Cash Flow Planning

Real-life Financial Stories: Student Loan Debt

Student Loans by Age graph

Student-loans-by-ageI’d like to introduce Erin Fleming McCloskey. Erin is just starting her career as a financial planner. She passed the CFP examination on the first try which is something to be proud of as the pass rate is about 63.5%.  Lucky for me, Erin is a paraplanner with my firm, Curtis Financial Planning, LLC.

Erin was born at the tail end of Generation X/beginning of the Millenials, a generation generally attributed with the following traits: highly-educated, tech-savvy, self-confident and ambitious. Unfortunately, this generation was also born at a time when costs of higher-education reached new heights. Just last week, the  Federal Reserve Bank of New York announced that outstanding student debt again topped $1 trillion in the fourth quarter of 2013, second only to the pool of debt behind mortgages.

Student loan debt has tripled in a decade, actually faster than medical costs or 500% since 1985.  Seven in 10 college seniors who graduated in 2012 had student loan debt, with an average of $29,400 for those with loans. The national share of seniors graduating with loans rose from 68 percent in 2008 to 71 percent in 2012, while their debt at graduation increased by an average of six percent per year.

This debt crisis not only greatly affects the quality of life of an entire generation, it has a huge impact on the economy as Millennials delay living on their own, buying cars and homes and starting families.

Erin has many of the traits that are attributed to her generation, and yes, she is paying off her student loan debt. Here is her story:

Q & A With Erin

Q: Where are you in the process of paying down your student loan debt?

A I graduated “undergrad” in 2002 and then “grad” school in 2007 and have only been paying my loans for the past 4 years due to deferring in those years of grad school or gap years of financial hardship.  

I went to a private university for undergrad and had financial aid (no scholarships for merit because everyone would have deserved them) and my parents did PLUS loans as well. I had no money from savings/529 plans/grandparents for college. I took loans for whatever I couldn’t cover from the maximum  financial aid package I had.

I owe $32,000 now on those loans (they grew for several years while I deferred payments and now I’m paying on them). For grad school, I went to a state school and only racked up $5000 in debt.

Q: Are you also contributing to a retirement plan (401(k), IRA)?

AI am married (file jointly) and we contribute to an IRA –> Roth rollover for me each year. (Income is too high to directly do a Roth contribution for me).

Q: How do you prioritize your long term savings and paying down student loans?

A: Fortunately I have money saved to pay my loans currently, and out of my husband’s salary, we save for retirement.  My goal is that by the time my saved money from my last job runs out, I will be earning enough to keep paying my loans down myself.

Q: Do you have private loans or government loans?

A: I have government loans and private loans.

Q: Did you consolidate your loans?

A: My loans are consolidated, and the interest is around 2.5%, so I am in no hurry to pay the balance ahead of schedule.

Q: Have your found a way to improve your student loan situation?

A: I did consolidate and I believe my current rate is the best I can get. I’ve had this rate for 5-6 years.

Q: Can you recommend any resources, apps, tools that have helped pay down loans?

A: Yes, for advice and consolidating

Q:  To what extent are your student loans affecting your life and the decisions you’re making?

A: The first time I realized that the loans were real and I owed money was when I came back from my first year after college that I’d spent in service abroad. I didn’t realize I needed to start paying on the loans after the grace period and since I wasn’t having my mail forwarded across the globe, I missed out on the reminders. So, I came back with my credit score ruined for the next seven years. 

Fortunately, by the time I was married and trying to buy a home my record was clean again. Having loans to pay did also stop me from leaving the country to be a backpacker for TOO long at a time; always had to come back and pay my minimums.

I am fortunate that I don’t have to worry about paying them, since now I am married and can take advantage of the second income.  I think the real difference to me now is that we have a 2 year old and we’ve already started saving for her college because I don’t want her to be in the same boat as I am with owing so much.

I’m also going to take advantage of technological/educational advances by the time she is out of high school and do a real cost/benefit analysis and see what education she can do virtually and for free.

I am sure that my education and life experience were worth the cost, but I do want to do my best to assure the investment will be worth it for my daughter and make sure she has good advice and career counseling when the time comes.

Q: When you are done paying off your student loans, what will you do with that freed up cash?

A: Probably give some to my daughter during her starting-out years, and otherwise use it to max-out retirement savings if needed and after that, PLANE TICKETS!

Q: If you could start over, would you choose the same education and loans?
A: Absolutely! My college experience was totally worth what I’m paying for now. I just wish I’d not made the mistake with missing out on my first 8 payments or so.

If you are interested in learning more about how you can tackle your student loan debt, join GoGirl Finance, Bicycle Financial and me for a twitter chat on February 26 at 5:30 PST, 8:30 EST. Use the hashtag #SavingsChat and join the discussion. More details can be found here: #SavingsChat: Managing Student Loans and Saving.

 Additional articles of interest:

From CNBC:   Repayment Strategies for Your Student Loans

From The New Republic:  When Millenials Can’t Move Out of Their Parents’ Basements the Entire Economy Suffers

From US News Personal Finance: Should You Consolidate Your Student Loan Debt?

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Where Creativity and Finance Connect

It was a beautiful sunny Saturday afternoon and the light was streaming in the windows of the cozy art studio. A long table was covered in butcher paper and  cheese and crackers, frittata and chocolate bars were ready to be consumed. As Tamara and I finished getting the room ready for our workshop, the attendees (all women)  began to arrive one by one, ready to challenge themselves to a few hours of personal exploration and discovery.

It was the Happiness Spreadsheet Workshop entitled “Where Creativity and Finance Connect”, and the exercises these women were about to embark on were from my newly published ebook, “The Happiness Spreadsheet.” I asked artist and attorney, Tamara Holland of Bean Up The Nose Art if she would team up with me to lead the “right-brain” creative exercises while I led the more analytical work. I couldn’t think of a better partner and I was fortunate that she enthusiastically agreed to work with me.

What is a Happiness Spreadsheet?
It’s a budgeting tool that guides and inspires the reader to figure out what is most important to them – experiences, things, people, causes, beliefs and goals – and then to apportion their resources (money and time) so that they can bring more of those things into their lives. Most of the women attending the workshop had done budgeting of one kind or another, but no one had ever thought to connect their budget with their values.

For example, if you love travel, what does that say about you? Perhaps that you thrive on adventure, excitement, or unpredictability. If you are a home-body, you may crave stability, safety and familiarity. If you value sustainability, you want to eat foods grown organically and locally or consume less and recycle more. Or if you desire more leisure in your life, you may want to hire more service providers to give yourself more time. Whatever it is, the better you know yourself, the more likely it is you will focus on your happiness triggers and bring more of them into your life. In our busy lives, we often just “do” and don’t spend much time thinking about “why” and then wonder why our lives feel stalled or unsatisfying. Or, we end up spending our scarce resources on things that don’t matter that much to us.

When the ladies were asked why they signed up for the workshop and what they wanted to get out of it, these were some of the replies:

“I’ve been giving a lot of myself to others for a long time now, and I want to focus on myself. I’ve forgotten what I want most out of life.”

“I’m going through some major transitions right now and I want to decide on my next move with thought and care. I thought this workshop would help.”

“As I get older, I find that I want to spend my time and money more consciously and stop frittering it away on things that aren’t that important to me.”

“I spend so much time at work and recovering from work that I don’t think about where I want to spend my time and money. I have the resources, I just don’t know how to best use them.”

The Happiness Spreadsheet Workshop Vision Artwork
The Happiness Spreadsheet Workshop Vision Artwork

I think it was unanimous that the favorite exercise involved  painting. Not with a brush but with credit cards! Tamara had each woman sprinkle three large sheets of paper with several colors of  paint and then using the edge of a credit card, scrape the paint across the page. This technique created the most wonderful art and then the sheets were used as the base for vision-boards. I can’t think of a better use for a credit card, can you? One of the numbers-based exercises consisted of allocating $2500  amongst a list of different things or experiences  – a real-life experience that we all do but perhaps not as consciously as we should.

At the end of the workshop each participant was asked to do a “show and tell” of their vision artwork. This was fun and inspiring. See a few clips below.

The Happiness Spreadsheet Workshop Vision Artwork
The Happiness Spreadsheet Workshop Vision Artwork

Tamara and I are  planning our next workshop on June 23rd in San Anselmo, California. If you would like to attend, email me at for details.

Tell me: Just how happy do you want to become?

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A Spreadsheet for Your Happiness

I came up with a brainstorm in my usual place (the shower) one morning. I had been thinking about the cash flow work I do with my clients and how it almost always initiates a discussion about what they want more of in life.  It usually goes like this: We review the fixed or essential expenses like mortgage, property taxes, utilities, insurance premiums and then we talk about their  discretionary expenditures:  things like entertainment, dining out, travel,  and hobbies. Many times my clients are frustrated because they want more of these pleasurable activities and things in their lives but don’t know whether they can afford them. Or, in the case of couples, one party wants more of something and the other doesn’t!

This dilemma is one of the key reasons that many seek out a financial advisor. In my experience people want a financial plan for three reasons:

  • To track progress towards short-term financial goals, i.e. college education for children or buying a home.
  • To ensure that there will be enough money to live comfortably in retirement.
  • To find out whether they can afford more pleasure in their lives enjoying the things and experiences they love.

Back to the brainstorm: This is why I decided to write The Happiness Spreadsheet– it’s an ebook and a workbook. It leads the reader through the work of creating a spending plan for their discretionary dollars that I call The Happiness Spreadsheet. Why would a spreadsheet (of all things) help to make someone happier?  Because in order to figure out what you most want and what you can afford, both sides of the brain-the right/emotional  side and the left/analytical side need to be engaged to come up with the answers. Because there are dollars involved, it means trade-offs, and by putting the numbers down on paper, it is easier to see what trade-offs need to be made in order to fulfill your dreams.

If this idea sounds intriguing to you, there are several ways you can learn how to create your own Happiness Spreadsheet. One, you can buy the ebook on Amazon here. It’s only $3.99.  Or, you can sign up for a Happiness Spreadsheet workshop. The first one is April 28, and at the moment is full, but you can sign up on the waitlist. Those who don’t get into the first class will be emailed about the next class. Or you can email me at to explore other ways we can work together.

If you do buy the ebook, please be sure and give me feedback on your experience!

More resources for your Happiness quest:

From the Money Crush blog:  Why Budgeting Isn’t Just About The Number

From Oprah: Five Things Happy People Do

From Brain Pickings: How to Find Your Purpose and Do What You Love

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Revisiting: Contrary to Popular Opinion, You Were Not Born to Shop

shoppinggirl Contrary to popular opinion, you were not born to shop. If you are a woman who loves clothes and fashion (c’est moi) this may be debatable. However, most of us have to curb our enthusiasm for adornment lest we wreak havoc on our cash flow and personal net worth.

Over the years, I’ve developed a few strategies that allow me to indulge my fashion passion and still manage to stay current on credit card bills, invest and save money. It’s all about stretching those dollars to stay within budget. You do have a clothing budget, don’t you?

Here are my top five strategies for smarter clothes shopping:

(I like to support the local economy, so most of the retail establishments mentioned below are in the San Francisco Bay Area. But most metropolitan areas will have similar venues—you just have to go out and find them!).

Strategy #1: Take a cue from chic French women and maintain a small but high quality wardrobe. Artfully use accessories to create different looks.

How? Find designers and shops that suit your fashion sensibility. Patronize these places—buy less, but buy what you love. As an added bonus, if you become a loyal customer, you’ll be invited to special sales and sample sales. My personal favorites:

FIT: FIT is a small clothing boutique in the Rockridge district in Oakland. Joyce Gardner, the owner, carefully curates her stock to satisfy her local clientele. She carries selected labels such as Schmacher, Cop Copine, Yoshi Kondo, Diane Von Furstenberg, Three Dot, Velvet by Graham and Spencer, and Pete. She packs a lot of style in a small space and her employees are adept at pulling looks together. She holds special sales and gives first dibs to her best customers.

Catherine Jane: Catherine Jane is a San Francisco designer who has an eye for gorgeous fabric and fit. She creates wonderfully feminine clothing with her own unique flare that will flatter your figure. Tip: Her sample sales are full of outrageous bargains.

The reward for buying high quality, timeless fashion is longer wear and thus less money spent over time.

Strategy #2: Find consignment shops whose buyers are very picky and who echo your style sensibility.

Yes, these are pre-owned and pre-worn garments. If you don’t have a problem with that, it’s a great way to add pieces to your wardrobe at good prices. Here’s how consignment shops work: Women bring in their current, gently worn and seasonal items and the store buyer selects which pieces work for her store. Then she splits the sale price with the seller, usually 50/50 or 60/40. Prices are generally 1/4 of retail prices.

My personal favorite consignment shop is Mirabel (3251 Lakeshore Ave, Oakland). This store is full of fashion gems. You will find labels such as Marc Jacobs, Burning Torch, Velvet by Graham and Spencer, Diane Von Furstenberg, Prada and Missoni as well as a carefully edited selection of Banana Republic, J. Crew and H&M. Occasionally there will be truly great finds (like an Isabel Marant leather jacket I found recently).

Added bonus: If you don’t want to buy, you can always sell clothing that is gathering dust in your closet.

Strategy #3: Find a fashion stylist to audit your closet and help you shop.

If you love clothes but hate to shop or feel like you make a lot of expensive buying mistakes, hiring a personal stylist may be the perfect solution. She can save you both time and money and you’ll look great with minimal effort.

Great Find: Urban Darling.

Stylist: Lisa Deane.

For more tips on working with a stylist, check out my previous post, “Save Money By Shopping in Your Own Closet with a Wardrobe Stylist.”

Strategy #4: If you don’t like going to shops, bring the shop to you!

There are clothing lines that are sold only in private venues. If you host a party, not only do you get to invite all your friends, you receive 50% off your items depending on how much others buy. Personally, I like the CAbi (Carol Anderson By Invitation) line. And my favorite CAbi consultant is Erin Saul who lives in Oakland.

Great Find: CAbi.

Strategy #5: Use the Internet to find sales on items you crave.

You see a gorgeous pair of shoes at Bloomingdale’s. You can’t afford them. Go home and do a Google search using the specific brand name, style and color. You may find that the shoes are on sale somewhere else. In addition, you can ask retailers to match prices if you find them lower on-line. Don’t be afraid to ask.

I think these five strategies will give you a good start on smart clothing shopping. But, if your closets are bulging and think you might have a shopping problem you may need another kind of help. Jill Chivers, a former shopaholic, has created the “My Year Without Clothes Shopping” program for people like you. Her program offers a fun and safe way to “break the cycle of unconscious and compulsive shopping” and to be more in control of your money. Check out her website:

I would love to hear of any tips or strategies you have to be stylish without breaking the bank. Please share your thoughts!

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How To Eat Locally On A Budget:Tips from 4 Locavores

Temra Costa,Deborah Madison,Jessica Prentice,Leda Meredith

San Francisco is on the leading edge of the locavore movement.  It’s also one of the most expensive cities in the U.S.  No wonder the Commonwealth Club program at the Port Commission room at the Ferry Building housed a sell-out crowd this past Wednesday night. The topic: how to eat locally on a budget. The speakers, all passionate locavores and sustainable food advocates, have huge locavore credibility:

Temra Costa’s  just released book, Farmer Jane: Women Changing the way We Eat tells the stories of 26 women leaders that are working to create a more holistic and nurturing food and agriculture system. Prior to writing her book, Temra worked for CAFF – The Community Alliance for Family Farmers on the Farm to School and Buy Fresh Buy Local programs. Temra resides in the San Francisco Bay Area.

Deborah Madison opened Greens, a vegetarian restaurant in San Francisco that is still popular after over 20 years, and went on to write several cookbooks about vegetarian cooking: The Greens Cookbook and Vegetarian Cooking for Everyone amongst them.  Her latest book celebrates fruit in all it lusciousness: Seasonal Fruit Desserts From Orchard, Farm and Market.

Leda Meredith is a passionate locavore and urban gardener. Her most recent book:  The Locavore’s Handbook: A Busy Person’s Guild to Eating Local on A Budget is full of practical, down-to-earth advice about incorporating locally grown foods into daily meals. She wrote The Locavore’s Guilde to New York City and teaches classes on urban gardening.  Leda resides in Brooklyn, NY.

Jessica Prentice is a professionally trained chef and expert in sustainable agriculture issues. She worked as the Director of Education Programs for the Ferry Plaza Farmer’s Market and founded Wise Foods Way in 2004 and Locavores in 2005. She is a worker-owner in a CSK- Community Supported Kitchen in Berkeley called Three Stone Hearth. In her book, Full Moon Feast: Food and the Hunger For Connection Jessica champions locally grown, humanely raised, nutrient-rich foods and traditional cooking methods. Jessica lives in the San Francisco Bay Area.

The discussion ended up being about much more than budgeting tips. All the women expanded upon the psychic, health and political  benefits of creating community around food. As Deborah Madison put it “When you get involved in local food you’re getting a lot more than food, you are getting community.” Leda Meredith got us thinking about community in a whole new way when she said “I never eat alone….I have a whole family on my plate.”  All of the women are advocates of developing personal relationships with the people that produce the food we eat.

Jessica Prentice spoke eloquently and deliciously about creating nutrient-rich meals out of simple ingredients such as beans and rice. “Bone broths with beans and rice and a bay leaf – simple, delicious.”  Jessica has a great sense of humor.  When espousing the cost savings in choosing mutton over lamb in dishes like lamb stew she said…”you really can’t tell the difference in taste – mutton just has a p.r. problem!”

The conversation always circled back to the expense of eating locally. All of the women on the panel are budget-conscious and offered some excellent ideas for saving money while eating locally. Here are some of the best:

  1. Volunteer for your local CSA or farmer’s market – many will offer trade in food for work.
  2. Eat seasonally, prices come down when food is in plentiful supply, i.e., strawberries in the spring, tomatoes in the summer.
  3. Use all parts of the vegetable: fresh organically grown beet, carrot and radish greens are delicious.
  4. Choose grains and beans over meat and create simple inexpensive meals using bone broths and vegetables.
  5. Preserve seasonal fruits and vegetables by freezing or canning.
  6. Choose cheaper cuts of meat and make stews that can last all week.

As I was writing this post I got an email from Britt Bravo, a social change consultant/coach based in Oakland who attended Wednesday’s panel.  She wrote a truly comprehensive list of tips for eating locally on a budget gleaned from the discussion. Here is the post on her blog:  Have Fun * Do Good – 25 Tips For Eating Locally on A Budget.

Thanks Britt!

Happy Eating!

P.S. Zuzy from Cooking 4 the Clueless also weighed in on the panel discussion:

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Simple Truth #4: Inflation and Taxes are Money’s Enemies (Saving and Investing are Money’s Friends)

Inflation and taxes

Inflation and taxes

Inflation and taxes can wreak havoc on the best-laid financial plans unless you arm yourself with the knowledge and tactics to prevent the most damage.

Today we’ll focus on inflation, which is one powerful enemy. Why? You can’t see it, there are are no laws protecting you from it and it’s not selective. Every single dollar is subject to its eroding influence.

What is inflation?  – Get to know your enemy.

Inflation refers to the increase in the Consumer Price Index (CPI), which tracks the prices of goods and services that most of us buy. Inflation has averaged 3% a year from 1926 to 2009.

When prices rise, each of your dollars buys fewer goods and services – eroding your purchasing power. Just think about the price increases on everyday items such as milk, bread and eggs over the last few years. Or, consider the rise in your medical insurance premium or the tuition for your children’s education.

It’s not hard to see that if your income doesn’t rise with the rate of inflation, your lifestyle can be dramatically affected. Not all goods and services rise at the same rate, however. If you buy more items that are rapidly costing more money (education, medical costs) you’ll be more adversely affected.

How can you fight inflation?

There are a few ways to fight inflation and fortunately you don’t have to take on this fight all-alone. One of the Federal Reserve’s (the Fed) key duties is to keep inflation under control or in Fed speak: to maintain stable prices. They do this by manipulating monetary policy – usually by raising short-term interest rates but they have other tools as well.

But since inflation is a persistent foe, all the Fed can do is control the rate of inflation, not stop it altogether (which could lead to deflation, but that’s a whole other story).

Five Inflation Beating Tactics

Fortunately, there are some actions you can take with your money to hold off or minimize the erosion of your purchasing power:

1. Invest your cash reserves wisely. Financial institutions are more than happy to take your cash and pay you a low interest rate. Then it’s invested for a higher return elsewhere! Keep up with current savings and money market rates and move your money to where you can get a competitive rate on your cash. Note: money market fund rates tend to move up quickly when interest rates rise.

2. Get the raise that you deserve. When it comes time for your performance review, let your boss know what a good employee you’ve been and ask for a raise when appropriate. A stagnant salary combined with rising prices is a formula for a less abundant lifestyle or the accumulation of debt.

3.If you’re self-employed, price your product or service competitively and take price increases when you can.

4. Monitor your investments based on your time horizon (when you will need the money) and risk tolerance (can you sleep at night?). Being overly fearful of the stock market and holding too much cash will not bring you abundance in your golden years.

5. Certain assets rise with inflation. Treasury Inflation-Protected Securities, gold, commodities, and real estate are examples of assets that typically rise with inflation. If you own a home, this is probably enough real estate.  One of the easiest ways to invest in commodities and gold is through exchange-traded funds.  Careful though, these assets can be volatile and you would only want a small percentage of a balanced portfolio invested in them. Educate yourself or get help before dipping your toe in!

Here are a few resources to get you started on inflation fighting.

From the Get Rich Slowly Blog: Best High-Yield Savings Accounts

From Morningstar:  Exchange Traded Funds

From the SEC website: Asset Allocation, Diversification and Rebalancing

Next Up:  Money’s Enemy #2:  Taxes  (To be posted soon).

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Planning and Chance

The Bay Bridge. Photo by Michael Macor
The recent Bay Bridge closure is a reminder that life is short and fragile. Photo by Michael Macor

The moment I heard about the Bay Bridge near-catastrophe….I thought oh, my God, that could have been me, my husband, or any one of the many people I know and love who cross the Bridge regularly. As it turned out, I did know one of the people who was on the bridge that day.  Lucky for her – she walked away with 4 flat tires, a totaled car, and frazzled nerves – but she was alive.  We all admit that “life is short” but when we say this we are thinking of our normal life span and yes, it goes by too quickly. But life is also fragile and we have no control over so many things – including whether we’re driving on the Bay Bridge at the moment it collapses.

What we do have control over, is how we choose to live day by day, and also how we prepare for the inevitable day of our passing. There’s a reason why so many positive-thinking, self-help, spiritual guides suggest writing your own eulogy as a way to get inspired about how to live your life. This exercise forces you to think about how you want to be remembered….and if you are living that way now.  Many of us get caught up in the busyness of the day-to-day, and never step back to see if all that activity adds up to a life we are proud of.

Think for a second about those you’ll leave behind.  The kindest thing any of us can do for the people we love, who will inevitably be devastated by losing you,  is to plan and prepare. Execute a will and a trust. Decide who will be the best guardians of your children. Make sure the designated beneficiaries on your retirement accounts are up to date. See a financial advisor about life insurance- do you need it?  Let someone you trust know where the key to your safe deposit box is  and where to find the combination to your home safe ….store your important documents and make copies for a trusted friend or advisor.   Live lightly, when you buy stuff and store it, think about a loved one walking into a room or closet and having to decide whether to keep or toss, recycle or sell your belongings.

The Bay Bridge near catastrophe was scary and inconvenient but sometimes that’s what it takes to motivate us to make positive changes and to take care of business.

Take good care.

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Cash Flow Planning: Debt and Generation X

Money doesn't grow on trees | Curtis Financial Planning
Money, unlike apples,
doesn’t grow on trees. Remember hearing that growing up? It’s true.

A recent article in Barrons, “Boomer Consumer” got me thinking; first, about my own clients and their particular situations, and second, about a key point that rang true: “The recession has left the typical 18-to-49 year old far less flush than the average 50 plus consumer.”

My youngest client is 29 years old, the oldest is 70, with the average age 48 years old.

Cash Flow, Budgeting, Retirement
The primary reason my 20 and 30 year old clients hire me is to help them with debt management, cash flow and budgeting. While my boomer clients definitely have felt the pain of dropping portfolio and home values, most invested before the bubble years and hold less overpriced assets.  My boomer clients are concerned about retirement, but the younger generation is challenged with making ends meet every month and is disproportionately saddled with debt.

Gen X and Student Loans
So are my Gen X clients spoiled spendthrifts knowing that they can fall back on Mom and Dad if things get really tough?  Not from what I see. I see student loan debt (so called “good” debt) that won’t be paid off for 20-30 years, incomes that aren’t keeping up with inflation, jobs that are harder to find and keep, and credit card debt not due to excessive living, but to just living. The easy credit years certainly didn’t help this situation. Young people and students with no credit history were able to use credit indiscriminately, and they did.

To take just one piece of this story, let’s consider student loan debt. This is a huge problem and it has unfortunate echoes to another, familiar financial narrative taking place currently. In a special report in Business Week titled “Student Loans: A Bitter Financial Lesson”, journalist Emily Schmitt writes, “Mountains of student loan debt have an unsettling parallel to another one-time boom market: real estate.  Like those who took out big a mortgage to fund their “can’t miss” investments in pricey McMansions – only to find those homes suddenly dropping in value – those of us who took out student loans to pay for pricey degrees, now find our prospects of securing well-paying jobs with comfortable lifestyles, shrinking every day.”

It may seem like a good bet to go into debt to get a good education, but if the decent job with decent pay is not forthcoming, and the price of admission is tens of thousands of dollars in long term debt, then perhaps the initial proposition is flawed. The recession makes these kinds of decisions truly difficult.

Is Generation X Solvent Enough to be Marketed To?
The Barron’s article that inspired this blog post  is not directly about debt, it’s actually about advertising. (Of course, debt and advertising are very close cousins.) The piece – Boomer Consumer – points out that the advertising industry might be making a big mistake by continuing to focus on the youth market instead of the boomer market.  I have to agree, because until the younger generation is less saddled with debt, and able to repair their collective balance sheets, they’re not exactly an ideal target audience for advertisers. The good news here is that some of these Gen X’ers know they need help or they wouldn’t be hiring a financial planner.

So what’s my financial advice to a Gen X’er trying to make good financial decisions?

1.  The number one goal has to be to pay off your debt.

Start with the highest interest debt first – usually credit cards.
Deferring student loan payments seems like a good idea – but interest is not
deferred on private loans. Start paying these loans as soon as possible, even with
minimum payments.

If you have large amounts of student loan and credit card debt and are also
making a 401k or 403B contribution, consider temporarily discontinuing the
retirement contribution  – on the amount that is not being matched only. Always
contribute up to your employer match…it’s like free money.

2.  Consider your living arrangement.
Can you take on a roommate?
Can you live in a less expensive part of town?
Can you move to a city with a lower cost of living?

3. Watch your cash flow and work within a budget.

4. There are programs that can help grads pay student loans. Do some research, not everyone is eligible:

Also read:

Is a College Education Worth The Debt at

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I Will Teach You to be Rich

What Exactly Does it Mean to be Rich? Ramit Sethi Tells All in His Book
What Exactly Does it Mean to be Rich? Ramit Sethi Tells All in His Book
What Exactly Does it Mean to be Rich? Ramit Sethi Tells All in His Book

Until a few months ago, I hadn’t heard of Ramit Sethi (pronounced Ra-meet, Say-tee) and his blog or his book of the same name. Then one day while I perused the book section at Costco, there it was – boasting a bright orange and yellow cover with black print. It practically screamed out at me. “I WILL TEACH YOU TO BE RICH.” My first thought was, “that sure is an obnoxious title.”  But being the personal finance junkie that I am, I chucked it into my cart in hopes that I would learn something new and share it with my clients.

After reading the first few pages I knew this book was different.  It’s written in an irreverent, breezy style and I found myself nodding my head and thinking to myself, “I so agree with this” as I read each paragraph. It’s written for people in their 20’s and 30’s (Ramit himself is 27) but this book is a great guide for anyone who is struggling with getting their personal finances in order.  It offers great, solid, no-nonsense advice, and an easy to implement 6-week action plan, plus lots of motivating talk about building a life that is “rich.”

Ok, I’ll admit it. I was fooled by the title, which of course is exactly his intent.  A rich life in Ramit’s world doesn’t necessarily mean lots of $$$, it means living the life that makes you most happy – which is different for each person.

Ramit is passionate about two things. He wants younger people to take action NOW and build a solid financial foundation (and he gives them the tools and specific advice to do so) and he is passionate about exposing the financial industry’s flaws. He is determined that his audience doesn’t  fall prey to the nefarious practices of some advisors and institutions.  He doesn’t like big banks, credit card companies, big brokerage companies and most financial advisors (although he does concede that “if you are determined to get professional help, begin your search at the National Association of Personal Financial Advisors (”  Full disclosure: I am a NAPFA advisor.

A couple of weeks ago, I was fortunate to have the opportunity to interview Ramit about personal finance philosophy at  the Commonwealth Club of California

I wasn’t surprised to find him smart, witty, engaging, and articulate. I asked him to describe his 6-week action program in 5 sentences or less. He said, “I can do it in 5 words.” He then proceeded to do it in 4, “Automate, Negotiate, Spend Consciously.” I asked him if he was rich. He said “….money is a part of that, but it’s a small part. People seem to think that being rich is only about money, but that is simply not the case.”

To learn more about Ramit’s personal finance philosophy and system, you can buy the book at Amazon.

Or, read his blog or view this video on the Commonwealth Club youtube channel.

Teaser from the book:

Week 1, you’ll set up your credit cards and learn how to improve your credit history (and why
that’s so important).
Week 2, you’ll set up the right bank accounts, including negotiating to get no-fee, high-interest accounts.
Week 3, you’ll open a 401(k) and an investment account (even if you have just $50 to start).
Week 4, you’ll figure out how much you’re spending. And then you’ll figure out how to make your money go where you want it to go. In Week 5, you’ll automate your new infrastructure to make your accounts play together nicely.
Week 6, you’ll learn why investing isn’t the same as picking stocks—and how you can get the most out of the market with very little work.

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Living Within Your Means – 10 Tips on Saving Money

Are you cash-flow challenged?When did dining-out, facials, manicures, pedicures, personal trainers, pricey haircuts, books, magazines, CD’s, I-Phones and expensive annual vacations become necessities? How did we get here?

This fee-only financial planner contemplates this question as client after client comes in with cash flow issues – agonizing over credit card statements, wondering how they can keep up with an avalanche of bills.

As a first step in my financial planning process, I ask clients to complete a detailed cash flow worksheet. This is followed by a meeting to review this document line by line.

Are you cash-flow challenged?

This exercise is as exhilarating as it is agonizing – clients are relieved to finally be doing something around financial planning, but terrified that the end result will be deprivation.  Everyone has his or her own “can’t give this up” list.

I’ve learned to remain neutral as a client explains to me why they can’t possibly cut out their $400 a month Amazon habit or can’t postpone the $4,000 vacation for a couple of years. (Really? Are you sure?)

Lately, there are more and more cash flow challenged clients at my door, and of course, it’s the economy.  No longer is cash-out refinancing an option as house values plummet and equity lines of credit disappear or decrease. And, to make matters more difficult, credit card companies are lowering limits and raising interest rates. Brokerage balances are also down.

Some state employees are seeing pay cuts as high as 8 %. The self-employed and freelancers lament incomes that have been slashed in half over the last year.

A spouse loses a job, two incomes are now one because of divorce, or unemployment — benefits have run out and there’s no job in sight. Not exactly a pretty picture.

All of a sudden, people have to live within their means, and for many, this is the first time they’ve had to watch what they spend and they’re not finding it easy to cut back.

As a financial planner, I can assure you – our incomes are finite, there’s just no way around that fact. I remind clients that recessions and hard economic times don’t last forever. The good times will roll again, but in the meantime, this is a good opportunity to really tap into what makes us most happy and to learn to live within our means and make it stick.

Living within your means doesn’t mean that you have to cut out all pleasure. Think of living within your means as good practice for your retirement years when you live off the money you save now. Think of it as living a sustainable lifestyle.

10 Ways to Save Money and Not Feel Deprived

Here’s a few spending tips for the person who doesn’t want to feel deprived:

  1. Suspend spending on those items you can do yourself:  manicures, pedicures,  highlights, gym workouts. Or, cut back on frequency.
  2. Don’t buy things you can borrow or trade  (books, magazines, cd’s).
  3. Avoid temptation – stay away from your favorite shops and toss out the catalogs unopened.
  4. Stop subscriptions to things you aren’t reading: newspapers, magazines, online and offline.
  5. Eat really well at home.
  6. Bring delicious food to work for lunch.
  7. Buy entertainment a la carte instead of via subscription: movies, theatre, and music events.
  8. Hold onto things longer – your cell phone, computer, car, and oven.
  9. Ramp down the luxury a bit – buy less expensive wines, eat at moderately priced restaurants.
  10. Postpone the big vacation for a few years; enjoy smaller trips to great places.

I’d love to hear from you. What are your favorite money saving tips?

Do you want to manage your money (and life!) better?

The Happiness SpreadsheetIf you want to think differently about the relationship between your spending, your values and your happiness, then sign up to get your FREE copy of The Happiness Spreadsheet.

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