(MONEY Magazine) – UNTIL RECENTLY, ARI AND JENNIFER DONOWITZ had no problem deciding what to do with their money. It was easy. They didn't have any.

The couple married young--they were just 21--while both were still in school. That first year, they scraped by on $20,000 in income, mostly from Jennifer's work as a student aide while she wrapped up a master's in special ed (she financed her degree with money they'd gotten as wedding gifts). Ari, a scholarship student, did odd jobs while finishing his senior year of college. They paid rock-bottom rent for a little one-bedroom in Far Rockaway, Queens, on the fringes of New York City, and they skipped the honeymoon entirely.

Three years later, their finances have taken a decided turn for the better. Jennifer is now a special-education instructor, Ari is a director of finance for a nursing-home operator, and together they're on track to earn $130,000 this year. Their expenses have grown along with their income: They have a son, Eli, almost two, and they've moved into a bigger rental to accommodate their growing family. Still, they're saving in earnest for the first time in their lives--just six months after Ari landed his job, they've already socked away $10,000 in their checking account.

The only problem is that the Donowitzes have no clue what to do with the money. They know what they want: Jennifer wants a house, Ari wants an M.B.A.; they know they need life insurance and that they should be saving for retirement too. But they don't know where to start. "I'm not confident about the concrete stuff we have to do to reach our goals," says Ari. "And we have so many goals--I'm not sure what to do first."

In other words, they face the same problems as other couples in their twenties and thirties. They're finally earning decent money and are ready to behave like financial adults, but need some guidance on how to get there. These tips should help.

• Set Priorities When you're just starting a career and a family, and all of your goals seem urgent and wildly expensive, you can feel so overwhelmed, you end up doing nothing. The key to overcoming paralysis is to zero in on the two or three goals that are most important, and to reassure yourself that you'll tackle the others eventually. The Donowitzes, for example, have decided to make saving for retirement and Ari's M.B.A. their top priorities now. Buying a house can wait a few years, and they're not even thinking yet about a college fund for Eli.

Once you have your short list, make the goals more tangible by assigning each one a number and a time frame for achieving it. You'll erase your credit-card debt in two years by paying double the minimum each month, or you'll put $25 a month aside for emergencies until you reach $3,000. If the amounts seem laughably small, don't worry. You'll kick it up over time. The important thing now is to get started. "Saving is a skill," says Ruth Hayden, author of For Richer, Not Poorer: The Money Book for Couples. "You need to practice it even when you don't have a lot of money."

• Work with a Net Part of growing up means planning for the worst--or at least the unexpected. That's why one of those first goals should be to build that emergency fund--a stash of cash equal to three to six months of your living expenses that can tide you over if you lose your job or your car breaks down. Getting to that target may take a while; in the meantime, a low-rate credit card with a zero balance can substitute for cash in the bank. Just make sure you save the card for real emergencies, and that your idea of an emergency isn't a family vacation at the beach.

Fortunately, with 10 grand in the bank, the Donowitzes have the emergency fund covered. What they don't have is life insurance that will provide financial security for Eli if one of them dies unexpectedly. The good news about life insurance when you're young: It's cheap. Ari can likely get a $500,000, 20-year term policy for about $265 a year; the same coverage for Jennifer will probably run $230. (To calculate how much you'll need, go to life-line.org; get price quotes at accuquote.com.)

• Put Your Money to Work Now, about that $10,000 that the Donowitzes have saved. The couple get major points for socking away so much cash in so little time, but they've chosen just about the worst place to park the money: a checking account, which typically pays less than 1% in interest or, in their case, no interest at all. It's a classic beginner's mistake--when you don't know much about investing, you're loath to take a risk, so you put your money in the bank where at least you know it will be safe and always accessible. Safe and accessible are good for your emergency fund and savings for other short-term goals, such as a down payment on a house. But there are better places to find those qualities than in a checking account. A savings account at an online bank, with recent rates as high as 4.5%, would provide much higher returns and, since it'd also be insured by the FDIC, just as much safety.

• Make It Automatic You'll greatly improve your odds of success if you organize your finances so that you don't have to discipline yourself to make progress every month, but can instead let things just kind of happen on their own. Most major banks, brokerages and fund companies will allow you to set up automatic monthly cash transfers from your bank or paycheck into a designated savings or investment account. You can also automate your credit-card and other bill payments, which has the added benefit of ensuring that your payments will arrive on time. That, in turn, helps improve your credit score.

• Don't Forget the Future As hard as it is to plan for life at 65 when you're only 25, you'll end up with tons more money if you start saving for retirement when you're young. Contributing 10% of your income is ideal. But realistically, cash-strapped young adults may need to start with 3%, then raise it a percentage point every six months. "One percent of your salary--you'll hardly feel it," Hayden says.

The payoff is emotional as well as financial. Once you take those first halting steps toward your goals, you'll feel more confident and less stressed. Just ask the Donowitzes. "Having a clear idea of what we need to do is a great relief," says Ari. "We feel like we're on our way."

3 fast fixes

A SMART START ON BUILDING WEALTH

NOW THAT ARI AND JENNIFER DONOWITZ are earning more money, they're eager to tackle bigger financial goals. New York City planner James Kibler offers this advice:

1 Borrow for the M.B.A.

Unlike many young people, Ari and Jennifer hate to borrow. Kibler says they're right to avoid credit cards but shouldn't be so quick to shun student loans to help Ari earn a degree that will help him qualify for a better job. "There is such a thing as good debt, which helps you acquire an asset that will outlive the loan," he notes. "The benefit from the M.B.A. lasts forever."

2 Wait on the House--for Now

It pains the Donowitzes to pay rent when they could be building equity in their own home. But the couple needs more time to save for an adequate down payment, says Kibler, who suggests they aim to put down at least 10% of a home's price and confine their search to houses that cost no more than 3½ times their pretax income (or 2½ times pretax income if they lived in a less costly housing market).

3 Save Now for Retirement

Kibler urges Ari to enroll in his 401(k) plan right away, and he advises Jennifer to open a Roth IRA since her employer doesn't offer a retirement plan. Don't put off signing up until you figure out investing, he says--just get that tax-advantaged growth working for you. "You can always switch investments later," says Kibler. "The important thing is to get the plan going."

42% of employees ages 25 to 34 don't invest in their 401(k)s.

SOURCE: Vanguard.

Keep It Simple

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