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10 Ways to Secure Your Kids Against Debt

Finance, Parenting

Everybody wants their children to do well.  I want my kids to grow up without making my mistakes.  Here are a few ways to help them avoid debt.

  1. Talk to your kids about money.  Your kids will never learn how to handle their finances if nobody teaches them how.   This is important.    The factor that contributes most to stress, divorce, long hours, and unhappiness can’t be left to chance.
  2. Set a good example. Spend less than you have and let them see you doing it.  No matter what you tell your kids, if they see you doing otherwise, they will learn the bad lesson.   Money, work, relationships.  They all need attention, and your kids are watching you manage each of them.  Make them proud.
  3. Open a savings account for them, and let them fill it. Teach them the value of their money by letting them work for it, watch it accumulate, and spend it on something they care about.  I make my kids work to convince me to make a withdrawal, so they know it is only for the important things.  I don’t, however, decide what is important for them.
  4. Start a college fund. $100 or $10, it doesn’t matter.  Start putting something aside today.   College costs keep rising.  In 10 years, or 20, you can be sure that college will cost more than it does today.  Last year, nearly two-thirds of students graduating with a four-year degree did so with an average debt of more than $23,000.   Anything you can do to move your kids towards the debt-free 35% will help.  They will thank you for it for the rest of their lives.  Remember, they are in charge of choosing your nursing home.
  5. Teach delayed gratification. Don’t let them think that every whim needs to be satisfied…ever, let alone immediately.  Sometimes, anticipation improves the act.   When I am looking forward to a good meal for a few days or weeks, I really savor it when I finally do get the chance to eat it.  If they want everything they see, make them figure out what they want most, and what it will take to get it.
  6. Teach them to balance a checkbook. This is one of life’s basic skills that far too many people are lacking.   If you can’t balance your checkbook, how do you know what you have?  If you don’t know what you have, how can you know what you’re able to spend on necessities, or even luxuries?  Knowing where you are is at least as important as knowing where you are going.
  7. Give them control of money. This is the best time to learn how to manage money.  Give them an allowance and make it big enough to cover school lunch and bus fare.   Let them practice real-world skills and, more importantly…
  8. Let them make mistakes with it. This is their opportunity to make financial mistakes that won’t haunt them for years or decades.   Let them have some money and let them screw it up.  When they can’t buy the new game, or can’t fix their car, they will learn.  It’s better to do that as teenagers living at home than as adults forced to move back home.
  9. Let them see your pride in their good decisions. If they do well, tell them.  Let their endorphin rush come from your praise instead of their purchase.  You aren’t helping them by getting them hooked on the latest gadget.  You are helping them by making them feel good about making the right decisions.
  10. Beat them with a stick.

How do you protect your kids’ future finances from the kids themselves?

 

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Credit Counseling: Swimming Out of the Mess

Finance

I once read a news story about a horse that slipped into a manure pit.

Some people–much like the unfortunate horse–are up to their necks in a mess, paddling for all they’re worth, wondering how to get out and panicking about the apparent hopelessness of their situation.

The mess I’m referring to is–of course–debt.

Fortunately, there are some life preservers out there.

The simplest option is a debt snowball.   You just list all your debts in order from smallest balance to largest.  Then, focus all you energy on paying off the smallest, while making minimum payments on the rest.   When the smallest debt is paid off, throw that money at the next smallest balance.   Eventually, all of your debts go away.

What are your other options?

There are debt consolidation loans, debt consolidation programs, horrible debt settlement plans, and even bankruptcy.   There’s a whole shark-infested reef of options, some of which will make things much, much worse for you.  What to do?

Take a look at credit counseling.   Credit counseling is designed as a way to educate debtors on their options, and how to pursue those options.  A good counselor will look at your income, your debt, and your spending habits and help you understand what went wrong and how to avoid it.

The trick is to find a good counselor.

First, search for approved and licensed counseling organizations here.

Once you have a list of candidates, you can start trimming it using these steps:

  • Ask them for information.  Good agencies will send you information about itself and its services at no charge.  If the balk, run.
  • Are they nonprofit?  In many places, credit counselor must be nonprofit to operate legally.  Whether or not it’s a legal requirement, consider making it your requirement.
  • Ask about their fees and get it in writing.  Is there a setup fee?  Monthly fees?
  • Will there be a signed agreement?  If there is, be sure to read it, first.
  • How do they train their counselors?  What are their qualifications?
  • How are the employees compensated?  Do they get bonuses if you sign up for certain services?  If they do, go elsewhere.  Their first priority should be your needs, not getting a bonus.

Once you’ve found a company you’re comfortable with, schedule a counseling appointment.  At the appointment, you can expect to go over your finances in detail, including your income, expenses, debt, and financial goals.  You’ll review your options with the counselor and build an action plan.

From there, your job will be to stay on the plan and get yourself out of debt.

Have you ever met with a credit counselor?

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Why Going Green is Good for the Pocket

Finance

Going green is about making changes, some of them very small, to lessen the impact you have on the planet and its precious resources. But if it can be both good for the planet and good for your pocket then who would seriously not want to ‘go green’?

Saving money is at the top of most people’s minds at the moment, so check out your credit card at Moneysupermarket to ensure you are getting the best deal and see how going green can affect the rest of your finances.

Most of the things we can do to reduce our consumption of both energy and materials are automatically going to save us money.

Some of the more obvious steps to make your home more energy efficient can result in substantial savings, such as fitting good insulation, having double glazing and putting up thick curtains to keep the heat inside.

These simple tips are not all that can be done in the home, as by starting to think differently about how you use the different areas of your home, you’ll find out how zonal living can save you even more.

Zonal living is about only using energy as you need it in the home. Heating can be varied from room to room, ensuring that the temperatures in each room are adjusted according to when and how the room is used.

Keeping bedrooms cool at night, for example, not only saves you money, but also promotes better sleep. You can achieve zonal heating by fitting thermostatic valves to your radiators and using electrical timers to switch heaters on and off at appropriate times.

Most of us now have more electrical appliances in our homes than we actually use and each of them can be steadily consuming energy even when not in use.

The worst culprits are probably the TV and DVD player, because it’s so convenient to use the remote to switch them off. You might think you’re turning them off, but all that’s happening is you’re putting them on standby. Spend a few seconds actually switching off appliances at the plug and you’ll be amazed at the savings over the course of a year.

The same applies to cell phones. Nowadays, most of them recharge in a couple of hours or less. If you leave them to charge overnight, you’re simply wasting energy and money.

Could you cut down on your usage of the tumble dryer? Nothing in the white goods department uses up quite so much energy as these noisy machines so, if you can, buy a washing line and rediscover the joys of laundry dried by the breeze and sun; your bank account will reap the benefits.

Fuel costs only ever seem to go up, so adopting a more efficient style of driving will help your pocket as well as the planet. The Drive 55 campaign claims that keeping within the speed limit of 55 mph can cut as much as 50% off your fuel bill.

When you move away from a junction or lights, you can use up large amounts of gas, so learning how to use your gears smoothly is another way of saving cash.

None of these steps require great changes but taking a little time and putting a little thought into your energy consumption will help save you money and help conserve energy and resources.

Post by Moneysupermarket.

 

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Shattering Taboos

Finance, Relationships

Taboo
Image via Wikipedia

ta·boo

-adjective

1.  proscribed by society as improper or unacceptable: taboo words.

There is a societal prohibition against talking about money, especially actual money.  Talking about a deal, or the hypothetical bundle you lost on the Super Bowl is  ok, but discussing how much money you make, or how much you have saved for retirement is almost as bad as talking about sex.  In many social circles, it’s far worse.

Money is one of the primary causes of divorce, second only to infidelity.   It can cause myriad problems, including anxiety, depression, paranoia, impotence, impulse spending, gambling, social isolation, suicide,  and murder.   Yet even therapists hesitate to discuss finance with their patients.

Occasionally to the chagrin of my family and friends, I’ve almost completely destroyed that taboo in myself.   After spending a year and a half writing about everything I do financially, I’ve found myself with very little hesitation to talk about my finances in real life.   I don’t mind discussing my credit card debt, my projections on paying off my mortgage, or almost anything else, with the exception of my salary.   I’ve never seen anything good come from coworkers comparing paystubs.   Somebody always gets hurt feelings.

Aside from that one exception, I think it’s healthy to talk about money.  How many kids launch into adulthood financially clueless because their parents wouldn’t talk about money?    How many marriages could be saved if couples would talk about their financial problems before they became financial disasters?

How can you go about breaking down the mental barrier to talking about money? Starting a personal finance blog and writing three to four times per week for a couple of years isn’t a practical solution for everyone.

Start small.

Mention the fact that you have a credit card balance(assuming you do) when you are talking to a friend.   Suggest a coworker appeal his property taxes, or offer a couple of tips to help your cousin negotiate her rent.

Most importantly, start having these conversations with your spouse/significant other/life partner.   If you can plan to spend the rest of your life with someone, you can certainly plan to discuss one of the most important topics in your life with her.   If you can’t, are you really a good fit?

Try it.  Break down that taboo. Your life will be better for it.

Are you afraid to talk about money?

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Invisible Cushion

Finance, Relationships

Debtor's Prison Historic Marker
Image by jimmywayne via Flickr

Earlier this year, we experimented with abandoning the strict budget in favor of automating as much as possible on our credit card, and keeping our discretionary spending under control, but on the same card.

We failed.   It was 2 parts lack of communication, 3 parts lack of discipline, and 1 part “we’re dumb”.   Transitioning back to cash hasn’t been that smooth.  The problem is that we went over budget for a couple of months and our renewed budget had to shrink to cover the credit card.

To recap:  Coming off a few months going over budget, we had to tighten our belts even more than we had before…after breaking our good habits.

It didn’t work out well.

If one of us forgot to grab cash, we’d just charge whatever we were buying, which gave the month’s budget a spanking, every time.

Last month, I added a new category to our budget.  It’s just a cushion.   I’ve got $200 whose sole purpose is to make sure we don’t go over budget.

But there’s a secret.

The cushion is a secret.

I’m not a fan of hiding money from my wife, but I’m hiding this.  Generally, I think that money and relationships and secrets don’t mix.

However…

She’s told me that, when she knows there’s extra money, she has an urge to spend it.   If I told her there was an extra $200, she would spend it.   If I tell her that we have $40o to cover our discretionary spending, and she goes over by $50, we’re still $150 to the good, which leaves me room to have lapses in discipline or memory, too.

Then, at the end of the month, any of the invisible cushion that is left over can get applied to our debt payments.

This system should let us keep rolling, with less stress and fewer arguments, while still helping us get rid of our remaining debts.   The biggest flaw is the secret.  I’m bad at keeping secrets from my wife, especially about things that affect both of us, but if i let it slip, the invisible cushion will go away.

What do you think?  Am I a jerk for hiding part of our budget?  Do you hide anything about your finances?

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Saturday Roundup – Happy New Year!

Misc

This week, my daycare provider has taken off to have surgery.   That means I have 10 days off in a row.  I haven’t done that since I was laid off at my last job, four years ago.  I’m really looking forward to the time with my brats.

Happy New Year!  Here’s hoping 2011 beats the pants off of 2010, no matter how 2010 went for you.

Best Posts

Free From Broke has a monster post with the best personal finance articles of the year.  If you need something to read….

Lifehacker posted about a service that will grade and critique your resume for free.  I’m not looking for a new job, but it looks like a great service.

Have you ever considered the similarities between hookers, doctors, and TSA agents?

Here’s an interesting analysis of the huge stimulus package that was supposed to revive the economy.  With all of the red tape and deadlines involved in getting the stimulus money, only projects that were going to happen anyway and already had permits and approval actually happened.   Private enterprise held off starting projects, hoping to get stimulus funding, only to find out they couldn’t possibly jump through the hoops in time, which is when they lost investors.   Huge fail with nothing accomplished beyond packing a ton of taxpayer money in a fat .gov bong and watching it go up in smoke.

LRN Timewarp

This is where I review the posts I wrote a year ago.

I wrote a post on the dangers of hypocrisy.   It’s a good post to re-read whenever I start feeling judgmental.

I also started my budget series.   Lesson 1 detailed my discretionary budget category.

Finally, I asked what you’ve done to improve your situation.  Every day, you can do something.  It may not be a big thing, but even small steps in the right direction will get you where you need to be.

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That’s all for today.   Have a great weekend!