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...

Look Mom, I Graduated! Now What?

The Class of 2009 is graduating into one of the worst job markets in decades. Lot's of articles are being written on the subject. What are the job prospects for these new graduates? If they have the means, many will go straight to grad school. Others will look in fields they otherwise might not have considered, like education. That could be a good thing. The bottom line is, they'll have to get on with their lives and do something. It's a bitter pill to swallow after years of hard work, but sometimes life doesn't work out exactly the way you planned. My husband likes to say that life is like a wheel, sometimes you're on the top and sometimes you're on the bottom. It's tough coming out of school into this market, but maybe learning to overcome adversity and pull through isn't such bad training for the road ahead. Just keep your eyes on the road.

I graduated into the recession of the early 80’s. I had a ream of rejection letters from every bank and Wall Street firm out there (most of which no longer exist, like Manufacturers Hanover and Chemical Bank, as a result of 20 years of consolidation). I got by tending bar and waiting tables. Ultimately, I went on to get my first job in my field, and my career got rolling. In tough times like these, take whatever job you need to in order to get by, but here's my 20-20 hindsight advice about what to do while you're treading water:

• Plug into networking opportunities in your industry (these 3 are great for women in financial services The Women's Bond Club , 85 Broads and The Financial Women's Association).
• Go to industry events to learn about what’s going on in your desired field as well as make connections.
• Do volunteer work, it’s also a great way to network while doing something productive.
• Read, read, read. Newspapers, magazines, the latest business books, all of these keep you abreast of the latest trends, what's happening in the economy, what the "new new thing is". I highly recommend Outliers and The Tipping Point, both by Malcolm Gladwell. Also, Who Moved My Cheese by Spencer Johnson.
  
• Lastly, tap your school’s alumni network to the fullest extent. Those of us who’ve been there and done that, love to help young grads.

What do you think? Please post your comments.

Recommended Reading: The Marketplace of Perceptions

I've written a lot about deferred gratification, and trade offs, and also about the importance of reading the fine print when making decisions. I recently came across this April 2006 cover article in Harvard Magazine by Craig Lambert discussing how we make economic choices, and the external forces that shape those decisions. It's fascinating reading. What do you think?

"Behavioral economics explains why we procrastinate, buy, borrow, and grab chocolate on the spur of the moment" Read more...

Dollars are Made Out of Pennies

I've talked a lot in previous posts about setting priorities, and teaching our children to set priorities or defer gratification. How does that translate into dollars and cents in every day life? How do you get a child (or even many adults) to grasp that skipping a Starbucks Frappuccino or a Snapple can pay for a PS3 game? Sometimes things are easier to understand if you break them into pieces. A big project seems undo-able until you break it down into tasks and milestones. The same is true about prioritizing and saving for an expenditure.

Let's start at the beginning. Dollars are made out of pennies. This is at the core of how money works, but to many it's intangible, especially if they usually pay with invisible money. How does saving 25 cents now translate into that $50 game later? The answer, of course, is to save a quarter here and a dollar there until, over time, you have the $50. Now we're starting to talk about math a child can understand. So, the Frappuccino vs. PS3 game choice isn't a one time trade off, it's a many times trade off. How many times? If the Frappuccino costs about $4, and the game costs about $50 then the answer is more than 10 times. That may sound like a lot of times, but it doesn't have to be the only trade off. More trade offs gets you to $50 faster. I know, this isn't rocket science. Still, I'm always surprised to learn how many people don't get it.

I once read a column in the Wall Street Journal where the author talked about playing "the soda game" with his kids. It's a great idea. Here's how it works. You're at a restaurant. You give your kids a choice: they can order soda or you'll give them whatever the soda costs. Suddenly that $3.00 investment in soda is theirs instead of yours. Most kids (but not all) will happily take the cash in hand. A good lesson, but doesn't work for everyone because there's still the element of "other people's money".

Here's a story my father told me when I was a kid that really makes the point about trade offs and deferred gratification. When he was a little boy, his Aunt and Uncle owned a Five and Dime Store a few towns away. His uncle told his Aunt that she could keep all the change in the drawer at the end of each day for whatever she wanted to buy. She saved the change, and bought a house. Like I said, dollars are made out of pennies.

Do you have examples of trade offs you make? I'd love to hear them.

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?