An old proverb goes like this: "The best time to plant a tree is ten years ago. The second best time is today." That not only holds true for tree planting, but for making changes in how you deal with credit card debt as well.  Too often consumers who are dealing with significant levels of debt feel overwhelmed by their situation, unsure if they can ever get control again. Regret and guilt are common feelings, too - "How could I have let this happen? Will anything I do make a difference now?"

To paraphrase another wise saying, "A long journey starts with a single step." What seems impossible can become manageable when you break things down to make small but effective changes in your financial life. Here are some practical steps to shake off that debt paralysis and get started on your journey to a debt-free life today:

• Think this is happening to you?  Start by reviewing your financial situation (with help from a trusted source, if you need it) and set reducing debt as a goal.
• Look for ways to free up more money to pay down your debt. Track your spending and write out your monthly expenses. Create a spending plan (otherwise known as a budget) which includes your debt-reduction goal. Prioritize your expenses now and see if you can cut back on some of the less important items. Involve the whole family in making changes.
• Identify how you are using credit and make changes. Don't use credit to supplement your income. Establish an emergency fund. People who have a rainy day fund are less likely to rely on credit when the unexpected happens. Don't carry your credit card when you shop. You'll be less likely to make impulse purchases.
• Make more than the minimum credit card payment. Credit card statements now tell you how long it will take to pay off your balance if you only make the minimum. That can be a real eye-opener. Even an extra $10 can reduce pay off time by months.
• Create your own debt repayment program. Try to pay a set amount each month on your credit cards and stick to it. As one card gets paid off, put that payment onto the next card with the highest balance or highest interest rate. Keep going until you are putting the entire payment on the last remaining card.
• Look for automatic and easy ways to pay. Once you've identified how much you can pay each month, consider setting up on-line bill paying or direct account withdrawal to make the payments automatic.
• Work with your creditors. If you encounter any problems repaying your debts, contact the creditor immediately and explain the situation. Creditors often will work with you to come up with an alternate payment arrangement for a short period of time.
• Seek help from a credit counselor. If you have been unable to resolve your finances on your own, consider working with a nonprofit credit counseling agency that is a member of the National Foundation for Credit Counseling (NFCC) to create a plan you can live with -one that helps you budget your money and repay your debt.  A certified counselor can customize a spending plan that fits your lifestyle.  There is a way out. To find it, contact an NFCC member agency by calling the NFCC referral line - 1-800-388-2227 or going to http://www.nfcc.org

Kathy Virgallito is the Regional Director for Apprisen Financial Advocates, a national nonprofit credit counseling agency that has been helping consumers manage their finances and get out of debt for 55 years. Services are provided in-person in 10 states through local offices and nationally by phone or via the Internet.  The oldest nonprofit credit counseling agency in the country, Apprisen Financial Advocates is known in its local communities as Consumer Credit Counseling Service (CCCS).  For more information call 800-355-2227 or visit www.apprisen.com.

Editor’s Note: Encouraging savings for youth is an important mission for the America Saves campaign. The following e-Wealth Coach article is one grandfather’s personal experience in teaching his children and grandchildren about finances. We hope it will provide a starting point for dialogue between you and the youth in your life when discussing saving.

The long-term key to improving America’s overall financial literacy quotient is to get to the kids. What’s important is to establish good financial behaviors early because those behaviors will carry over to adulthood. As a father of four and grandfather of nine, I’ve seen it work firsthand. Start early, insist on consistency in behaviors, and set a good example.  Monitor your saver’s progress and celebrate the successes. With that mantra, here’s what how to get started:

• When kids can walk, it’s time to start saving. Establish the first behavior of saving by teaching your child to drop coins in a piggy bank or a jar. Explain the meaning of the word save.

• Show the money. Periodically, show the child that consistent saving adds up by regularly tallying up your savings.

• Take it to the bank. Make a ceremony of taking the child to the bank to deposit the jar of money. Teach them that the bank will give them money (interest) to “store their money.”

• If there is an allowance, it’s time to budget by putting savings first. No matter what the size of the allowance is, break it down between what they can spend, and what they have to save. Note: this may be your first financial “negotiation” with your child – start with saving 50%, and settle for 25%.

• The first large purchase. As your child ages, he or she will inevitably want to spend their entire savings – on one item. The answer is “no.” Modify budget into more line items – discretionary spending, mandatory saving, and “saving for the large item.” This is where the behavior of “buying within means” is established. 

• “But, I want it now…” This may be the time to deve lop a new financial concept – borrowing money. That’s okay as long as the rules are set, and the “borrower” adheres to them.  This is where the behavior of “borrowing within means” is established.

• “Can I have a credit card?” Response: No, it’s too early. We’re sticking to the plan above. However, let me teach you about credit cards – after the “eye roll,” stick to your game plan. 

• “My friends have credit and debit cards.” Response: I’m happy for them. We’re sticking to our financial plan, and here’s why.

In my own experience, my children were grateful for instilling financial responsibility at a young age. Start early, consistency, monitor progress, and celebrate success – I’m convinced that’s the formula for increasing America’s financial literacy quotient many times over. Get to the kids.

Proud Grandfather,

Carl George

Carl George is the Senior Executive Partner at Clifton Gunderson LLP, a national CPA firm; past Chairman of the National CPA Financial Literacy Commission of the AICPA, www.360financialliteracy.org and www.feedthepig.org; and the proud grandfather of 9.

Do you need loans for college? Would you like to have your own place and obtain a great job after graduation? Whether you’re twenty-two or forty-two, nothing affects your financial future like your credit score. Your credit score is a number, calculated based on information in your credit report that lenders use to assess the credit risk you pose. The higher the score, the better your credit rating. A good credit score will help you secure a low-interest rate on loans for college or an automobile. Negative items on your credit record can affect your ability to get a job, rent an apartment, or obtain a cell phone. Make building a great score a priority while you're young and you could actually save hundreds or thousands of dollars over your lifetime.

Action Steps to a Healthy Credit Score:

• Pay your bills on time. This is the most important factor in determining your credit score. A history of on-time payments will help you improve your score, and a history of delinquent (or non-existent) payments will hurt your score. Accounts that remain unpaid will be sent to collections and further negatively impact your score.
• Keep your balances low. Credit scores also measure how much credit you’re using versus the amount available to you. For example, if you have 2 credit cards with a $1,000 limit and you have balances of $800 on each, you’re using 80% of the credit available to you.
• Don’t close old accounts. Credit scores also measure your credit history and the longer you’ve had access to credit, the better. Keep your oldest accounts active rather than closing them when they are paid off.
• Limit your applications for new credit. A large number of credit inquiries (applying for a car loan or credit card) at once can negatively impact your score.

Finally, ensure that you’re monitoring your credit reports on an annual basis. The three major credit bureaus - Equifax, Experian and TransUnion - must provide all consumers, upon request, a free copy of their credit report once every twelve months. You can order your free annual credit report online at www.annualcreditreport.com or call 877-322-8228.

For more information on your credit score, check out CFA’s “How Credit Scores Work."

	This month's e-Wealth coach is Laura Levine, executive director of the Jump$tart Coalition. Laura works to improve financial literacy for kindergarten through college-age youth. The Jump$tart Coalition operates an online clearinghouse of more than 700 financial education resources at www.jumpstartclearinghouse.org.

The seeds of wealth building can and should be planted with young consumers as early as elementary school-or even sooner.  As the mom of a five-year-old, I can tell you that preschool age children are curious about money and actually want to accept some responsibility for establishing good habits, like saving.  What better time to teach them than when they really do still believe what we grown-ups have to say?  And if your kids are a bit older, well, there's no time like the present.

Setting kids on the path to becoming good savers isn't hard; in fact, it can actually be fun.  Here are a few things that parents can do-even if they don't feel financially savvy themselves. 

Buy and decorate or make a piggy bank or any type of savings container.  This engaging activity will get your child excited about saving and the creative elements will help the child feel connected to the effort.  The Money Mammals and Moonjar offer great age-appropriate financial information and creative savings containers for your kids to put together or decorate; and then explore what they can do with the money they've saved.   

My son and I saved coins in an empty milk jug that was transparent enough for him to track his progress visually, before he even knew how to count money.  Piggy banks and the like are great for children because they enable immediate action-someplace to save gifts or allowance right away; but don't forget to move what you've saved into an insured, interest bearing account at a bank or credit union.  When you do, visit the branch together and spend some time looking around.  Ask your bank about Teach Children to Save or your credit union about the Thrive by Five materials.

Help your children set and work toward a modest, short-term savings goal.  For young children, it can be something like a special toy, a goal they can reach easily.  For teens, the goal can be more significant, like saving for a class trip or the prom.  But, resist the temptation of starting with goals that are too big and too far in the future.  If you can afford to, offer your kids age-appropriate extra jobs to earn money.

While you're at it, consider setting a family goal for something fun like a vacation or holiday celebration.  This is an easy opportunity for parents to set a good example, regardless of how they've managed money in the past, and initiate dinner table conversations about finance. Sure, most families should also be saving for more serious needs, but families can work together-pooling loose change or maybe having a yard sale-to establish saving as a good habit and a family value.

Parents can also help their kids become good savers by reading stories, playing money games like Break the Bank and Financial Football; and talking with their kids teachers and youth leaders about the wide array of financial education programs and resources currently available.

Remember, if your child's first saving experience is fun and successful, he'll more likely want to do it again and again.  


Sincerely,
 
Laura Levine
Executive Director
Jump$tart Coalition

Making the commitment to become a steady saver is a vital first step toward financial peace of mind and, ultimately, greater security and wealth.

Now comes the fun part: In order to reach the “greater security and wealth” part of the equation, you must learn how to make your savings grow, thanks to--you’ve heard it before—“the miracle of compound interest.”

How Money Snowballs
What exactly is compound interest? And what makes it so miraculous?

If you saved $50 per month, by putting into a zero-interest coffee can, at the end of 10 years you would end up with $6,000 stashed in your little can ($50 X 12 = $600. $600 X 10 years = $6,000). Sounds OK.

Now, let’s assume that you deposited your savings into an account that earned 3% interest per year. In 10 years you’d have about $6,990—almost $1,000 more.

That’s because, every year you’d earn interest on your deposits, and the next year you’d earn interest on your interest (plus the additional deposits)…and your cash would snowball. You can see it for yourself in this chart, and plug in some of your own numbers into this calculator.


The Magic of Time
The sooner you begin saving, and the longer you allow compound interest to work its magic, the more money you’ll gain.

If you also save money in your retirement account (and we hope you are), that money is usually invested in mutual funds, which typically have an even higher yield over time. If you deposit $100 per month into your 401k, let’s say, which earned 8% per year on average, for 30 years, you’d end up with about $141,761.

Your total cash contributions over 30 years would be only $36,000—but the compound return from the stock market would give you an additional $105,761.

It’s a powerful reminder that even the smallest steps in the right direction add up to big changes—and in some cases big money—over time.

Where to Find the Best Rates
How much interest does your savings account yield now? You can check your statement or call your bank or credit union, but don’t be surprised if the interest rate is disappointingly low—perhaps less than 1%.

That’s all right. Many institutions offer higher rates if you’re willing to look beyond the bank next door. You can set up automatic, secure electronic deposits to almost any account that offers a good rate. A savings account is simplest, but for higher yields, you may want to consider a money market account (MMA) or a certificate of deposit (CD).

Money market accounts and CDs have more restrictions; most limit the access to your cash, and some have minimum deposit requirements.

The sooner you start looking, the faster your money will grow.

Good luck and keep saving!

This month's e-Wealth Coach is Michael Gutter. Dr. Michael S. Gutter is an Assistant Professor and Family Financial Management State Specialist for the University of Florida. His Ph.D. is in Family Resource Management from The Ohio State University. Gutter has published research relating to saving behavior, racial differences in financial behavior, and the relationship of financial socialization on financial behavior. He led the effort to establish Florida Saves.

With 2010 under way, many of us are starting to receive our tax documents in the mail or at work. Tax season is a great time to jumpstart your savings. Here are some tips to keep in mind this tax season.

Avoid Expensive Preparers or Loans
Keep more of your own money by avoiding expensive tax preparation or refund-anticipation loans. Many communities have Volunteer Income Tax Assistance (VITA) sites available which provide electronic filing and tax-preparation assistance at no charge for many taxpayers.  You can find your local tax resources by zip code on the IRS website.

If you do decide to use a paid tax preparation service, you can keep your cost down by declining any refund-anticipation-loan (RAL) products.  E-Filing and direct depositing your refund can reduce your waiting time and avoid these cost services. Refund-anticipation-loans have high fees, and not using a RAL can save you an additional $100.   By waiting, you could use that extra money you did not spend on the RAL to contribute to savings or pay down debt.

Pay Only What You Must
In order to maximize your tax refund, work to reduce your income subject to taxes by taking advantage of tax deductions and credits. Deductions lower your taxable income, and credits lower your taxes. Tax deductions can include interest expenses on student loans, medical expenses, contributions to qualified retirement plans. If you can itemize certain expenses, then you can deduct mortgage interest paid, taxes paid, charitable gifts, and more.

Regardless of whether you utilize a standard or itemized deduction, everyone can take advantage of tax credits. Like deductions, credits can help you receive a larger refund.  The Earned Income Tax Credit is a tax credit for lower-income families and can even be refundable. This means you are entitled to the full amount of the credit even if it exceeds the amount you face in taxes. You can use more than one deduction and credit. Having someone else check you tax return can help you to not miss any savings opportunity. For each new deduction or credit you find, utilize a portion of the savings to add to your savings account or pay down debt.

For basic information on taxes check out the University of Florida’s fact sheet on “Federal Income Tax Management”  and additional resources.  

Pay Yourself First
When it comes to increasing savings, the old wisdom of paying yourself first comes to mind. Now with IRS Form 8888 you can directly deposit funds from your tax return into up to three different accounts, including your savings account. Form 8888 is a good way to save automatically, open new accounts, or add to existing accounts. By setting aside money that hasn't yet reached the individual's hands, there is an opportunity for painless savings. Form 8888 is available at most tax preparer sites or where you can find tax forms.

It’s Not Too Late for Retirement Savings
Even though 2009 has come and gone, you can still help your tax bill by maximizing your contributions to tax-advantaged retirement accounts. Contributions to a traditional individual retirement account (IRA) can reduce your taxable income and can be made up until you file your tax return for the previous years. Traditional IRA contributions grow tax-deferred and can be invested in many types of assets including mutual funds.

Remember to take advantage of every deduction and credit you can! Taxes can impact your saving and investing and are a great way to start saving. For more information on saving and investing, click here.

It's a new year and the start of the tax season and many of you are taking a hard look at your finances. Saving money and/or reducing debt remain one of the most popular resolutions remain each year. Make 2010 your year for financial action. Even with the recession, you can make changes to improve your financial future by:

• Start (or add to) an emergency fund. An emergency fund is your protection against unexpected expenses. Having an emergency savings fund may be the most important difference between those who manage to stay afloat and those who are sinking financially. That's because maintaining emergency savings of $500 to $1,000 allows you to easily meet unexpected financial challenges such as car repair or a medical bill and avoid high interest, short-term loans.
• Track your spending. If you're looking for ways to cut back, your first course of action should be to know where your money is currently going. Knowing how you and your family spend money can help identify areas to reduce your spending.
• Let go of bad habits and bank your savings. A simple behavior change, like bringing your lunch to work rather than buying, can add up to big savings over time. Find one or two things in your life (i.e. cable television) to cut back on and bank the difference. What you don't see, you will probably not miss.
• Go automatic! Treat savings like another bill by setting up automatic monthly transfers at your financial institution from your checking to savings account or having a portion of your paycheck directly deposited into your savings. Savers who save automatically are more likely to be successful long-term.
• Save all or part of your tax refund. With IRS Form 8888, you can choose to save all or part of your tax refund.
• Take advantage of free money at work. Many employees turn down free money from their employer by not signing up for a work-related retirement program such as a 401(k) plan. Savers with a dollar-for-dollar match would likely receive an annual yield of greater than 100% on their investment.