Set measurable and realistic goals for your savings

Define what you need and want to save for. Is your short-term goal to save enough to make a down payment on a home, or pay for your wedding? Have you started a savings fund for your children? How much time do you have before they will be heading to college, if you're planning to pay for this? How much time do you have to save for your retirement?

You also need to be realistic about the kinds of returns you are likely to get and understand that there are many factors beyond your control that can affect your returns, such as inflation or changes in the stock market or interest rates.

You certainly can't count on the same steady return rate each year. Expect instead a reasonable average return rate over several years that allows for both good and bad years

$20,000 Rolex

Financial advisers call it "the problem of the $20,000 Rolex." If a 25-year-old spends $20,000 on a watch or on a big night out at a nightclub, that money is either depreciating or gone. "But if they invested in a five percent, Triple A insured, tax-free municipal bond for a period of 30 years," money manager Seymour says, "that $20,000 would be worth $86,000 at that tax-free rate of return. And needless to say, they buy more than one $20,000 Rolex."