Here we are: another year older, wiser, and closer to paying for college. If there’s one resolution you keep this year, especially in this economy, it should be getting your financial house in order. Here are five money "musts" for a peaceful and prosperous 2009.
Review 2008. Now’s the time to glance at how you spent your hard-earned money in 2008. Many credit cards and banks offer annual reports that divvy up your spending by category. Although it may cost you a few dollars, these can be good tools if you primarily use plastic.
If interpreting the past is too difficult, start tracking the present — either the old-fashioned way or with the help of Mr. Laptop.
The tried-and-true paper-and-pen method requires you to write down every penny spent for at least a month. If that’s too tedious, track a category or two that you know is out of hand, such as eating out or buying clothes.
If you charge a lot of stuff or use a debit card, consider signing up with free sites Quicken Online (Quicken.com) or Mint.com, which collect all of your account information in one place and make nifty pie charts of your spending. They’ll even let you know if you’re about to go over budget, overdraft your account, or miss a bill’s due date.
Set goals for ’09. After you know where your money went, you can set goals for the new year. One idea is to focus on one spending category that’s out of hand. Using Mint.com, I learned that we’ve spent more than $300 at McDonalds this year, just one embarrassing example of how we spend too much on food — both fast and fancy — outside the home.
Given the uncertainty in the economy, another goal we all should have is to pledge to save at least three months of bare minimum living expenses. Try to set aside more if your job is insecure or your family relies on one income.
Calculate college. With college tuition outpacing inflation, I don’t blame you for not wanting to calculate the cost of sending your little Einsteins to school. Fortunately, estimating your college bill is a breeze with SavingForCollege.com‘s "World’s Simplest College Calculator." Collegeboard.com is another good stop, with data galore on college pricing trends.
Hopefully, calculating your future college bill will also open up discussions with your partner about how much you can and want to pay. My husband and I believe our kids should pay at least something toward education so they’ll take their studies seriously. Even so, we need to save close to $800 a month to afford 75 percent of state school tuition circa 2020!
Include the kids. Asking your 9-year-old how to stay within budget may seem odd to some parents. But children can bring perspective and creativity to the process. Give your children responsibilities depending on their age. For example, put an older child in charge of a sliver of the spending, such as weekly family entertainment. Have a teen sit down with you to prioritize and pay bills. Even kids with a grasp of basic numbers can assist. Tell your son or daughter that you don’t want to spend more than $10 on a birthday gift and have them compare prices — an educational alternative to having to say, "No, that toy’s too expensive."
Your money or your life. In these complicated times, many of us have experienced the urge to simplify. Perfect timing, then, that one of the great works of the life-balance movement — Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence, by Vicki Robin, Joe Dominguez, and Monique Tilford — has just been updated. When you finish the book, you’ll have a better sense of how to align your personal finances with your personal goals and values. What better way to start the New Year?
Kara McGuire is a mom and personal finance columnist for the Star Tribune.
