Recommended Reading: She Got Out of Debt, So It's Time to Party

This is a great "feel good" article from TwinCities.com about one new grad who took a good, hard look at her finances and cleaned up her act.

She Got Out of Debt, So It's Time to Party

"One twentysomething saw a shaky economy and a worrisome credit card balance. But she didn't fret; she set out to pay it off. Now, she embraces living within her means." Read more...

Reality Check: A Night at the Prom

The New York Times article A Prom with all the Glitz, but Every Dollar Squeezed from April 30th got me thinking. Another example of the interesting ways that people prioritize during tough economic times. Prom is a milestone in most teenagers lives, and can be a happy memory. I went to a very small Prep School, way too small to have a Prom. We went on to live perfectly happy and successful lives having missed Prom, but I confess that I went to a public school friend's Prom. What is striking in this article, is not the desire to go to the Prom, but the things deemed necessary as part of the experience. Here are historical tidbits I borrowed from About.com:

• Prom has been around since 1811, and is derived from the late nineteenth century “promenade ball”.

• Proms are inspired by debutante balls, which are events that formally debut teenagers from prestigious families.

• In the early 1900s, Prom was just a simple tea dance for high school seniors.

• Proms thrived in the 1950s due to a post-war economic boom.
  

• Girls didn't originally purchase new clothing for proms—dress codes found on invitations simply called for “your Sunday best”.

Over the years, we've come a long way from a formal in a decorated High School Gym. The price tag has come a long way too. Back when I went to the Prom, the boy rented a Tux and bought the girl a wrist corsage, the girl bought a gown (more on this later) and a boutinierre for the boy. The boy bought the prom tickets. The big after Prom event was sleeping on the beach (I'm sure there were regionally adjusted equivalents). Today's Prom price tag includes expenditures such as hair salon, nail salon, make up artist, limo, photographer, and a trip to the beach for the weekend. How did we get here?

Forget the obvious questions like, did teenage girls suddenly become incapable of doing their own hair, nails, and make up (or each other's)? Forget that the limo thing probably originated as a way of ensuring that kids weren't driving around drunk on Prom night. So, here's what I think happened. Kids who grew up watching the red carpet on TV started emulating it. Businesses were all too happy to market to this crowd (can't blame them, business is business). Most important though were parents willing to pull out their credit cards and foot the bill, or allow their children to spend their own hard earned money on one-time excess. I will stop right here, and be very clear that I think the Prom is a nice milestone in a kid's life. It's a bonding thing, and part of the closing of the High School chapter of their lives. However, I do not think this rite of passage needs to include channeling Beyonce or JayZ for the weekend (I almost fell off my chair when my daughter told me that couples were choosing their music for when they got out of their limo, and were captured on the official Prom video).

So, I cheer for the parents and children in this article who are realistic enough to make tough choices and set priorities, even if it means facing up to the fact that food and shelter are higher on the list than hair and nails. I challenge the parents who say they will make whatever sacrifices necessary to ensure their child doesn't miss out on Prom with all the trimmings, to ask themselves what they are teaching their children about coping with adversity. Remember, there's a difference between what you want and what you need. If the key objective is going to the Prom, then whether the dress was seen before should be irrelevant. I've said it before, if it's clean and paid for it's nobody's business.

Okay, okay you think I'm being harsh and judgmental. Well, unfortunately sometimes life presents us with harsh realities and tough choices. Sometimes those choices don't have to be all or nothing. You can make a list and set priorities. In my professional life, we do this all the time. Make a list of all the things to be delivered with the project, separate the "must haves" from the "nice to haves", determine what can be done within time and budget constraints, and redline (or defer) the rest. This is a life skill we should be teaching our children. This is part of preparing them to be responsible adults.

Here are some suggestions:

• Skip the professional make-up job. This is a 100% consumable spend on something that lasts for a couple of hours and will be washed off. I include in this the offers at department stores to "do your make-up" if you purchase some amount of make-up. While this is slightly less than one time use, will this make up ever be used again and is it needed. Most girls already have make-up, and can pick up a shade of eye-shadow and a new lipstick at CVS or Target for less than $10. No one will know the difference (and who cares if they do?).
• Skip the salon "up-do". The amount saved will go a long way toward the cost of the dress or the Prom ticket, and again this is a one and done use of money. I've rarely met a teenage girl who either can't fix her own hair, doesn't have a friend who can fix hair, or doesn't have a Mom (or Dad) who can fix her hair.
• Skip the photographer, and take your own pictures.
• If this is a dress to be worn once, don't invest too much money. It's an investment with no return. This gown will not be reviewed by Joan and Melissa Rivers on E! Stay away from stores that specialize in selling Prom gowns, this is their Super Bowl. There are plenty of discounters like Loehmann's where you can get a beautiful dress for under $200. Consignment or Charity Thrift shops in affluent areas often have really high end stuff (tuxes too). Call it vintage, and suddenly it's chic. My college roommate bought a fur coat for $35 at the Wellesley Thrift Shop (and she was a trust fund baby).
• In general, the whole fake nail thing is a huge waste of money Prom or no Prom, so skip it.
  

As a matter of full disclosure, my oldest daughter went to Prom twice when she was in High School. She did her own hair, nails and make up (not because I couldn't afford to pay for a trip to the salon, but because she and I both agreed it was a waste of money). I think that's an important dialog to have with a child. The difference between what you can afford, and what's worth spending on. I helped her pay for the gowns, but they were not over the top (and they are still hanging in her closet, like souvenirs, and were never used again). So, now that Prom season is upon us, I hope you have that dialog with your child too. If times are tough financially right now, use this as a teaching opportunity about setting priorities rather than about ignoring reality or charging up credit cards with nice to haves. Remember, in the choice between movies and socks, socks win. Since this is a milestone on the road to adulthood, teach your child how to make adult choices by making them yourself as well. What do you think?

A World of Invisible Money

I was raised by a very fiscally responsible family. I was taught the value of hard work, saving, and most importantly, deferred gratification. When I started raising my own family, I somehow assumed that my children would glean, by osmosis, the same money sense I had gleaned from my parents. But as they grew up, I realized that this wasn't happening. And it wasn't just my kids that had no concept of financial reality, it was other kids and younger colleagues, too. What happened? I pondered this for some time. I had set a good example for my children. I worked hard, saved, lived within my means, shopped frugally, and had no credit card debt. Then one day it hit me when my very bright 16 year old daughter asked me if she could deposit cash in the bank. I was dumbfounded! At first I couldn't even grasp what she was asking me. What's the bank for, if not for depositing cash? How could my bright, beautiful daughter who'd come to the office with me since she was small, who'd travelled with me on business trips to Europe, who knew there's always a breakfast buffet at a hotel and that you can call the concierge if you forget your toothbrush, not know that you could deposit cash at the bank? Then she told me. "Mommy, I've never seen you deposit cash". She was right. Why would I? My paycheck is direct deposited, and aside from depositing an occasional birthday check, I never go to the bank. Money has become invisible. It goes electronically to the bank from your employer, and comes out magically when you put your ATM card in the machine. Even better, now we all just pay with our debit cards, so we barely touch cash.

Before I go any further, let me make it very clear that I love technology and the convenience of direct deposit and debit cards. To me, the best part about debit cards is that I don't need to carry cash or write checks, and they are not credit cards (which I knew from an early age are bad, but that's another post).

When I was a little girl, I had a passbook savings account. I learned to deposit the 50 cents a week allowance I got, so I could save up to buy things. When I was 8, I started working in my father's clothing store for 25 cents and hour. I deposited my earnings in my savings account, and learned that every month you got a bonus entry in the passbook called interest. My father used to send me down the street to the bank with a green pouch to deposit money from the store in the bank (unbelievable in this day and age, but that was small town America in the late 60's and early 70's). Okay, this is all very nostalgic, but why does it matter? It matters, because I saw money being earned, counted, deposited in the bank, and earning interest. Money was real, tangible, and visible. You earned a finite amount, and you could spend a finite amount. The money you had in the bank was the money you put in the bank. A simple equation.

How did our economy get into so much trouble? While it makes good populist TV to blame greedy Wall Street fat cats (and there were some), the bottom line is that too many people lost sight of that simple equation. You can't spend more than you have. Invisible money is fine, and very efficient, as long as you learn that behind the scenes is real money that has to be counted and kept track of. The challenge now, is to teach an entire generation how to keep track of their money and determine what they can actually afford. But that's the stuff of future posts.

If you have stories about how you learned (or didn't learn) about money while you were growing up, I'd love to hear them.