to work or until age 65 if your injury is permanent. Most mid-size and large employers provide such coverage for their full-time employees, but if you work for a company with fewer than 100 people or you freelance, you'll likely have to buy your own policy. Premiums are based largely on annual income and occupation and could run you $70 a month if you're 28 years old and earning $40,000 a year. You may be able to cut your costs by about 50% if you belong to a union or trade organization that offers group rates such as the International Alliance of Theatrical Stage Employees. Otherwise, find an insurance broker by word of mouth or let your fingers do the walking. If you do use the Yellow Pages, though, call your state insurance department before you enlist a broker to make certain he or she is licensed.

Before you sign up, be sure you understand how the policy defines disability. What you want, Bay explains, "is a definition that says you are disabled if you can no longer do a job that requires the skills you've got." Make sure there's a provision for partial disability, which would compensate you if you were forced to work a shortened week and consequently lost income. How much partial coverage pays depends on what percentage of your income you lost and the size of your policy.

You're probably wondering why we're not urging you to buy life insurance. At your age, a debilitating injury is a bigger threat to you than death. So of the two, "Get the disability, no question," says Stewart Welch III, a financial adviser in Birmingham. "If you are married with children or your spouse is entirely dependent on you, then consider buying term life insurance, but it should still be second to disability coverage."

Step three: Now that you've taken care of the unforeseen, it's time to get your debts under control. Chances are you're juggling at least a couple of credit-card balances, if not student loans and car loans as well. Find out which are costing you the most in interest, and tackle them first. Probably it's your credit cards. Here's a satisfying way to get back at those card companies charging you 18%. When an issuer solicits you with the marketing ploy of a low introductory rate, consolidate your balances on that card. After six months, when that cheapo 6% rises to 14% or so, transfer your balance to another card with another attractive introductory rate. So it goes until you pay off all the debt.

If you're not up for all that effort, see Your Money Monitor on page 49 for today's best credit-card rates and consolidate your balances on the card with the lowest rate. For example, Pulaski Bank & Trust of Little Rock (800-980-2265) offers a Visa or MasterCard at 9.45%. Careful, though: When you consolidate your debt, you free up the credit lines on your plastic. "Many people end up with more debt than they had before they consolidated because they don't stop using their cards," says Martin Kehe, director of education for National Credit Counseling Services in Columbia, Md. To avoid temptation, carry only one card--one that forces you to pay off your balance in full every month, such as American Express--and go easy on that.

After credit cards, student loans have the tightest stranglehold on people in their twenties and thirties. Shorten the repayment schedule, and you'll reduce your total interest payments. For example, if you have a Stafford Loan (the most common federal student loan) and you're paying it off over 30 years, you can change your repayment term to 10 years and reduce your total interest payment by about 70%. After you've made 48 on-time payments to the Student Loan Marketing Association (Sallie Mae), Sallie will cut your rate by as much as two percentage points. Then, authorize your bank to make payments directly to her from your checking or savings account, and you'll save another quarter of a point. For details on how to restructure your loan, call the Federal Student Aid Information Center (800-433-3243).

Step four: Okay, now you should actually start having some money to save for your--ahem!--retirement. Where you do it depends on what sort of tax-sheltered savings plans are open to you. If you don't have such a plan where you work or earn less than $25,000 a year, your vehicle of choice is an Individual Retirement Account (IRA). Whatever you contribute, up to $2,000 annually, comes right out of money that Uncle Sam would otherwise tax. Not only that, the investment gains in your IRA are also allowed to build without being taxed.

An even better deal, if your employer offers it, is a 401(k) plan. Not only are taxes deferred on your contributions and the gains on your investments, but many employers will kick in 50¢ for every dollar you contribute. Not bad! You have a guaranteed 50% return right off the bat. Most 401(k) plans let employees contribute between 1% and 15% of their salaries on a tax-deferred basis, up to the legal maximum of $9,500 a year. You may think that because you can't afford to max out on your contributions, it's not worth bothering with a 401(k). That's what has stopped Barbara Diamond, 27, of New York City from putting anything into her 403(b) plan, a 401(k) offered by nonprofit organizations. "I have a hard time seeing that as a priority with all sorts of other expenses I'm dealing with," says Diamond, who has worked for four years for the American Jewish World Service. This is the sort of thinking that has financial planners pounding sand in frustration. Says Marilyn Capelli: "I'd like to see Barbara kick in at least $50 a month. No matter how tight your budget, you can't pass up such a good offer."

Keep socking away that money, however teensy the amount, and watch it grow over time. No matter what, never cash out your plan before you turn 59è, or you'll pay not only income taxes on the amount you withdraw but also a 10% penalty. If you change jobs, simply roll over the money into your new employer's plan or, if there isn't one, into an IRA.

Step five: This is the fun part, investing your savings. In two words: Be aggressive. Most employers offer at least three investment choices for your 401(k)--a stock fund, a balanced fund (which invests in both stocks and bonds) and some kind of fixed-income investment like a stable value fund (think of it as a pool of CDs). Put your money and as much of your employer's contribution as he'll let you into funds that invest exclusively--or almost so--in equities. Stocks provide a better return over the long run than either bonds or fixed investments like stable value funds (see the next story). And, though stocks can take some nasty turns over short stretches, because you'll be in the market for 25 or 30 years you don't have to worry about that.

At least you don't have to worry as long as you're a patient investor. You're going to have a less than profitable experience if you bail out of your stock funds at every bump and shimmy in the Dow. "One rule people in their twenties and thirties should follow is: Give your investments a chance," says Ronald Wiser, a mutual funds specialist in Kalamazoo. Remember that investments move in cycles and that you have enough time on your side for any temporary dog to turn into a greyhound.

A final thought. Saving, paying down debts and investing all take a certain amount of self-discipline. To get the money to start that emergency fund, for example, you may have to cut back a little on your spending. What would happen if you limited yourself to one trip a week to the ATM? Or drew up a budget for yourself and stuck to it? The generation ahead of you is only now growing up financially, which is why one of their most common fantasies is winding up on the street homeless. Wouldn't you rather fantasize about living in Margaritaville forever more?