Stocks vs. Mutual Funds: Which Is Right for You?

Question: I'm planning to invest some money in the stock market, but I'm wondering whether I should buy mutual funds or individual stocks. Which do you think is better? And in the event I decide to go with stocks, which ones do you think are really good buys now? --Monique Thompson

Answer: The stocks vs. funds issue has always been a biggie for individual investors. But the question of whether you should go it alone or turn over your money to a mutual fund manager who'll invest it for you is even more critical today, if only because this uncertain economy and volatile market make the rewards for success and the cost of failure that much higher.

Clearly, the answer will vary from person to person, depending on such factors as how much money you have to invest, how well versed you are in the ways of the financial markets and how much time and effort you want to put into your finances.

It's also clear that each approach has advantages and drawbacks. With mutual funds, you get convenience, a diversified portfolio and the security of knowing that you have an experienced stock picker working full time on your behalf.

On the other hand, you have less control over your investments - not just which ones you choose, but when you recognize gains. That can be an issue when it comes to taxes. If the fund manager sells enough shares at a profit so that the fund has realized capital gains in a given year, you'll have to pay tax on a share of those gains even if you haven't sold shares of the fund (assuming you hold the fund in a taxable account).

If you decide to buy stocks on your own, you definitely have more control over what you own and when you sell. But you've also got to be willing to devote more time and attention to your investments.

So as I see it, the decision to go with stocks or funds comes down to a realistic assessment of how much you want to make your own investing decisions and your ability to handle that responsibility. Here are three questions you might ask yourself to help you with that assessment.

Am I willing (and able) to analyze companies' prospects? You don't have to be a rocket scientist to identify promising stocks. But you should be able to evaluate a company's finances. What sort of earnings growth is it likely to achieve? What's the value of its assets? Is it vulnerable because of a heavy debt load or a weakness in its product lineup?

But even that's not enough. You've also got to be able to assess whether it's selling at an attractive price. If a company has solid earnings and an impeccable balance sheet but is so popular that it's trading at a bloated share price, buying it may be an invitation to subpar returns.

There are many ways you can develop stock-picking skills. CNNMoney's Money 101 section has easy-to-read lessons on everything from assessing stocks to putting together a portfolio. The American Association of Individual Investors also offers lots of information about stock investing [www.aaii.com/basics/] that's geared toward beginners, as does the Learn [www.weseed.com/learn/learn.html] section of relatively new site called WeSeed.

But until you at least familiarize yourself with the basics of stock investing, stick with funds (or at least keep all but a tiny portion of your money in funds).

Am I ready to devote the time and effort to monitor my holdings? As we know from recent experience, the investing world can change dramatically. I certainly don't want to suggest you need to be buying or selling stocks every time the market or the economy reverses course or the fortunes change for a company whose stock you own. But there may be times when you should react.

If a company's potential has dimmed, you may want to sell some or all of your shares and plow the proceeds into a firm that has a rosier future. Conversely, if one of your stocks has racked up such huge gains that it now represents an outsize percentage of your portfolio, you may consider selling some shares to avoid having too much riding on one stock.

There may also be times when you can turn the tax system to your advantage, say, by selling shares that are trading for less than you paid for them and then using the loss to trim your tax bill.

Keeping an eye on your portfolio and making occasional adjustments isn't a 24/7 job. But you should be prepared to spend at least a few hours a week tending to your holdings. If you're not disposed to put in that amount of time - and possibly more during periods of upheaval - then you're better off in funds, which generally require less attention.

Do I have enough money to make it worthwhile to choose stocks on my own? Here, mutual funds offer a clear advantage for most investors. By using a tool such as Morningstar's Fund Screener, you can easily find funds that allow you in for a minimum initial investment of as little as $500, even less in some cases. Many of the funds on our Money 70 list of recommended funds also require a minimum of $1,000 or less. And once you're in, you can typically add to your account in increments of $50 to $250.

If you want a reasonably diversified portfolio of stocks, on the other hand, you're talking about a much larger investment. You don't have to buy in round lots of 100 shares as was the case back in the day. But at the same tie you don't want brokerage commissions to eat up your returns. So even if you figure on paying a modest $10-per-transaction brokerage fee, you'd probably want to invest a minimum of $1,000 per stock in order to prevent your costs from exceeding 1% of the amount you invest. (Remember, you'll also have to pay a fee when you sell.) Assuming you'll need at least 20 stocks to create a balanced portfolio, you're talking about investing in the neighborhood of $20,000 to $25,000, if not more.

You can always invest smaller amounts, either initially or when adding shares. But the less you invest, the higher the percentage of your return that gets eaten up by brokerage fees.

One final tip: If you're relying on personal finance columnists or cable TV pundits for stock picks, then my feeling is that you probably shouldn't be in stocks at all.

The point to buying individual shares is that you think you bring something to the table that adds value and can boost your return - in-depth research, expertise at valuing securities, a sense of discipline that prevents you from buying or selling on emotion.

But if all you're going to do is buy on someone else's say so - in other words, substitute their judgment for yours - you'll save yourself a lot of time, energy and money by acknowledging that upfront and sticking to funds.

Building Wealth:Resist the Urge to Cash Out

Should a man keep most of his retirement money in stocks, or move it to a money fund?

After suffering through the great bear market, Matt can't help but wonder if he's doing all he can to maximize his retirement savings.

The father of 5-year-old twin daughters, Hadley and Sutton, Matt has several retirement accounts, including a 401(k), a rollover IRA and a Roth IRA. He and his wife, Jenny, have saved close to $200,000. But Matt, director of financial planning and analysis at Cox Enterprises, a giant national cable company, worries that he won't have enough to exit the workforce when he wants -- at age 60.

"The direction of the market is troubling," he says. "For months, I watched my nest egg shrink every day." In March and early April, he and other investors finally caught a few breaks.

Like many people, Matt is still worried about keeping most of his retirement stake in stocks. So, while he continues to contribute new money to stock funds in his 401(k), he's considering moving to cash the $200,000 he and Jenny have already saved -- in essence, starting a new stock-fund allocation from zero.

Matt doesn't see this as trying to time the market -- although it is. "If I miss a bounce, I'll be kicking myself," he says. Fortunately, he didn't miss the March-April rebound. If he had, he'd have missed out on perhaps $30,000 in gains -- serious money.

That's why Matt should keep his investments in place. It's natural to second-guess yourself after Standard & Poor's 500-stock index loses 57%, as it did from peak to trough. But it's unwise to redo your portfolio in a knee-jerk fashion. "It has been a tough period, but this happens every 15 to 20 years," says Don Humphreys, president of Voyager Wealth Management, in Harrington Park, N.J. "This is the worst time to be selling because we're at the bottom."

It's nearly impossible to guess market swings in the short run. If Matt were to give up, there's no guarantee he'd be better off in bonds or real estate. In fact, history shows that stocks outperform bonds over time. Even with the huge drop from October 2007 through March 2009, T. Rowe Price calculates that over rolling 20-year periods since 1926, stocks have returned 11% annually, on average. Money-market funds? Just 4%.

Matt also has time to recoup his losses. Price advises that investors close to age 40 should have 90% to 100% of their retirement kitty in stocks. Cautious advisers would say 75%. Almost none would suggest that Matt zero out his stock allocation. To gauge his plan, Matt can use the retirement calculator at Kiplinger.com.

Stuart Ritter, a financial planner at T. Rowe Price, likens Matt's desire for drastic action to that of a soccer goalie who jumps to one side of the goal to block a penalty kick. Research shows that although goalies jump 94% of the time, they'd be better off sticking to the middle. The trouble is, a "bias for action" takes over.

It's the same with investing. Unfortunately, "we don't know what the future holds," says Ritter. "To be sure of your investments, do the same thing you should do in soccer: Stay focused on your position."

Lowball Salary Offers: A Working Guide

You can prevent—and sometimes turn around—offers of stingy pay, says Liz Ryan. But first let's have a little fun defining and categorizing them.

I get lots of mail from job-seekers who want to know the perfect juncture in a job-search process for the Salary Discussion. I'm glad to get these inquiries, because nailing down a salary range is not a trivial matter in a back-and-forth job-search conversation. However, all of these folks looking to pinpoint the Ideal Time for the Salary Conversation are in great shape—they're people I don't worry about. It's the ones who decide never to have the conversation at all who scare me.

There are people on the job market who believe that if a position sounds challenging and the interviews proceed well, the job offer will have to be reasonable, too. When I have the opportunity to talk with these folks face to face at a workshop or speaking appearance, I'll ask them: "Don't you see that one of the reasons the whole process goes so smoothly, the interviewers are so courteous, and the praise heaped upon you is so rich and varied is that they're planning to give you a lowball offer?"

"You're just a cynic," they answer.

Simple Faith

Job-seekers like these believe the right answer to the question "What are your salary requirements?" is "I'm sure that whatever you offer me will be fine." These folks don't lack self-esteem, and they're not expecting to jump into low-paying positions. They simply have faith in a system of manners and protocols that, sad to say, died out long ago—or at least can't be taken for granted.

Some of the job offers going to smart and capable people today are downright insulting. I talked to a friend of mine over the phone last week. Four years ago, I hired her for a spot in my business. She reminded me about that offer.

"You offered me $43,000 a year," she told me, "and what I remember about it is that you apologized for the salary. You said that it was clear I was worth more, but that the position wasn't especially senior, but that if I wanted it, it might be a great way to learn in a fun environment. So I took the job. I remember your apologizing for not being able to pay me more in that job. I appreciated that."

"It sounds like there's a punch line coming," I said.

"There is," she replied. "Last week I was offered a job at $37,000, and by now I have seven years of post-college marketing experience and half of an MBA under my belt. The funny thing is, there was no apology for the salary. Far from it. The lady said 'There are a million marketing people on the market so you should grab this opportunity while you can.'"

Stories like hers, along with my observations on how 2009's job market is developing, have compelled me to create the Liz Ryan Salary Offer Taxonomy. Here's the rundown:

• Delightful: An offer at the top of the mental range you'd created—one that surprises you in a good way.

• Perfectly Acceptable: Pretty much just what you expected and what you feel is fair for your background.

• Less than Sensational: Slightly disappointing, because it's lower than what you believe your skills merit.

• The Frustrater: Quite discouraging, in that the job itself seems great and worth doing, while the salary is far under your expectations.

• Gobsmacked: An offer so stingy it causes your jaw to drop and your brain to say, "What kind of chump did you take me for, anyway?" It sends a flush of righteous indignation across your face and body. It's not so much a job offer, as an insult to your professionalism and experience.

What can you do if you're hit with one of these insulting job offers? You can, of course, tell the hiring managers or HR representatives where they can shove their offer, and move on. Nonetheless, you must acknowledge that the Gobsmacker could have been avoided if you had broached the salary topic earlier. It's easy to be lulled into a false sense of security when the people you're meeting seem businesslike and worldly. "They'd never try to rip me off!" you think.

Oh yes, they might, and there's nothing worse than learning the bitter truth after investing six or eight weeks in the process.

Next time, be sure to bring the topic to the table early. A second interview is the perfect time to do it. But since that won't help you if you've got one of these Gobsmacked offers in front of you right now, here are some ideas for salvaging something of value, after the shock has worn off.

• Go back to the hiring manager and say: "Thanks so much for the offer. The job seems terrific, and I'm thrilled to be moving along in the process. We've had some kind of miscommunication along the way, clearly. I'm focusing on opportunities in the $XX range, and the offer I've received is obviously way below that number. If you're set on this type of salary range, I'm not your hire, but it may make sense to talk about having me consult with you as you get your new plans under way and your new hire up to speed."

• Suggest taking the job and performing it on a 20- or 24-hour-a-week schedule if that suits you. If the manager says, "We're strictly looking for a full-time person," you can wish him or her well and get out of Dodge. The key to these alternative resolution approaches, in my experience, is goodwill. It won't help you to sound miffed or affronted. There's a big communication gap; that much is clear. Can it be surmounted? Since you didn't raise the salary question earlier, you must take some of the blame as you talk with your prospective boss. "I should have begun a conversation about salary earlier, I can see," you'll say. Resist the temptation to say "I earned more than this in 1994" or "My daughter in grad school earns this much." Don't make it a personal issue. It's business.

• Try to get the cheapskate—er, that is, the manager with whom you've had a communication glitch—to see things your way. Of course, it's doubtful that you'll be able to negotiate a full-time salary offer upward by 40% or 50%, once the lowball offer has been extended. But you can talk about a results-based bonus, ownership in the company (if it's very small), and other perks.

With job offers, the big question is: Am I going to want to work for this company? Remember that miscommunications happen, so it pays to learn how to convey our value more effectively.

But there are companies out there—my young friend and many other job-seekers have been running into them right and left lately—that don't care so much about what you've done or can do. Mostly, they're concerned with the question, "How cheaply can we hire this person?" and this doesn't bode well for you or for them.

Underemployment Compensation

Five strategies that will move you closer to your dream job

Mounting job losses continue to take a huge toll on the economy and on household budgets. But they can also have a debilitating effect on those who are employed in less than their full capacity.

In addition to the thousands who receive pink slips every month, there are those who work fewer hours than they'd like, are employed in a position that doesn't suit their skills or forced to take a low-level job just to make ends meet.

While the weak economy makes it difficult to rise out of any of those situations, experts say workers should stay optimistic and avoid desperation. No matter what your work circumstance, you can still get a fulfilling job that uses more of your talent and promotes your career even in these tough times.

Here are five strategies that can move you closer to landing your dream job:

1. Be Flexible

To get closer to that dream job, workers might need to take a position with less-than-ideal hours, or that doesn't take advantage of all of their skills, experts said.

"They need to be more flexible," said Allison O'Kelly, chief executive of Mom Corps, a staffing firm that specializes in flexible employment. "You need to think about all the things that the employer is looking for."

As a way to enter the right organization, workers might want to consider taking a job that is a bit beneath their skill level because it can set them on the right career path.

"Take it because you can prove your worth. Right now people need to take what they can get in their field," O'Kelly said.

Cynthia Shapiro, a career and business strategist based in Los Angeles, said workers should take a job that could better position them for their career later on even if the pay is disappointing.

"Sometimes people just take something and it doesn't work with their résumé," Shapiro said. "It's more important to have a title that looks decent on your résumé than the money."

If you can't find work within your industry, Walter Akana, a career strategist based in Decatur, Ga., recommended that workers capitalize on their transferrable skills, and consider other sorts of posts. Employers consider hires based on their accomplishments in prior positions, he said.

"You need to step back and do a serious assessment of your skills, your accomplishments and interests. A lot of times people lose track of what they actually accomplish for a company," Akana said.

2. Continue to Network

In addition to making sure your résumé and interview skills are top notch, networking is key to finding the right job. Don't let shyness stop you from contacting colleagues, friends and family members, taking full advantage of in-person events and the Internet.

"In any economy, perhaps even more so in a weaker economy, networking is the most valuable tool by far," said Randall Hansen, publisher of career development site Quintessential Careers. "The vast majority of jobs are through referrals."

Hansen also recommended building a network by reaching out to organizations and industry groups.

"Then once you have a network ask around if they know anyone who's hiring," Hansen said. "You should tell everybody you know that you are seeking a new job and follow job leads no matter how small they seem."

3. Show Your Spirit

While it's easy to be dispirited during the downturn, keeping perkier may be more helpful when it comes to finding full-time, fulfilling work, experts said.

"If your hours are cut or there are threats of additional layoffs, you must stay positive," Hansen said. "That reinforces that you are not one of these people who are down on the company."

If perkiness doesn't come easily, at least try to keep an overall positive attitude so that you are not at the top of the list when it comes to managers' decisions about layoffs, he said.

"A lot of times it's not about productivity. It comes down to personality," Hansen said. "If the most efficient person is somewhat of a toxic person in many cases that will be the first person whose hours are cut or is let go."

Keeping up your spirit may also put you on the right track to a better position, Shapiro said.

"If you are working in something that is a little demeaning, but it's in your current path, it's important to go to work with a smile on your face and do it with pride because you are in your industry," Shapiro said. "I've seen people take these horrible temporary jobs and seen it bloom into a real job."

4. Take a 'Survival' Job

If you aren't landing your dream job as soon as you'd like, take a lower level job to keep busy, experts said. Getting a traditional permanent job in this market is going to be tougher because the competition is so high.

"We call those survival jobs. In some cases that means working at Wal-Mart or something, but it keeps them in their house," Hansen said. "Get one of these survival jobs and then as much as possible continue job hunting."

Shapiro warned about taking an off-the-books job, noting that workers may not be able to list the spot on their résumé, and may have trouble qualifying for a variety of benefits. She added that working in a job, even one that you may feel is beneath you, can also help you get an offer for a better position.

"It makes you look much more desirable. Hiring managers all want what someone else wants -- they want to steal away that person from the other company. The longer you are unemployed the more you look unemployable," Shapiro said.

Also, working in a part-time spot, even if it means slinging lattes, can help stave off desperation, and increase your shot at doing well in an interview for a better job, she said.

"If it pays the bills while you are looking, it takes the pressure off and you are not going to have that desperation in an interview," Shapiro said. "They are not going to hire you if they get a sense of desperation. The person who gets the offer is the person who looks like the safest best for recommendation."

Workers can think about taking a part-time or a "survival" job as an opportunity to show off skills to their employer,O'Kelly said. She added that employers are still looking for part-time workers in this tough economy.

"We've been hearing from a lot of employers that they can't give permanent positions right now, but they really want to hire temporary or contract workers," O'Kelly said. "Companies are realizing that they need to get the job done even if they can't hire a full-time employee."

5. Keep Busy

If you're working less than you'd like, make sure to be productive during those extra hours, experts said.

"They should do something to show that they are actively trying to keep themselves in the job market, or keep skills," Hansen said.

O'Kelly recommended that workers focus on maintaining and building skills. Workers can volunteer, participate in industry organizations or go to school.

"Maybe there's something new that came out in your industry and it might be time to take a course. It might bridge that gap to an employer," O'Kelly said. "It makes you look proactive, and gives you the skills to come in and provide value to the employer."

Negotiating the Freelance Economy

In April 2008, Rebecca Haden lost her job when the small store she managed went out of business. A year later, she's working as many as 40 hours a week and earning much more than she did before -- even though she still doesn't have a job. Her formula? Freelancing her Web skills.

Ms. Haden, of Fayetteville, Ark., is among a growing number of professionals who are making ends meet by working on a project-by-project contract basis. Even as permanent- and temp-job opportunities are shrinking, the amount of contract work to be found on freelance-jobs sites is expanding. What's more, it's moving beyond computer-programming and graphic-design gigs for small employers to include listings from larger companies and assignments in fields such as accounting, law, engineering and sales.

Between January and March, employers posted 70,500 of these work-for-hire positions onElance.com and 43,000 on Odesk.com, which represents increases of 35% and 105%, respectively, from the same period in 2008.Sologig.com, which lists remote and on-site freelance jobs, says its average monthly postings have more than doubled to around 13,500 per month in the past year. In March, there were 750 jobs listed on VirtualAssistants.com, versus 400 in March 2008.

At the same time, the number of U.S. workers employed by temporary-help-services firms in March fell 27% to 1.8 million from the same month in 2008, according to the Labor Department.

As the recession takes hold, more employers are using freelance workers to avoid the expenses associated with hiring permanent staff, says Fabio Rosati, chief executive officer of Mountain View, Calif.-based Elance. "The power of online work is that it's immediate, cost-effective and flexible," he says.

Indeed, freelance workers are often cheaper and more flexible than temp workers, whose jobs, though short-term, tend to be full-time, subject to temp-agency fees, and bound by agency restrictions, such as limits on the permanent hiring of temps.

Mr-SEO.com, an online marketing firm with eight employees, began using freelance help a year ago to handle tasks in Web-site development, administrative services and copywriting. The five-year-old Seattle-based company hired 17 freelancers throughOdesk.com for projects that lasted as little as a few days or as long as eight months and counting. "It gives us the flexibility to expand our work force depending on client demand," says Greg Gaskill, the company's president.

Like many workers who turn to freelance positions, Ms. Haden, a 51-year-old mother of four, didn't plan to take on piecemeal work after her layoff. At first, she approached a local Internet company about a permanent job doing Web optimization -- a technique for boosting a site's search-engine rankings. It was a skill she had learned while overseeing her former employer's online store and blog. The firm wasn't hiring, but it offered her a short freelance assignment. She accepted.

Ms. Haden, who holds a master's degree in linguistics, wrote about the experience for a popular blog on Web optimization. "People started approaching me with work pretty soon after that," she says.

'I Just Do the Fun Stuff'

One gig she landed introduced her to Odesk, which, like some other contract-job sites, can monitor freelancers' work. Since then, Ms. Haden says she's landed a steady supply of Web-optimization assignments through Odesk, as well as through her personal Web site and blog. Most months, she earns more than double her previous income. Ms. Haden says the work has been fulfilling, and she has put her permanent-job search on hold indefinitely. "I get to pick and choose what I do now," she says. "And I just do the fun stuff."

Many other laid-off professionals appear to be taking up freelancing, either as a new career or as a way to weather the downturn. Freelance-job sites say membership among individuals, which is free in many cases, has risen sharply. For example, Guru.com has nearly 878,000 freelance members today, up from around 760,000 a year ago.

Freelance-job sites also say they're seeing more midsize and large employers posting assignments, and the jobs have expanded into more business functions, such as finance, manufacturing and law. For example, roughly 1,700 new jobs were added to the sales and marketing category on Elance in March, a 50% increase from a year ago. That's led to new types of contract workers, too.

Last month, Lynn Welch became one of those new freelancers when she began a 96-hour home-based consulting stint for Axsys Technologies Inc., a large, publicly traded manufacturer of infrared technologies based in Rocky Hill, Conn. She was laid off in March from a senior marketing position at a midsize technology firm and says her Axsys contract is one of four freelance assignments she's landed either through networking or Guru. She's so far earned roughly $10,000 from freelance gigs in online marketing.

Pitfalls of Contract Work

Despite her successes, Ms. Welch, who is 40 and lives in a Washington, D.C., suburb, says she still deals with some of the pitfalls that come with contract work. For example, she says she once spent several hours researching and explaining how she'd handle a potential project, but didn't get the gig. "Some [employers] want to pick your brain and have no intention of paying you," she says. Now Ms. Welch is more cautious about sharing information with employers before a contract is signed. "If they're asking for a lot of details, that's a warning sign," she says.

Sites like Odesk, Guru and Elance guarantee payment after jobs are completed in return for commissions of about 6% to 10% of freelancers' fees. But many other sites hold individuals fully responsible for billing clients and collecting payments.

There are other downsides to freelancing, from the lack of health coverage and paid time off to the need to make your own retirement contributions. Striking out on your own also requires regularly searching for and vetting potential new assignments, while ensuring that you complete on time the ones you've already secured. Furthermore, you may need to invest in equipment such as computer software and a business phone line.

Carving Out a Niche

Should you decide to take up contract work, there are ways to help ensure the process goes smoothly. First, make sure to be very specific about your skills and expertise when you fill out a profile on a freelance job site, says Kate Lister, author of "Undress for Success: The Naked Truth About Making Money at Home." Doing so will help you stand out from the competition. "You want to carve out a niche," she says.

To figure out how much to charge for your work, research the rates that experienced freelancers demand for similar services, suggests Ms. Lister. The information can usually be found in members' profiles on freelance job sites. "Look at their portfolios and ask yourself, could I produce that level of work? Could I do much better than that?" she says. After settling on a figure, Ms. Lister suggests starting out at a slightly lower rate to build a track record.

Another option is to offer to work for just a few hours at first to prove yourself, suggests Gower Idrees, founder of RareBrain Capital LP, a consulting firm specializing in high-growth businesses in The Woodlands, Texas. Since early 2007, Mr. Idrees has hired about 1,500 freelancers from Guru -- including former big-company executives, many as consultants. "I've used them in every way possible," he says.

Mr. Idrees recommends discussing potential projects with hiring managers over the phone whenever possible, rather than using email, in order to build trust and negotiate a fair pay rate. That way, a potential freelancer "can educate [the company] on what the challenges really are," he explains. Sometimes, he says, employers aren't aware just how many hours a project will require.

Job Seekers: How to Negotiate a Higher Offer

With an average of five unemployed people now vying for each job opening, according to the nonprofit Economic Policy Institute, employers who are hiring can afford to be picky — and tight-fisted. Many companies are reducing compensation for their existing employees, which means they’re more likely to offer lower salaries to new hires, says Fred Crandall, a senior consultant at human resources consulting firm Watson Wyatt. In April, 21% of employers had reduced employee compensation, according to a Watson Wyatt survey, up from 7% in February.

And while you may feel compelled to accept any job offer, failing to negotiate a compensation package can cost you. These days, employers who engage in such “lowballing” are offering an average 10% to 15% less than what they would have offered before the recession began, says Ford Myers, president of Career Potential, a Haverford, Pa.-based career coaching and consulting firm.

Here’s how you can find out how much you’re worth in this economy — and how to get it.

Know How Much Your Peers Make

Start your research at Salary.com, which offers free salary range reports based on your job title and location. You can also purchase reports that show salary ranges based on education and experience. Entry-level position reports cost $30 each, while midlevel and executive reports cost $50 and $80, respectively. Another free resource: the Bureau of Labor Statistics’ Occupational Outlook Handbook, which includes median salary statistics for hundreds of occupations.

For more personalized advice, team up with a headhunter who specializes in your industry, says Bonnie Monych, a career coach based in The Woodlands, Texas. Headhunters track average salary ranges and can tell you what skills are most sought-after by employers in your field. Public libraries and professional industry associations often keep lists of local headhunters. Your employed friends may also help with referrals.

Finally, consider broadcasting your request to your Facebook and Twitter contacts. You can’t just ask someone how much they make, but you’d be surprised how many people would be willing to share a typical salary range for their field, says Annemarie Segaric, owner of the Pelham, N.Y.-based Career Changer Company, which offers career coaching. LinkedIn users can join industry networking groups and post questions about salary trends.

Polish Up Your Skills — and Boast Them

Faced with tight budgets, few companies these days are willing to spend money on training new hires, says Joe Kilmartin, managing director of compensation consulting at Salary.com. Instead, they’re looking for applicants who can hit the ground running from the first day on the job. During your interviews, ask what the company is looking for and explain how you can fulfill those needs, says Robert Todd, head of compensation and benefits operations at Novartis Vaccines & Diagnostics, which is currently hiring.

Training or certification programs can hone your skills or acquire new ones. The good news: Many courses are offered for free. The Department of Labor’s Career Voyagesprogram, for example, provides educational and apprenticeship information for auto workers transitioning to careers in public safety, marketing or sales. And many prestigious universities, including Harvard University, Massachusetts Institute of Technology and Yale University, post the materials that professors use to teach their regular classes on the web for free. States also receive funding from the federal government for one-stop career centers. Services vary by center but include interview preparation and training events.

Don’t Be Afraid to Negotiate

Many employers won’t extend their best offer unless you negotiate, says Monych. So now is the time to use all that research and come up with a desired salary range. Don’t be afraid to ask for a 10% increase from your last salary -- especially if you were underpaid. Ranges for five-figure salaries should be within $10,000 (for example, $60,000 to $70,000), while six-figure salary ranges can be wider (say, $100,000 to $140,000).

When an employer doesn’t budge from their initial offer, try negotiating other terms, like an extra week’s vacation, says Segaric. Or see if your employer will consider a raise six months after you start working — assuming that you meet their performance standards.

Focus on Lifelong Investing

Why You Need a Roth IRA

One of the smartest money moves a young person can make is to invest in a Roth IRA. Follow the rules and any money you put into one of these retirement-savings accounts grows absolutely tax free: You won't owe Uncle Sam a dime as you let your savings accumulate, or when you cash out in retirement. Plus, an IRA is more flexible than a 401(k) and other retirement plans because you can invest it in almost whatever you want, from stocks and mutual funds to bonds and real estate.

If you haven't yet opened this gift from Uncle Sam, do it now. You have until your tax return deadline to set up and make contributions for the previous tax year. The government sets a limit on how much you can contribute to a Roth. That limit was $5,000 for 2008 and also for 2009. That means if you act before April 15, you can invest $5,000 now to count for last year, giving you a solid start to your savings. And you have until next year's tax deadline to kick in your $5,000 for 2009.

Don’t let the recent market turmoil scare you. Now may be an especially good time to start investing because stocks are cheap -- think of them as on sale. And stocks historically do well over the long-run, so a good place to start is with a well diversified mutual fund. But if you really can’t stomach the market right now, the Roth lets you save in less-volatile investments too, such as bonds or money market accounts. The key is to find your comfort level and get started soon.

The Tax Advantage

The idea of saving on your taxes may seem a tad obscure, but it really can pay off big. If a 25-year-old contributes $5,000 each year until she retires and makes an average annual return of 8% on her investment, she'll have $1.4 million saved by the time she retires at age 65. And the money is all hers -- she won't have to give the IRS a cent of it if she waits until retirement to withdraw the money.

If that same 25-year-old invested that same $5,000 a year in a taxable account earning the same 8% return, she'd only have about $1 million after 40 years if her earnings were taxed at 15% federal. That's more than one-fourth less money than if she'd gone with the Roth. If she owed state taxes on the money, too, she'd be down even more.

Roth Rules

As with any government gift, the Roth IRA comes with a few strings attached. First, you can contribute to a Roth only if you have earned income from a job. Say you're in school, you're not working and you have a little extra money left over from your student loan or your parents gave you money. You cannot put it in a Roth. Also, you cannot save more than you made. So if you worked a summer job and made only $3,000, the most you could contribute to a Roth would be $3,000.

It's also possible to make too much. You can contribute the full $5,000 in 2009 as long as your income falls below $105,000 if you're single, and $166,000 if you're married filing a joint tax return. The contribution limit is then phased out incrementally if you make between $105,000 and $120,000 (single) or $166,000 and $176,000 (married-joint). (SeeIRS Publication 590 for more on calculating your contribution.) Make more than those upper limits, and you don't have to cash out the account -- you simply cannot contribute any more money to a Roth IRA.

If you expect to exceed the Roth income limits at some point during your career, you should open a Roth now while you're young and your salary is low enough to qualify. If a 25-year-old saved $5,000 a year for only five years, then didn't contribute another dime for the next 35 years because his income was too high, that money would continue to grow -- to nearly $481,000 by the time he turned 65. That alone certainly won't be enough to retire on, but it'll be a nice tax-free bonus to his other retirement savings.

Bonus!

If the savings power, flexibility and tax-free status aren't enough to persuade you of the Roth's virtues, Uncle Sam throws in a few extra perks, making the Roth an indispensable tool in a young adult's financial life.

You can take money out in a pinch. Although the purpose of a Roth is to save for retirement, and your money can grow only if you leave it in the account, you can withdraw your contributions at any time, tax free and without penalty -- and you don't have to pay it back, like you do with a 401(k). Of course, it's best to leave your money in the account so you can earn more money, and you really should have a separate emergency savings account on standby, but it's nice to know the Roth is there for you if you need it.

Notice we said you can take out your contributions at any time -- not your earnings. If you withdraw any of your earnings before age 59½, you'll trigger a tax bill on the money, plus you'll have to pay a 10% penalty. Ouch.

You can tap your Roth to buy your first home. The IRS lets you withdraw up to $10,000 from your Roth IRA tax- and penalty-free -- which can include earnings -- to help you achieve the American dream. However, the account must have been opened for five years. That means if you make a contribution now and count it toward 2008, you could use tax-free money from your IRA to buy a house starting in January 2013. That $10,000 limit is per person, so couples could withdraw up to $20,000.

If you don't meet the five-year test, you still can take out your earnings for your home purchase, but you'll have to pay taxes on the amount you withdraw. You won't have to pay the 10% early withdrawal penalty, though.

You can use it to save for Junior's education. Many new parents don't know whether to save for retirement or the baby's college tuition. Hands down, retirement wins. There are loans to pay for college, but none to help fund your retirement. But starting a Roth is a great way to cover both bases, just in case. Focus on your retirement now, saving as much into a Roth as you can. And as your finances allow, consider opening a specific college-savings account for the new baby -- say, a Coverdell or 529 plan. Then, when the day comes for Junior to head off to school, you can assess whether you can afford to -- or need to -- sacrifice some of your retirement dollars to make it happen.

You can, of course, take out your contributions at any time to help pay the bill. If you dip into earnings, you'll owe taxes -- but you don't have to pay the 10% early-withdrawal penalty if you use the money for college. The Roth shouldn't be used as the sole savings vehicle for higher education, but it's nice to know you can use it if you need it.

How to Open a Roth IRA

When you're just starting to invest, the Roth should be your first stop -- even before you open a regular, taxable account, or contribute to a workplace retirement-savings plan. The only exception is if your employer offers a match on your 401(k) contributions. That's free money you don't want to pass up. In that case, contribute enough to win the match, then send any extra money into a Roth IRA. (Yes, you can invest in both a Roth and a workplace retirement plan.)

You can invest your Roth IRA in almost anything -- stocks, bonds, mutual funds, CDs or even real estate. It's easy to open an account. If you want to invest in stocks, go with a discount broker. For mutual funds, go with a fund company. For CDs or money market accounts, you can go through your bank.

Because you're young and have a long way to retirement, you'll want to invest in the stock market to get the highest returns over time. Rookie investors should stick to mutual funds that invest in stocks. They're easy to understand, you leave the stock-picking to the pros, and they make it easy to spread your risk around several stocks or bonds without putting all your eggs in one basket.

Most mutual fund companies even lower their minimum investment requirements when you open an IRA. T. Rowe Price, for example, requires $2,500 to invest in a taxable account, but IRA investors need only $1,000 to get started -- or as little as $50 a month if you sign up with its automatic investing program.

Use Kiplinger's Fund Finder to search for funds that have low investment minimums and that meet your other criteria. Stick to no-load funds with low expense ratios (the average expense ratio for stock funds is about 1.5%).

Many fund companies will let you open an account and make contributions online. Make sure you designate what year the contributions are for.

Not sure where to find the money to fund your account? Consider investing your tax refund. About 70% of us will get a refund this year, and last year the average check totaled more than $2,700. That cash would make a great start to your Roth.

Another way to fund your account is to put it on autopilot. Most banks and brokers will allow you to set up an automatic investment plan taking the money directly out of your bank account and putting it into your Roth. It's much easier to find the cash when it's considered already gone than if you have to make a physical effort to write the check each month.

Focus on Lifelong Investing

Yes, You Can Still Be Rich

How do young people think about money?

As young people, we don't pay attention to our money. When there's something you're neglecting and you just hear bad news, you again don't pay attention, but you feel guilty about it. It's a combination of apathy and guilt that comes with money, just like eating and working out. 'I know I should go to gym four days a week, I shouldn't eat that pizza.' We know that we should be figuring out something about money and should probably do a Roth IRA, but we don't know where to get started. There's so much conflicting advice out there.

Will the recession make 20 and 30-somethings more pessimistic and risk averse for the rest of their lives?

Yes. There's a lot of research to suggest that. It's a particularly bad situation for young people because we're already not investing as much as we need to. Going forward, there will be people who say, 'I'm not investing in the stock market,' or 'Crooks can still my money.' It's hard to convince people, 'No, you have to look long term.' In any 30-year period, the stock market has always gone up.

How can you encourage people to invest when those who were doing so have lost upwards of 50 percent of their money over the last eight months?

There are two separate things: The intellectual and mathematical part, and the emotional part. If I told you nine months ago that you could pick the same investments on a 50 percent sale, it sounds very attractive. But we think of it as a 50 percent loss. Tremendous wealth has been lost, nobody can deny that. But if you're in your 20s or 30s, you don't need money for 30 or 40 years. So on an intellectual and mathematical side, you think, 'I'm going to continue dollar-cost averaging into the market.'

As for the emotional part, I can understand the emotion of saying, 'I've lost so much, I'm going to pull it all out. People often think they have just two levers to pull, put money in or pull money out. But there are other options. You could pull less in, put more in savings, re-allocate investments to put more in fixed income -- there are so many different levers you can pull. If you pull money out, you're guaranteeing you won't be in the market when it returns.

But what if it doesn't return? Japan's stock market has been virtually stagnant for decades.

There are functional and structural differences between us and Japan, but without getting too deeply into that, what strongly effects my belief going forward is what happened in the past. The past doesn't predict the future, but it gives us a fairly accurate view of what's likely to happen. Whether it returns 6 percent or 8 percent -- we can split hairs over that -- the question is, do you fundamentally believe the stock market will go up. If you believe that, then invest. If you don't, where do you put your money? If you only put it in a savings account, it's not going to give you the returns you need to live on. You have to take risks to get potentially high returns.

People like to complain about the economy, but the economy versus your finances are very different. My question is, 'Have you automated your accounts? Do you use a bank account with overdraft fees? Have you set up a conscious spending plan? How much is dedicated to a savings account versus going out and eating?'

I assume you follow your own advice and have money in the stock market, and it must have lost significant value lately. How do you not get down about that?

I built an infrastructure where I only focus on one thing -- earning more. It gets automatically disbursed -- 20 percent to investments, 5 percent to savings, etc. In terms of dealing with losses, first of all, I don't check into my investments every day, and I don't think anyone should. Second, there's a difference between losing when everyone is gaining and losing when everyone has lost.

I'm resolutely focused on the long-term. I do believe the long-term prospects are great, but I'm not a prognosticator. My focus is on living a rich life, which also means being able to visit a friend or buy what you want. Being rich is just partially about money.

Focus on Lifelong Investing

7 Myths About Marriage and Retirement

Think married couples have it easy? Or that you should get your pension policy to pay out as much as possible, as soon as possible? Well, think again. Predicting that you'll die too early--or too late--can leave you and your spouse in a financial crunch. New research upends these 7 common myths about marriage and retirement:

Single people need less money. It's true that that single people spend less money each year than couples, but at all ages over 65, they spend more of their income than couples do, according to research by Michael Hurd, senior economist at Rand. Then, after age 65, single people's income goes down by three percent a year until it dwindles to 20 percent of its starting value at age 95. (For those at age 65, the probability of surviving to age 95 is around 11 percent.) Couples, meanwhile, maintain their income until the oldest member reaches age 79, when wealth starts to decline at around 3 percent a year. (On average, couples start out with three times the wealth of single people.) So while single people may need less money, they also tend to be less prepared for retirement and spend down their savings much more quickly. (Hurd's calculations are based on data from the University of Michigan Health and Retirement Study.)

Married couples have less to worry about. While married couples do tend to enter retirement with greater resources than their single peers, there is a small chance that both members of the couple will survive to old age. According to Hurd, at age 65, the chances that both survive to age 77 is less than half. Once one spouse dies, the surviving spouse tends to spend down their joint wealth much more quickly. By age 95, on average the surviving spouse has just 32 percent of the couple's initial level of wealth.

The worst case scenario is unlikely to happen. A recent survey by AARP Financial found that many people find themselves financially unprepared when the worst case scenario does strike, which compounds the tragedy. The survey, which focused on adults between ages 40 and 79, found that most (57 percent) had already experienced such a crisis, including long-term job loss, divorce, and death of a spouse or partner. Of those who lost a spouse, 63 percent said it had a significant impact on their finances.

Women are especially likely to be widowed, and to run into money problems once they are. According to the Census Bureau, more than 1 in 4 women over age 55 are widows; the proportion rises to two in three for women who are 75 and older. Divorce is another risk factor: While 12 percent of all women over age 65 live in poverty, the rate for divorced women is 21 percent, according to the Government Accountability Office.

Thinking you'll die young--or live forever. Deciding how much to save and spend depends partly on how long you plan to live, a prediction many people get wrong. According to Hurd's research, between ages 65 and 69, people tend to think they'll die sooner than they actually will, which puts them at risk for over-spending. Then, over age 75, people tend to think they'll live longer than they will, which means they may be overly frugal. Women tend to underestimate their chances of living longer compared to men. Between ages 65 to 69, women tend to underestimate their chances of survival by 12 percentage points compared to men's four, Hurd says.

Getting as much money as possible, as early as possible, is best. Many people make the mistake of opting for higher payments from pension or other benefits payments during their lifetimes, which means their surviving spouses are left with less later. Mary McGrath, executive vice president at Cozad Asset Management, a financial planning firm in Champaign, Ill., says even couples with other assets should consider selecting an option that allows benefit payments to the surviving spouse after death, because suddenly losing all income adds unnecessary stress to the grieving process. "It's too upsetting to the survivor to have all of the income cease when you die," she says.

High-earners have less to worry about. While people who earn above-average income during their working lives tend to have acquired more resources than those who earn less, they also need more money in retirement in order to maintain their lifestyle. Hurd adds that another challenge for wealthier individuals is that they pay much heftier taxes, a factor many people forget to take into account.

Retirees should maintain their wealth until age 100. You can't go wrong saving too much, but Hurd says it's reasonable to look at more realistic survival rates. He defines a household as "adequately prepared" for retirement if it has a five percent or less chance of outliving its resources if it reduced its initial spending by 15 percent. By that definition, 83 percent of couples and 70 percent of single people are prepared.

Annuities are too expensive. Hurd says that more people should consider annuities as a way to ensure they maintain their wealth as they age. Annuities, or contracts with insurance companies that allow consumers to purchase a guaranteed income stream, tend to be under-used because people hesitate to pay a large lump sum now for a payout much later. "In my view, individuals are likely distrustful that the annuity will be there in 25 or 30 years when it is needed," says Hurd. But, he adds, "even partial annuitization would reduce the burden of managing the level of spending and the portfolio."