April is Financial Literacy Month!

In March of 2004, the U.S. Senate recognized April as Financial Literacy Month in an effort to highlight the importance of financial literacy among adults and youth. In honor of this, Money Management International (a non-profit debt counseling organization) created a website called, appropriately enough, Financial Literacy Month.

In cruising around the Financial Literacy Month website, I found the section entitled 'Tools for Success' to be most useful. On this particular page, there are links to all sorts of helpful spreadsheets and resources, such as:

• The Income Worksheet
• Tips for Setting Financial Goals
• A Debt Payoff Calculator
• A-List Tips (featuring articles from PF bloggers we all know and love)

A big part of financial literacy is taking the time to learn about personal finance, as well as being responsible for that knowledge. Since no one knocked on my door and educated me about how to pay down debt, how to refinance my house, or how to spend my money strategically, I had to go out and find the information myself. I'm only now beginning to emerge from the fog of self-induced financial ignorance, but I've never felt more stable and in-control of my finances.

Each American has the same obligation to find and absorb the information, whether it's at the public library, in the office of a financial advisor, or in the multitude of pages on the internet. Of course, with internet learning, we always have to be careful that the information we're reading is reliable.

In addition to the Financial Literacy Month website, the U.S. government's Financial Literacy and Education commission website is a wonderful resource. There, you'll find all sorts of links concerning financial planning, paying for education, home ownership, and raising financially literate kids.

In my work with college students, "but nobody told me" is never an acceptable excuse for making a mistake. I'd posit that the same holds true of people who are financially under-educated. As I mentioned, no one is going to call you up one day and offer to give you, free of charge, the information you need (and I'd certainly be wary of anyone who did call with that sort of offer!)

Instead, we should all take responsibility for ourselves and our loved ones, with the helping hand of organizations like Money Management International and, yes, even the U.S. government.

Saving for the future. . . .

The fall term is upon me, and with the changing leaves, classes starting, and chillier weather, so arrives my tuition bill. Since I work at the university, I'm eligible for tuition benefits, which amount to roughly $2,700 a term (not a bad chunk of change). However, I'm responsible for approximately $300 for university and department fees, plus book costs. In years past, these costs normally ended up on my credit card---I never had $300 in my checking account at any one time, let alone the $150 additional for textbooks and other school supplies!

These days, however, I have my ING Direct savings sub-account entitled 'Tuition and books', to which $133 is sent every payday. Right now there is more than enough to pay my fees, and on October 1st, there will be an additional $133 added to it, which will help cover my book costs.

A simple change in my budgeting system has allowed me to pay for these items outright, rather than putting them on credit and paying 8 or 9 or 12 or 15% interest over many, many months. I'm actually amazed at how simple it is, and the best part is the decrease in stress when the term begins---I have the money. It's in the bank. I can pay with cash! Well, with 'debit', but you get the point.

And it was so simple! All I did was:

1. estimate the amount I would need for tuition and fees, plus books, each term. This is admittedly the most difficult part; it's basically a 'guesstimate'. However, once I'd come up with this estimate, I:

2. multiplied that number by four. Why four? Because the Oregon university system runs on quarters---four terms per year (as compared to the semester system, which I prefer, by the way). So if I know that I'll be taking courses every term during a year, then I'll need to know my yearly tuition, fees, and related school costs. Then I:

3. divided by 12. This gives me the rough monthly 'cost' of attending school, which is around $133. Finally, I:

4. created an ING sub-account (I LOVE sub-accounts!) into which I deposit $133 each month. I had to begin the sub-account at the beginning of a term, so the money in the account had time to grow large enough to cover the following term's bills.

It works like a charm! I know it sounds like an exercise for a kindergartner, and I probably shouldn't be so delighted by it, but for someone who used to regularly put piddly amounts on credit---even items that I had known well in advance I would have to purchase, it's nothing short of a miracle.

Frugal reading. . . .

Lynn Truong at Wise Bread very generously sent me her copy of Rich by 30, and asked that I donate it to my local library when I'd finished.

Yesterday, I rather hesitantly walked up to the counter at my branch of the public library and asked if I could donate a book. For some reason, I was a bit nervous that they would turn me down, or ask me to fill out reams of paperwork, or consider it a waste of their time.

Instead, the woman at the counter gave me a giant grin, and thanked me profusely. I felt wonderful walking out the door, and it made me think about all the reasons I love the library:

• I practically grew up in a library, first of all. I come from a family of voracious readers (with two librarians, a poet and English professor, and an English literature major, it's not suprising). My parents couldn't afford to buy so many books, so we hung out at the library on the weekends, picking out five or six books to last through the week.
• On a more practical note, the library has saved me countless hundreds of dollars over the years. Last year alone, I probably saved $200, primarily because my 2007 New Year's Resolution was to stop buying so many books and instead check them out of the library. I also borrowed several books for school, which I used throughout the term, instead of buying them at inflated prices at the university bookstore.
• The library staff is generally very helpful and friendly. They answer my questions and help me find the books I'm looking for. I've also noticed that they treat every person with the same respect, whether the person appears homeless, is a student, is elderly (or grumpy), or, like me, is simply clueless much of the time.
• I feel like I belong to a true community when I spend time at the library. I tend to see the same people over and over again at my local branch, reading the newspaper on the weekends, spending time with their kids in the children's section, checking email on the public computers.

It's a shame that so many public library systems struggle financially----but there appear to be many opportunities to volunteer (and, apparently, donate). My grandmother was involved with the 'Friends of the Library' group in my hometown, my mom volunteered (and was then hired) by the library after she retired, and I can see myself continuing this tradition when I reach retirement age (whenever that is).

Frugal economy. . . . .

CNN has an ongoing series that profiles American families and how they're reacting to our slowing economy (i.e., the recession). It's called 'America's Money: In their own words' Today's profile caught my eye, because it's written by a man who is working a second job, to "pay the bills", just as I am.

I really wish these profiles were a little longer and more in-depth, because I'd love to know several things about this person: for example, just how much (or little) does a Vice President make? Is he truly living a "lower middle class" existence? Does the wife work? Do they have overwhelming student loans or other debt? A giant house? Is he driving a gas guzzler, since his gas bill is $170 a week (mine is $30 a month)?

I'm trying hard not to automatically judge this person and make assumptions about how his family is living. I look at my own situation (also working two jobs) and realize that everything is relative, after all. I have access to great public transportation (hence the lower gas bill) and make use of it. I have a wonderful public library where I can stock up on books, read magazines, and study in a warm and inviting atmosphere. I live in a tiny house, although with an admittedly too-large mortgage compared to my income. My car is old, but efficient and reliable. I have access to great health benefits, retirement plans, and tuition remission through my employment. Yes, I'm working two jobs, but I feel like I'm squarely middle-class.

It's interesting to read about how others are handling their own financial struggles, if only to help me realize that I'm not doing all that badly. . .

Vice president of information technology, 32, Denver, Colo.

We purchased a home last year and I'm proud to see my children live in a decent neighborhood close to a good public school and have a backyard to play in.

However, since moving, unexpected expenses and rising costs have created a situation of struggle. I do have a fixed-rate mortgage, but everything else is getting so expensive. Last week I spent $170 on gas alone. I've taken on a second job, and I know as long as our economy hangs in there and doesn't collapse, we'll be okay.

My biggest frustration is I work very hard to maintain a lower middle-class income and lifestyle. We don't go on vacations, or rent movies. We just hang out and do free or cheap stuff. But I still work a second job and I miss out on school events and struggle to feel okay explaining this to my son.

What's going on in the blogosphere. . . .?

It's pretty quiet in my personal finance world, so I thought I'd create a compilation of recent posts from other personal finance and/or frugality blogs:

Lynnae at BeingFrugal posted a great article with suggestions for frugal spring break activities. For those with kids, there are some helpful tips on how not to blow the budget while entertaining the children.

Along the same lines, FrugalMomLA has posted some links to websites for the pre-Kindergarten to grade 2 kiddos.

J.D. over at Get Rich Slowly asks the question, "how to live simply, without looking cheap"? Something I've struggled with as I attempt to have a social life while living frugally.

Meanwhile, Moolonomy explains why a penny saved is actually better than a penny earned.

The Simple Dollar (which I haven't visited for quite some time) reviews a book called The Little Book that Builds Wealth. This is book five of a series of investment books by Wiley Publishing. Today, maybe I'll do a search of the site for a review of the first in the series, so as not to miss anything.

As for me, I'm all set to go out and help and friend celebrate her birthday tonight, and am planning to eat before I go----and I'll be driving, so that means my alcohol consumption will be limited. I'm hoping to keep the entire evening under $10, including the drink I plan to buy for the birthday girl.

All gain, no pain. . . .

I spent all day Saturday at the library, writing a paper and studying for a final exam (I'm on the quarter system, so our winter term finals are this week). As per usual, I spent a fair amount of time catching up on my magazine reading.

Money Magazine had a fairly good article concerning tips for increasing your savings rate. Now, generally, most 'savings' tips regurgitate the same old ideas over and over again. This article actually had some tips I hadn't seen before.

Put it on Autopilot: Of course, there was the tried and true suggestion that we should set up an automatic savings plan, whether that means sending part of our salary to a 401K, a Roth IRA, or to a savings or money market account. The idea being, of course, if you never 'had' the money in the first place, you'll be less likely to miss it when it's gone. We've all seen this before, many, many, times. Probably because it's such a great idea, I suppose. I myself do this, and plan to increase my auto savings rate when and if I ever get a raise (my faculty union is currently in negotiations with the university----almost a year after our contract ended).

Reward Yourself: Ooooooh, I like this one!!!! I'm all about the rewards. The idea behind this is to set a specific savings goal. For example, one of my New Year's Resolutions was to increase my emergency fund by $1,000, to $2,000. I know, I know, it's not much---but I'm still in debt repayment mode. Anyway, using this strategy, I would get to 'give' myself a reward when I've met my goal----maybe a new pair of shoes, or $100 to spend on whatever I want?

Wield a Stick: Money Magazine cited a website, Stickk.com on which you can enter your goals (whether it's saving money, losing weight, or exercising more). Then you can appoint 'referees' to help keep you honest by monitoring your check-ins. You can even 'put a contract on yourself', by wagering money against your goal: for example, if your goal is to save $100 a month for the next six months, you can create a contract in which you'll have to 'pay' money (say, another $100) if you don't meet your goal. You can choose to send your money to an individual, to a charity you like, or even a charity you don't like, if that acts as a great incentive.

Invest in a Roth: Okay, this is one I've heard before too, but since this is one of my goals after I've paid off my credit debt (later this year), I was glad to see it on the list. I just decreased my 403b contributions to 1% of my salary from 10%, so I can use the extra money to pay down my debt further and faster. Since I have a pension (of sorts) through the university where I work, I'd like to keep my 403b at 5% and then do 10% to a Roth when my finances allow for it.

All in all, this article was a mix of 'vintage' (but good) ideas as well as some newer, perhaps more controversial suggestions. In the end, I benefit from hearing the same savings tips over and over again anyway----the more times I read or hear it, the better chance I will follow the authors' advice and put some of these ideas to good use in my own life.

How I squandered my financial fresh start. . . .

New here? First read The Early Years, and then The Middle Years. . . .

Once upon a time, almost two years ago, I was debt-free (except for my student loan). I sold my house in California (just a wee house, in a rural part of the state---so my ‘take’ was less than $50,000 after three years of ownership). With the proceeds, I paid off my car, my credit cards, and my home equity loan, leaving me with about $15,000.

I took a giant breath and moved to Portland, Oregon, to start a new life and a new job (at a lower salary---but hey, I was debt free, remember?). Somehow, I now find myself once again a slave to credit card debt, saddled with a mortgage that is probably too large for my salary, and with over $50,000 remaining on my student loan. How did this happen?

I was so unused to having money in a savings account---an actual cushion! It felt so great, I was loathe to spend any of the money on piddly, every day stuff. So I used my trusty credit card when I visited Target, Home Depot, and Bed, Bath & Beyond, knowing that I had the money to pay it off every month----which I didn’t. Pay it off, that is.

I then used much of my remaining ‘house money’ to purchase a house in Portland---now, granted, the home I live in is even smaller and cozier than my California house, and cost less than the sale price of my California home----but it cost over $60,000 more than my first house originally cost, and with me at a lower salary than I was then, the mortgage payments now seem almost overwhelming. And of course, you know what happens when you move into a new house or apartment, especially if you’re an ‘owner’! There are needs, after all! More trips to Target, Home Depot, and Bed, Bath & Beyond----adding to my creeping credit card debt.

Each month, as I continued to live as if I hadn’t just bought a more expensive house on a lower salary, I would take a little here and there out of my savings account, to cover dinner out with friends, or the electric bill that came due at the end of the month, or the auto insurance premium that I hadn’t thought about until the day it arrived in the mail. And so it went. Until my savings account was so meager I began getting nervous. Which was a good thing, because that anxiety caused me to re-evaluate how I was living, and most importantly, how I was spending.

I think the combination of ‘starting fresh’ two years ago, a new outlook on life---free of credit card and auto loan debt, after all---and actual money in my savings account served to create a false sense of financial security. I bit off more than I can chew---almost. I am, after all, ‘making it’, as they say. I am paying my mortgages and other bills each month on time, and I’m even finding ways to pay off my credit cards---for the last time.

I now realize that I squandered what could have been my ‘financial fresh start’. I can kick myself for letting this happen, or I can learn from it---I choose to learn.

The Early Years. . . . .

So, now that the introductions are finished, down to the nitty gritty. Just how far in debt am I, and how did I get here? In the next few posts, I’ll explain the topsy turvy financial world I created for myself over the past twenty years.

The Early Years

It all started many years ago when I was in high school. Upon sullenly (I was sullen a lot in those days) informing my father that I was NOT going to college, because we “couldn’t afford it anyway”, he said, and I quote “You get into college, and we will find a way to pay for it”. With that in mind, I applied to and was accepted into the local state university. What I didn't realize at the time was that when my dad said "WE will find a way", what he meant was, "YOU will find a way" to pay for college. Which led to my student loan habit.

Ahhhh, student loans. Easy money, right? You just sign on the dotted line (don’t bother to read all that confusing text above it) and lo and behold, you receive a check for thousands of dollars, deposited directly to your checking account if you like! What could be easier? Years later, after studying abroad (read: partying abroad), squandering untold thousands on “cute” outfits and pints of beer, and finishing a private-school graduate degree, I found myself in debt to the U.S. government to the tune of $50,000 (in addition to the thousands owed to several credit card companies). Uh oh.

“But wait”, you say! “You have a graduate degree! You can pay that back in no time when you’re raking in the dough”! Um, yeah, I have a degree in Education, without even a teaching certificate to add some practicality.

So that’s where things stood when, at the age of 28, I grabbed my master’s degree and drove straight back across the country (from D.C.) to California (paying for hotels, food, and gas with credit, of course). Tune in tomorrow for the next installment. . . . .