Family Finances

This month, I've been tackling our family finances.

Thanks to a frugal upbringing, I entered my adult life without debt. My husband, alas, did not. In fact, because he decided to leave the Marine ROTC after receiving two-years of tuition at Boston college, he entered his post-college life with around $60,000 in debt.

He managed to wipe out more than $50,000 by joining the Navy and serving four years as an enlisted man - quite possibly, he ws the only enlisted man at the base who had a four-year degree.

Time and time again, I've read that money is the number one cause of divorce. It really doesn't have to be this way.

There are lots of online resources to help you get out of debt and manage money. And there are different ways of making it work if you and your spouse have different ideas about how to manage money. For years, one of my friends and her husband held separate accounts. They split their bills, each paying a percentage based on income. This worked for them for years. After the birth of their child, they merged accounts but by this time, they were on the same page financially, more or less, and they have an incredibly strong marriage and are financially healthy today.

When I married my husband, we set out to knock out the debt immediately. We went to extremes to do this: One car, beans for dinner, a crappy apartment, no new furniture and thrift store clothes. Of course, the fact that the Navy provided all his work clothes helped a lot on the wardrobe budget. I drew a bar chart on a piece of ruled paper and tacked it to our fridge. Each month, I'd color in our debt contribution, so we could see our progress.

We're debt free - except for our mortgage - and now we're applying those same techniques to savings. Yes, sometimes we still haggle over money, but we're never overwhelmed by our financial situation.

Here's an article to help you if you're dealing with family and financial stress. I particularly like the advice about setting aside money for your basic needs first. I would add a few more tips, though:

• Set aside some money for savings. The rule of thumb is 10 percent, but if you can only save $10, then do that. Saving may seem like a luxury, but it's not. It's the only way to get out of debt in the long run. By creating a savings, you're building a cushion to pay for emergencies without incuring more debt. When we were young, lived in an apartment and had no children, I found that a $200-500 emergency fund would take care of most emergencies. When we bought a house, we needed more like $1000. Now that we have a child, I've realized we need more like $5000-$10,000 to comfortably deal with the myriad of things that can go wrong in a given year. We're not there yet, but we're working on it.
• Decide how much you can pay on debt. If this is below what creditors want you to pay, then contact them and tell them what you will be paying. Really, devote 10 percent of your take-home to debt reduction and find a way to live off the rest. If you have more to spend, then you can try Dave Ramsey's Snowball approach or you can pay down the highest interst debt first. The first is psychologically rewarding and may be the carrot you need to keep going. The second is financially 'smarter' but can be discouraging if you have tons of different bills and collectors calling.
• Cut expenses and stop spending. Some people call this "budgeting." If you hate that term, here's an easy fix for you: Grab some envelopes, get 70-80 percent of your money in cash and then start dividing it into the envelopes. Label the envelopes: Rent, food, gas, utilities, phone, clothes, household. Put more in food than you think you'll need. Not enough for clothes and households? Shop yardsales and thrift stores. Ask for clothes for your birthday. If you run out of gas, walk, carpool or take the bus.
  
• Get another job. Hey, no one should ever be too good to deliver pizza. Not your teen, not your spouse, not you.