The surest way to sound personal finance in your twenties is to learn how to manage your money before you need to. And if you’re a parent, you can help your children become wealthy even if you’re not.

Although this site is mostly dedicated to readers in their twenties looking to better manage their finances, I believe it is never to early to begin a child’s financial education, and it’s a topic I want to touch on as often as possible. The following are some points that can go a long way in helping your kids get off on the right foot financially.

Allowances Aren’t Enough – Whatever age you decide to start giving your child an allowance, be sure that it comes with your two cents on smart spending. If junior is blowing the allowance on candy each week, insist that a portion of the money goes directly into savings. Kids aren’t inclined to think about the long-term, so don’t feel bad about helping yours along!

Lead By Example – You won’t get very far saying “spend as I say, not as I do.” If you’re preaching frugality and savings but racking up new purchases on a credit card, chances are your advice is going to be wasted. Actions speak louder. Kids should give you yet another reason to be financially responsible. If you are, let your child see you in the act of saving money, paying bills on time, and foregoing purchases that you may want but not need.

Watch Where the First Paycheck Goes – When your child, perhaps as a teenager, lands his or her first steady job, be involved in how they use their first paycheck. Of course some of it will go for movies and eating out with friends, but what about the rest? Are they saving for a car or going to the mall on a shopping spree? Sadly I had already spent my first paycheck, by checking off things I wanted in catalogs, long before I had earned it – a telling sign of my credit card woes to come. On the flip side, one of my best friends had over $1,500 saved in an IRA before he started college.

Teach Credit Slowly – Credit cards are a necessary evil. Giving a teenager a credit card is risky, but it is also the best way to begin developing a credit history early on. Two alternatives to giving your child his or her own credit card? Create a duplicate card tied to your account. Allow your child to make purchases on it as long as the balance is paid to you in full each month. If your child overcharges, take the card away until the balance is paid off. You could also use a pre-paid card like Visa Buxx. When it is time for your child’s first credit card, explain the dangers of consumer debt carefully, and check in with them to make sure they aren’t racking up a balance.

Helping your child become financially responsible can be a tricky balance between parental guidance and independence and privacy. At least until your child is 18, it is fair to ask to be involved in all of your child’s financial decisions. Doing so may be one of the most valuable things you can do to secure your child’s future.

Posted on May 26th, 2006 by David Weliver in Credit, Personal Finance
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The second step in my Debt Free in Seven Steps system involves composing a clear picture of the debts you want to get rid of, any assets you are willing to liquidate to make debt payments, and your monthly cash flow. You will want to have copies of your most recent credit card and loan statements, bank or investment statements, and a pay stub. A calculator and pen and paper will also be helpful. Ready? Read more…

Posted on May 25th, 2006 by David Weliver in Debt Help, Personal Finance
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Faced with debt it is tempting to spend sleepless nights aimlessly crunching numbers, as if the right few calculator taps will make that red ink disappear. Sadly we both know that won’t happen—wading through your bills unnecessarily will only exasperate you, and tomorrow you could end up charging three lattes just to perk up for work. But don’t take debt off your mind just yet; ignoring those bills is another fast way further into the hole. Read more…

Posted on May 24th, 2006 by David Weliver in Debt Help
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Got debt? You’re not alone. The average American’s credit card balance is over $8,000. In 2001 we paid $50 billion in finance charges, and 1.3 million people declared bankruptcy. Fortunately, you can become debt free. If you’re ready to eliminate your debt once and for all, here are the steps I’m following to reduce my debt. I’ve already cut a total debt of close to $100,000 in half, and I hope to be free and clear of the remaining balances in one to two years. Read more…

Posted on May 23rd, 2006 by David Weliver in Debt Help
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These rising interest rates are bad news for those of us hacking away at our credit card debt. A couple of years ago I thought I was safe because my cards had so-called “fixed interest” rates, not variable prime-plus rates most cards are infamous for. Surprise, surprise, when the rates really started to take off my credit cards sent me nice little notes with how much my “fixed” rate was going up. One went from a decent 9.89% to 15.90% and the other from 14.99% to 17.99%! Good Lord. Eventually I’ll be in the position to negotiate these down, but with my current balances they just laugh at me — they know I’m not getting any other offers. Debtors beware the rising rate! Check out the Debt Zapper Calculator at Credit Card Nation to compare what different rates will cost you, or see how fast you can pay down your debt.

Posted on May 22nd, 2006 by David Weliver in Credit, Debt Help
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Thanks to AllFinancialMatters for pointing out this story from MSN Money featuring some average personal finance statistics of people in their 20s. For example, our median net worth is $7,901, but for nearly 25% of us, that figure is negative. We owe more than we own!

These numbers are exactly why I created this site! Immediately upon graduation I fell into the trap of living like an adult even though I was earning like a graduate… A few years later and I am really in the hole. But as the MSN story points out, I am young enough to recover from my mistakes. With some planning and hard work I will be out of debt and have a healthy 401(k) before I turn 30. Obviously this site is all about how we can all do the same, but in a nutshell there are three rules that will be repeated here over and over again!

• Kill Your Credit Cards: High interest credit card debt has to be the first to go. Use all available resources to rid yourself of this debt as soon as you can.
• Save for Retirement: Check out the calculator at AllFinancialMatters showing how much more you will have to save each year if you postpone starting your 401(k) or IRA.
• Live Below Your Means: Once you pay off your consumer debt, you must spend less than you earn to avoid going back in the red! Keep only one credit card for emergencies that must be paid off every month. Create an emergency fund with the money left over each month to fall back on in emergencies. Use this site’s budgeting tool to help track your spending.

Posted on May 22nd, 2006 by David Weliver in Investing
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New sites are surfacing allowing budget-conscious bibliophiles to swap books, movies, and more through the mail rather than buying them. This is an awesome money-saver for avid readers that don’t have time to drop by the library. My old friends at SmartMoney picked some of the top sites in a recent article.

Frugal Reader, Bookins, Title Trader, and PaperBackSwap are all sites that let you post books you have to trade and request books you want from others. So far the sites are free, allowing you request credits based on the number of books you send out. Membership fees may be added as the sites grow, and some already offer premium memberships for readers wanting to request more books than they share.

Peerflix and My DVD Trades offer similar services for DVDs.

When shipping books, USPS Media Mail rates, starting at just $1.59, are a great value.

Posted on May 19th, 2006 by David Weliver in Frugal Living
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All my life I have lived among the American upper-middle class, but I never had the money to actually count myself in this group. But of course I tried. It was a classic case of keeping up with the Jones’, and unfortunately, the more I tried to keep up, the poorer I became. Don’t get me wrong; living among rich people isn’t so bad. It beats living the ghetto – but the more people around you have – the easier it is to think you need more. Which is exactly what happened to me.

Born one of the nation’s wealthiest regions, west of Boston, I attended an expensive private college with the help of loans and financial aid. When I arrived I found that many of my classmates not only didn’t have to worry about paying tuition, they were living like royalty on trust funds. With all that free money, it amazes me they bothered to study! And of course I wanted to live their life, too.

With the help of new credit cards pouring into my campus mailbox by the truckload, I started furnishing my dorm room, buying new clothes, and taking my girlfriend to expensive dinners and to hotels. I picked up bar tabs for my friends. I even dropped $4,000 on flying lessons. After all, it was 1999-2000, and even English majors were getting $75,000 dot.com jobs after graduation. Even if I racked up debt, I thought, I could pay it off after a few months of work.

Boy was I stupid. Today my college credit card debt is an enormous hindrance to my financial future, but one good thing may have come out of it. I have learned to love living with less.

Basically, I can list here what I own: My car, a computer, a camera, an iPod, two guitars, a sofabed, a desk, and my clothes. Really, that’s it. I rent my room and use everything else that my roommates own, and I’m thinking about ditching one guitar and the camera (the iPod was a gift, so I will keep it). And if I didn’t work in the boondocks, you can bet I’d lose the car.

A friend with a lot of stuff told me the other day that I live like a monk. Maybe it’s true, but there is probably a reason monks get rid of possessions along the road to enlightenment. With less things to care for and worry about loosing there is more time (and more money) to enjoy life. Of course, unless you want to be homeless, nomadic, or a monk, we might not be able to get by with nothing. But here are a few pointers for unloading possessions without turning your life upside-down.

Possession Triage: Take a day to go through your belongings one by one and determine the last time you used each one. If it was less than 6 months – get rid of it! If you are hanging onto large items for sentimental reasons but don’t use them, consider selling them anyway. You will always have the memory, and chances are somebody else can use the item more than you can. Another rule: If you have to pay to store something, you don’t need it. Clean out that storage space and save your money. Remember that you can rent or borrow almost anything, anytime!

Organize: Get everything you do own into easily accessible places. If you can access it easily, what are the chances you will actually use it?

Sell, Donate, or Trash: You can purge anything you own in these three ways. Hold a yard sale for smaller items, or sell bigger ticket items on eBay or a community marketplace like Craigslist. Donate clothes to charities. Some will even take furniture in good condition. Toss anything else!!

Improvise: Use plastic storage containers instead of dressers. Hang wall shelving yourself instead of bookcases. Speaking of books, go to the library and rent videos instead of buying! Many items have multiple uses. A sofa can be your bed. An eating table can be your desk. A storage chest can be a coffee table. But then again, what do you have to store?

Take Care: Make the things you do own last and last by taking care of them. Remember, the less you buy, the higher quality things you can buy.

Posted on May 18th, 2006 by David Weliver in Frugal Living, Personal Finance
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The IRS may be good for something. BusinessWeek reported yesterday that the IRS has revoked the tax-exempt status of 41 “nonprofit” credit counseling agencies. Read more…

Posted on May 16th, 2006 by David Weliver in Debt Help
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Q: I just started my first full-time job but am not eligible for the company sponsored 401(k) until December. What should I do if I want to start saving for retirement now?

A: It’s a great idea to get a head start on your retirement saving even if your employer delays the onset of its retirement benefit. In most situations, a traditional IRA (Individual Retirement Account) is the best solution for young, independent retirement savers. IRA contributions not only grow tax-deferred, but are tax-deductible up to $2,000 per year.

Almost any financial institution (including, most likely, your local bank), can set up your IRA, and many will waive minimum balances if you agree to have monthly contributions automatically deposited into your account. As with opening any retirement planning account, there will be a seemingly daunting variety of investment options available to you. Especially as you just start out, how you decide to allocate your savings is far less important than the act of saving something. If possible, choose a pre-designed aggressive portfolio.

As a young investor you can better tolerate the risks inherent with aggressive investments but stand to be rewarded further down the road.

Once you become eligible for your 401(k), contribute to both. That way you can take advantage of any matching contributions from your employer and the IRA tax deduction.

Posted on May 15th, 2006 by David Weliver in Investing, Personal Finance
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