It’s all about the Benjamins (or euros or pesos or pounds) — are you saving?

That’s the American $100 bill.

Saving money is my single greatest challenge. (That, and earning a lot more — like trying to double my income this year in a dying industry. No pressure!)

Today’s New York Times paints a grim picture of how tough it is to save money now, especially for younger people:

A new study from the Urban Institute finds that Ms. Brady and her peers up to roughly age 40 have accrued less wealth than their parents did at the same age, even as the average wealth of Americans has doubled over the last quarter-century.

Because wealth compounds over long periods of time — a dollar saved 10 years ago is worth much more than a dollar saved today — young adults probably face less secure futures for decades down the road, and even shakier retirements.

“In this country, the expectation is that every generation does better than the previous generation,” said Caroline Ratcliffe, an author of the study. “This is no longer the case. This generation might have less.” The authors said the situation facing young Americans might be unprecedented.

A broad range of economic factors has conspired to suppress wealth-building for younger American workers; the trend predates the Great Recession. Younger Americans are facing stagnant pay — the median income, when adjusted for inflation, has declined since its 1999 peak — as well as a housing collapse and soaring student loan debt.

I grew up in a family with good taste and the money to indulge it — cashmere and trips to Mexico or France, a nice house, decent used cars, good food. My maternal grandmother inherited an insane amount of money and ran through it as fast as she possibly could, blowing it on jewels and furs and gorgeously-decorated apartments and a limousine service with a thin driver named Raymond.

It’s weird to grow up around a lot of money and develop tastes for luxury — and then choose a field, journalism, that has rarely paid me enough to satisfy them.

Saving money is so boooooooooring!

And so utterly necessary.

American Buffalo (coin) (Photo credit: Wikipedia)

But I save 15-25 percent of my income every year, as does my husband. It means a lot of self-denial and self-discipline, certainly if your income is barely meeting your basic expenses, even pared to the bone.

I’d so much rather go to Paris and buy lots of pretty clothes and see Broadway shows and go away for romantic weekends. But to save the dough we need to retire — which we very much intend to do — demands it. Working freelance also means having no idea, most of the time, what my annual income will be. Not even next month’s.

So it means being aware at all times of what I’m earning, spending, saving and carrying in debt, (and at what rates of interest.) It’s only in the past three or four years — and I’m in my 50s — that saving diligently has finally felt worth it, as my retirement fund is now six figures.

It feels good! (Cue James Brown…)

James Brown (2001) during the NBA All Star Game jam session (Photo credit: Wikipedia)

It’s terrifying to plan so far ahead, to hope we’ll live that long, and healthily, to wonder if all this daily self-denial is even worth it. I get why people don’t.

Saving a ton is certainly easier if you also earn the maximum you possibly can. That might mean working two or three jobs for a while.

Many women, though, remain deeply uncomfortable asking for more money, whether in a salary negotiation or freelance gig. No one is going to hand it to us!

One of my favorite books — every woman who works must read it – is “Women Don’t Ask”, which examines the many reasons women continue to receive lower pay than men for the same work. Mostly because we’re too damn scared to ask for more! (Men do, almost every single time.)

The more I make, the more I can save. (And occasionally splurge.) That motivates me every single time to ask for more work and the highest possible rates for it.

Here’s an honest and moving post about money — and being in your 20s and needing/wanting a lot more of it.

Here’s a really interesting interview with an expert in behavioral finance who thinks we should be forced into saving by the government, as they do in Israel and Australia.

saving and spending (Photo credit: 401(K) 2013)

Do you save money?

Do you find it difficult?

Any tips you can share?

How to manage your money

There are so many people eager to tell us how to do it.

But how many of them are right?

I recently recently reviewed a terrific new book, by a fellow New York writer, Helaine Olen, called “Pound Foolish: The Dark Side of the Personal Finance Industry” for The New York Times; here’s my full review.

She’s largely scathing of the Big Names who make a shitload of money telling us what to do with our own — (my finger slipped and typed “yelling.” That, too!)

English: CNBC’s “Mad Money with Jim Cramer” came to Tulane University’s Freeman School of Business Oct. 19, 2010 to broadcast in front of a live audience as part of the show’s “Back to School Tour.” (Photo credit: Wikipedia)

People like Jim Cramer, Suze Orman and Robert Kiyosaki.

In 2012, I wrote a personal finance column for five months, every week, aimed at Canadian readers. I learned that every personal finance author seems to have a different opinion:

Love ETFs! Hate ETFs! Bank six months’ savings! No, three! Mutual funds are great! No, never!

Personal finance is deeply personal, affected by family, culture, education, understanding, (two very different things!), greed, fear, hope, comfort, wishful thinking. And the larger economy. In the 1980s, I earned 18 percent on my Canada Savings Bonds. Not today!

At 19, I was handling my money alone. Like every other, it’s a skill best acquired through practice. I was living alone, earning income as a freelance writer and photographer, putting myself through university and living on a stipend of $350/month in Toronto, where my rent, for a tiny studio apartment in a lousy neighborhood, was $160 a month. That left me $190/month — or $2,280 for the year for everything else: dentist, haircuts, clothing/shoes, laundry, food, phone, answering service.

Oh, and tuition and books; University of Toronto then (mid-1970s) cost $660 a year.

My parents never helped me out financially — beyond the cost of my small, cheap first wedding. And no chance to go home and live free or cheaply for a while after the age of 19.

Mutual Funds for Dummies … U.S. Funds at War — Too simple? (Monday, June 4, 2012) …item 3.. Music to Help Study and Work – 26:39 minutes … (Photo credit: marsmet545)

Here are some of the many factors affecting our ability to earn, save and invest, in bold:

One reason we’ve been able to save a decent sum for retirement is having no children, an estimated annual cost, per child, of $10,000.

I chose a profession, journalism and publishing, that often pays crap. I did expect to have a steady income, and a staff job making $60-80-100,000 a year throughout my 30s, 40s and beyond. But my first New York magazine job, in 1990, paid $40,000 — $5,000 less than I’d earned at a  Montreal newspaper in 1988.

(Thank God for my pre-nuptial agreement, and alimony, both of which gave me time to get back on my feet and find a well-paid staff job.)

Yet three recessions since 1989 — with 24,000 journalists fired in 2008 — and ongoing upheaval in my industry have put paid to any notion of a steady, high income.

Once you’re earning beyond your basic needs, (and learn to keep your overhead low,) save like crazy and invest thoughtfully to keep your nest egg growing, no matter how slowly or how small.

Luckily, Jose’s staff newspaper job is steady, union-protected and a kind of work that does not damage his health or strength. Unlike many Americans, we’re extremely lucky he has a company pension to look forward to. He has also been responsible enough to make a will and designate me the beneficiary of all savings to protect me financially if he dies before I do. (I did this for him as well.) If you have assets, and dependents, protect them!

Do you play the CPW game? Cost per wearing? Better quality clothes and shoes, even pre-owned and repaired, typically last longer than cheap crap you have to keep replacing. (And earning more money to pay for!)

I bought an apartment in June 1989, a one-bedroom. I’m still here. I certainly didn’t plan that, and fear I’ll never live in a house. I’d kill for a fireplace and backyard! But that real estate decision, (a long term mortgage with a decent rate, and low maintenance costs) allowed me to do good work I enjoy, even freelance, living alone, and allowed me to save 15-20 percent of my income every year, even when it was laughably low.

Read this life-changing book, and decide what is truly worth most to you — owning even more/bigger/newer stuff or enjoying free time. You can’t ever buy more time!

We drive a used, paid-off car, with no plans to replace it any time soon. (See: low overhead.)

Managing your money intelligently and attentively is a wearying life-long game of Whack-a-Mole. Just when you think things are going smoothly, boom! The car or house needs a costly repair or your kid needs braces or you lose your job — or all three happen at once.

Here are a few tradeoffs that work for me:

I don’t write a lot of checks to charity — but donate my time and skills to several volunteer boards and organizations instead.

I chose not to continue my formal education beyond a B.A. — but I attended Canada’s top university and, ongoing, read widely, attend conferences and network assiduously to stay current in my industry. Until or unless I know the ROI on an advanced degree, I won’t assume any educational debt.

We drive a battered old car — but it takes us safely, affordably and comfortably 10 hours north to Canada to visit family and friends.

We live in a smaller space than I’d prefer, with no second bedroom for my office or a bed for guests — but it allows us the extra cash to travel, save and entertain.

Managing your money means making choices, every single day. It means determining what matters most to you, and examining — truthfully — why that choice matters right now more than anything. (Designer labels, a trip to Paris, a new pair of skis, a second bedroom, a fourth child, grad school….)

Do you manage your money well?

Where did you learn those skills?

Personal Finance (Photo credit: 401(K) 2013)

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Hey, Rich Kids! Work Retail, Learn The Value Of A Dollar. Not.

Image by AFP/Getty Images via @daylife

This is the sort of story that makes me want to throw a chair. From today’s New York Times:

Steven D. Hayworth, chief executive of Gibraltar Private Bank and Trust, is thrilled that his daughter will be working this summer at a women’s clothing store before heading to college in the fall. It is not the particular job that pleases Mr. Hayworth. Rather, he is hoping his daughter will make the connection between how much she earns each day and what that will buy.

“As a parent who has worked his whole life and has had a little bit of success in my career, one of the huge life lessons I learned early on is the value of a dollar,” said Mr. Hayworth, whose bank is based in Coral Gables, Fla. “Particularly for children of upper-middle-class and affluent families, there’s no perspective on value. When the new Range Rover pulls into the driveway, there’s no concept of how many hours of hard work went into owning that vehicle.”]

Unlike many collegebound children today, Mr. Hayworth’s daughter would have had no worries if she had not been able to find a job. She could have spent the summer by the pool knowing her parents had the money to put her through college.

I’m finishing my book this month, a memoir of working retail in a national chain of stores for two years and three months, part-time, for $11/hour. However much little Miss Hayworth learns from slumming it for a while on the sales floor, I doubt she’s going to learn “the value of a dollar” from crossing over to the dark side of the cash wrap

She doesn’t need the money. She’s taking work away from someone — maybe one of the millions of workers over 40 or 50 or 55 who can’t even get a job interview in their field or industry, even with decades of experience — who does.

Yeah, a little rich kid showing up to please Daddy is going to fit in just great with a group of co-workers who know the value of a dollar because they count every single one they earn. They may have many kids or be single moms or be putting themselves through college or, as were three of my colleagues, be working retail despite a prior criminal record, making it really tough to get any job.

Rich kids think work is sorta cute. Something to do before they head off the Hamptons for the weekend or start Harvard med school or head off on Mummy’s yacht.

A Range Rover costs $78,425 to $94,275. At a median national retail wage of about $8, she’d be working full-time for five years – if she didn’t, like people who really need her job, have pesky stuff like rent, food, car  payments, insurance or student debt.

In the world of investment banking, $78,425 is pocket money.

You want to teach kids what a Prada/Range Rover/pair of Manolos really costs? Send ‘em far away from home, so they’re paying the real cost of housing and commuting to that job. Make sure it’s the only job they can get. Make ‘em stay in it for a full year, including the holidays.

They’ll still have no idea — because they’ll be too tired to shop and too intimidated to go into a store full of expensive shit they can’t afford. Many of our customers drove Range Rovers. They were some of the most spoiled, nasty, entitled people you could imagine.

I worked retail with two kids, both in their early 20s, one of whom stayed barely  three months who was clearly from a well-off family. Not an unpleasant guy, but his sole raison ‘detre was scooping up as much of our product at the healthy employee discount as possible. The money, as anyone working retail knows, is low and the work both physically and emotionally grueling.

Playing poor is an insult to those who really are. Playing poor is no joke to those earning poverty-level wages selling overpriced crap to the rich.

She won’t last a month — because she won’t have to.

Are Women Still Fiscally Illiterate? What's In Your Wallet?

Image via Wikipedia

A new website for women, designed to help us figure out to better handle our money, has received $4.5 million from Accel Partners, a venture capital firm.

The site, LearnVest, is the idea of a 26-year-old Harvard grad, Alexa von Tobel, reports The New York Times:

Ms. von Tobel came up with the idea for LearnVest in 2006, during her senior year at Harvard. She speaks at an auctioneer’s pace and uses tidbits from Warren Buffett and neuropsychology to bolster her arguments. Yet in 2006, when she had a job offer from Morgan Stanley’s hedge fund, she realized there was something she was not confident about: managing her finances.

“How is it possible I’m going to be a trader and I don’t even know how to open a credit card properly or my credit score?” she asked herself.

Help me out here. How do you get into, and graduate from, a place as competitive as Harvard without a clue about your FICO score?

Is such fiscal illiteracy typical?

Writer Anya Kamenetz addressed it, and the many issues facing younger consumers, in her terrific 2006 book, Generation Debt.

Here’s an excerpt from an interview with her, then 25:

Going back to the personal for a moment, do you have any advice for people who are facing huge student loan debts, mounting credit card bills, and low-paying jobs in terms of practical day-to-day living?

Go to annualcreditreport.com and get your free credit report. That’s your real-life permanent record and it gives you a starting point for fixing your financial life.

Pay over the minimum payment on your credit cards, even if it’s just $10. You can set this up online, automatically. It can save you thousands in interest, depending on the size of your debt.

Open a savings account, even if you’re up to your ears in debt. Every time you deposit a freakin’ tiny paycheck, put a fixed amount into savings. It compounds over the long term and the next time there’s an unexpected expense, you’ll have something to fall back on.

If you’ve never heard of FICO — or haven’t recently checked your score — here’s the site.

Fiscal illiteracy is not an option!

I grew up in a family of freelancers, with no pension, sick days or paid vacation to look forward to, so knowing how much income I earned, spent, saved, invested — and owed, at what APR — became gospel for me as soon as I began working for myself, at the age of 19.

I’m disturbed by women who (why?) don’t take the time to understand their finances. There is no Prince Charming! There is, instead a sometimes confusing, overwhelming alphabet soup to learn, understand and use to your advantage, from FICO to 401(k) to IRA to Roth to SEP to ETFs to APRs.

The investment field is often dominated by men and who wants to admit you have no idea what they’re saying to you? Read “On Your Own Two Feet”, a smart book by two women on females and finances, and check out their list of resources and links. I interviewed Manisha a few years ago and she’s great; here’s her money management blog.

Like millions of others with excellent credit histories, I was really pissed off that my 9.9% fixed rate on my American Express Blue card had been switched for no reason other than their greed to 15% variable, so the other day I asked them to lower it. They did, by 1% that day, because I was annoyed and I asked.

My favorite book — because it addresses the underlying fear many women have of standing up firmly for their financial interests (Bitch! How dare she?) is aptly entitled, “Women Don’t Ask”. It partly explains why women’s salaries so often lag — from their very first job offer to their last – behind that of men. They’re scared to ask.

Cheap-o's Rejoice. It's Genetic!

Image by emdot via Flickr

Maybe being cheap is genetic?

So suggests writer Adam Sternbergh in the current issue of New York magazine. It’s a theory, since some people spend money so fast and so insanely — and with so little remorse — it makes the rest of us feel a little ill. I’ve been accused many times of being tight/frugal/cheap, but sometimes it’s in the eye of the beholder. To my mom, who lives on a fixed income and who saves money like no one I know, I’m like a crazy person. A trip to Paris?  Travel is indeed one place I will blow my scrimped-up bucks. Yet she has a cleaning lady once a week and I can’t imaging paying someone else to do what I can do so quickly and easily for free. She found it obscene I spent $100 for a pair of consignment shop suede loafers — except they’re Ferragamos, which, new, would have cost five times that price. And I’ll be wearing them for years to come.

So if I’ve inherited my mom’s cheap gene, maybe it’s recessive?

I’m usually the saver and my sweetie is the spender; typical of most couples, we’re different in this respect which makes for interesting moments. We wear cashmere and drink decent wine, yet sit on a 20+ year-old loveseat, (slipcovered when I had a salary to pay for it) and I’m typing this on a “table” we built of fiberboard covered with a piece of mattress ticking found, yes, at the Paris flea market.

Where do you cheap out? When and where do you (still?) splurge? Who taught you to pinch — or blow — your pennies?

The Boomerang Kids Learn a New Word — Budget

Image via Wikipedia

budget n. An itemized summary of estimated or intended expenditures for a given period along with proposals for financing them.

In today’s New York Times, personal finance writer Ron Leiber tackles the challenge of managing life with adult children who return to their parents’ home to live. In the piece, one college student is interviewed and photographed at his parents’ home in a wealthy town in a wealthy county. He tells the Times he has no idea what a budget is. The accompanying photo shows his  Dad. And Dad looks mad.

Who taught this kid how to not budget? Has he not been responsible for taking care of his own finances for a while? Apparently not. I was out of my Dad’s house — which had been sold, so there wasn’t much choice in the matter — at 19. I’ve never been back and it’s never been an option. He re-married, lived in a smaller apartment and had a second family whose needs took precedence. My mom, similarly, never suggested this was a back-up plan for me either. They both expected me to figure it out. And so, living alone in a studio apartment and going to university full-time and freelancing for national publications to finance this life, I did. During that time, I really wanted to take a ballet class. The shoes, tights and leotard were $30. It took me three months to save that $30. I missed a few ballet classes and I hated that. I learned what it feels like to be thisclose to what I want and have to work and save and work and save and not buy other stuff to leap the gap to get there.