(Photo: iStockphoto)

My fiancé and I have one set of “couple” friends who are a lot like us in many ways. We’re all around the same age, and we’re all products of similar schools and universities. We live just a few blocks away from each other in San Francisco, and we’re all interested in travel, food, music, and nightlife. 

There’s one major way, though, in which we differ. Our friends are rich, and we’re not. We rent an apartment in a shabby turn-of-the-twentieth-century building, while they own a spacious new condo. They think nothing of dropping $250 on a weekend dinner, while we stick mainly to tacos and Chinese food. We may live in the same city as our friends, but we occupy completely different worlds. 

The Money Melting Pot

There’s nothing that can come between friends as easily as money can, and in the past few decades, growing income disparities and greater social mobility have begun to make money an increasingly contentious issue in more and more friendships. 

A generation or two ago, people were friends with those they’d grown up or attended school with, or people from their workplace or neighborhood, and every group was composed of people at roughly the same socioeconomic level. Wealthy patrician families sent their children to Ivy League universities to become lawyers and doctors, while the children of blue-collar families learned a trade and remained in the lower middle class. Nowadays, a plumber’s son can go to Yale just as easily as the son of a congressman can, leading to peer groups that blur class and socioeconomic lines. 

The economic realities of career decisions can also have a serious effect on friendship; friends who started off together at the same economic level suddenly develop tension once one is a lawyer and the other is a teacher. My fiancé and I work in creative industries, while our wealthy friends became white-collar professionals. These divergent paths become more complicated by the fact that incomes themselves have diverged, too. According to data compiled by the New York Times, the starting salary for a university professor in 1985 was about $24,500, while a first-year associate at a large law firm earned about $53,000. Even though that disparity may seem large, it’s nothing when compared with the gap between today’s salaries: now, that university instructor would start out earning $35,300, and the lawyer would earn $170,000, plus a bonus.

Growth in white-collar professions like banking, consulting, management, and law have led to a generation in which some people earn supersized salaries while their peers who are teachers, nurses, graphic designers, editors, and academics still have low wages. 

Some economic research has shown that being surrounded by wealth can have detrimental effects on a person’s health and happiness. A 2005 study at Penn State University found that people were unhappiest when they were living in proximity to wealth. People of modest means who lived in modest communities were happy, but people with the same income who lived in areas where they were surrounded by richer people were markedly less so. When people develop their sense of self-worth relative to their friends or neighbors, that tendency can hurt their self-image and lead them to spend more to try to fit in and assuage their insecurity. 

It’s difficult not to feel jealous about what other people have, and it becomes very tempting to live beyond your means to replicate the lifestyle your neighbors are living. When more well-off friends suggest a pricey dinner or a day of shopping, it’s hard not to indulge, in an attempt to fit in and grasp a little bit of the luxurious life for yourself. But most of these purchases end up on credit cards, and years of extravagant spending can spell financial ruin. 

Letting Go of the Joneses

If you feel surrounded by friends who earn more money than you do, there are easy ways to mitigate their influence over your own finances and rein in your spending: 

* Be Up-front and Set Boundaries

Whether you’re just generally short on cash or you’re saving up for a big purchase, don’t be afraid to let your friends know. Many people who can’t control their spending also have a hard time saying no, so it’s important to be able to set a limit and stick to it. If a splurgey dinner just isn’t in your budget, suggest something more moderately priced. If you’re honest about your financial situation, your friends should stop pressuring you to live beyond your means.

* Keep It in Perspective

If your friends treat you to a lavish dinner at their house, there’s no need to reciprocate by buying caviar and truffles the next time you host. Avoid getting caught in a game of tit-for-tat or trying to keep score. The kindness is in the gesture itself, not in whether you served haute cuisine or hamburgers.

* Accept Generosity Graciously

Believe it or not, it can be uncomfortable to be the friends with money, too. Many well-off people struggle constantly with trying not to flaunt their success. If a friend offers to treat you to dinner or pay your way for an outing, she’s showing you that your friendship is worth more to her than a few dollars. Many people get uncomfortable if a friend offers to pick up the check, but if she does, it’s best to thank her and move on. No need to feel indebted for the occasional treat.

* If All Else Fails, Get New Friends

Your mom was right—anyone who pressures you to overextend yourself isn’t a real friend. If people know your budgetary limitations but don’t ease up on the pressure to spend, you may have to consider limiting your time with them. Those who care will work with you to do fun activities that won’t break the bank. 

Having well-to-do friends forces us to confront our own feelings about money—how much we have and how much we want. If you find yourself getting envious about a friend’s new purse or luxurious vacation, use the feelings of jealousy to get in touch with your goals for yourself. Perhaps they could give you the courage to consider a career move or to ask for a raise. Instead of resenting your friends or their success, try to think more clearly about your own financial and professional aspirations. 

The best reason not to get too caught up in wealthy friends’ lifestyles is that you never know what goes on behind closed doors. Perhaps they’re the ones living extravagantly, building up credit card debt they’ll never pay off—and having money isn’t a reliable predictor of a better marriage, more well-adjusted children, or any of the intangible things that people value.

My fiancé and I might have to make do with tacos and Chinese food, but that’s okay, because we like tacos and Chinese food. Having money may mean being able to own a bigger house or drive a faster car, but there’s one thing it can’t buy—happiness.

Rich in Spirit: When Your Friends Have Money but You Don’t was provided by DivineCaroline.com.

Kids. As soon as they make their grand entrance into our lives, we’re hit with a tsunami wave of money-related questions and issues that we’ve likely never faced before.

Such as: How much should I pay the babysitter? When do I start giving my kid an allowance? How much do I pay a kid to mow my lawn? Should I save in a 529 Plan?

Notice a trend? As your kids grow, those money questions only get more complex. This is when some of us turn to friends and family members for advice; others pay a professional – and yet others take their questions to the online community.

In this week’s round-up of Q&A activity on Mint Answers, we feature the four questions above, along with some of the suggestions shared by the Mint community.

To read more answers or to chime in with your response, click on the links below.

How much should I pay the babysitter?

I have a newborn and would like to have a couple of nights free per week.  How much should I pay my neighbor, who has offered to watch my son and has a couple small children of her own?

From Mint Answers:

My wife and I recently struggled with this and settled on minimum wage for our regular babysitter.  I didn’t feel right paying less but certainly didn’t think the qualified for more.  We also have a friend watch our son once a week for about 1-1.5 hours and pay her $10/week.  She has two kids of her own around the same age as our son.

More answers to this question>>

Kids & Money – When to start allowance?

My 3 yr old helps out around the house without me asking.  Should I give him an allowance at such a young age?  I have been told not to, but I feel I should.

From Mint Answers:

An allowance is a great way to teach kids money management skills; however 3 is a little young for them to grasp the concept. At 3, 4, & 5 small rewards like stickers or small trinkets may be better.

More answers to this question>>

How much should I pay a kid to mow the lawn?

How much money should you pay a kid/child to mow your yard?

From Mint Answers:

A lot of people are saying $10/hr. A lot of other people are saying, “If you pay by the hour, the kid will make a one-hour job take three hours.” The original people are saying, “Oh yeah? If you pay by the job, they’ll rush a three-hour job in one hour.”

So, something like that?

More answers to this question>

Does investing in a 529 plan make sense for grad school?

I’m considering going to grad school in the next 1-3 years. I opened a 529 plan for myself and have a measly $1,300 in it (I’m putting about $100 per month into the account.)

My income has increased dramatically this year, and I am trying to figure out where to allocate my savings. Does the 529 plan make sense? I’m investing aggressively in it because I figure if I end up losing money in the short term I can let it grow for a long time and one day when I have children and they want to go to school, I can use the 529 plan to fund their education. It it performs well, I can use it to pay for my education.

Still, I’m hesitant to put a large amount of my savings into the 529 plan. Do you think it would be better to just put into stocks or other savings vehicles?

From Mint Answers:

You don’t say whether you have other savings, but if you are not already doing so I would consider putting $5,000 a year into a Roth IRA.   

Ordinarily, a 529 is the right choice for educational savings because you usually expect to need the money before retirement age, and because the 529 can accommodate very large upfront contributions (in the hundreds of thousands of dollars, potentially). But both of those factors assume you’ve got some time for the account earnings and the tax advantages to build up. And you’d also want to be fairly certain that you are going to use it for qualified purposes.

If your time horizon is only 1-3 years, you aren’t going to earn much because you’ll need to be invested very conservatively. This limits the tax advantage. You also have some uncertainty about what you’ll use the money for, and the 529 takes away some flexibility.

A Roth addresses both of these concerns. First, you can withdraw your contributions (but not the earnings) from a Roth at any time for any reason, without taxes or penalties. So you get the same benefits you would have had with a 529 (tax-free accumulation), but the added flexibility to withdraw the contributions for other purposes, or keep the money there as retirement savings if you decide not to go to graduate school. You may also find a better variety of short term investment options outside of a 529 plan.

… if you already max out your Roth IRA, then the 529 is the only place left for tax free accumulation. 

If you don’t use the money yourself for graduate school, and even if you never have children, at your age the benefits of tax free accumulation are likely to more than outweigh the penalty for non-qualified withdrawal by the time you are ready to tap the your retirement funds. 

Consider the limitations, however. If your Plan B is long term retirement savings or college savings for your children, the 529 looks good. If your Plan B is to buy a house and you might need this money for the down payment, a 529 looks less attractive. So as long as you recognize the limitations on accessing the money, I think the 529 is still a viable option for you. 

More answers to this question>>

Do you have a money question that you feel has no black-or-white answer? Go to Mint Answers and ask away! While you’re there, feel free to answer questions from other community members. Come back often, as we introduce new enhancements to this feature.

Joint Statement of Secretary Geithner and Secretary Clinton on the Announcement of Japanese Autonomous Sanctions on Iran

WASHINGTON – The U.S. Departments of Treasury and State today released the following statement from Secretary Tim Geithner and Secretary Hillary Clinton on Japan's adoption of new sanctions against Iran:

"The United States welcomes the announcement by Japan of new sanctions on Iran that implement UN Security Council 1929. They mark a significant step forward in the international community's efforts to combat proliferation and prevent Iran's development of nuclear weapons.  Japan joins other responsible nations that have also implemented such sanctions on Iran for its failure to meet its international obligations, including the European Union, Australia, Canada, and Norway.

"We applaud in particular Japan's decision to impose sanctions on a number of Iranian entities and individuals of proliferation concern, including many of Iran's banks such as Bank Mellat, the Islamic Revolutionary Guard Corps, and the Islamic Republic of Iran Shipping Lines.  These sanctions – combined with Japan's establishment of a financial authorization system for all transactions with Iran; prohibition of the transfer of proliferation sensitive dual-use items to Iran; and of any new investment or sale of goods, services, and technology to Iran's energy sector – will deepen Iran's isolation from the international financial, industrial, and energy sectors and protect Japanese banks and businesses from Iran's ongoing efforts to conduct illicit activities.  We recognize and appreciate that as a major trading partner of Iran, Japan's decision to robustly implement UN Security Council resolution 1929 is not without a cost. 

"Japan's actions underscore the international resolve to present Iran's leaders with a clear choice: Meet your international obligations and enjoy the benefits of integration into the global system or continue to reject your responsibilities and face growing isolation and consequences. We have made an unprecedented effort to reach out to Iran, and we remain committed to a diplomatic solution to international concerns regarding Iran's nuclear activities.  We believe that additional pressure on Iran is the best way to reach that goal. 

"We encourage other states to follow Japan's example and impose robust measures in support of the international community's efforts."

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photo: pink_fish13

Cooking at home is the best way to save cash, but it’s nice to go out sometimes, too. Check out Frugal Foodie every Friday for a selection of the latest coupons for casual and fancy fare.

Where did summer go? It seems like only yesterday we were exploring budget-friendly ways to spice up your Memorial Day barbeque. Now it’s time for a round-up of Labor Day and back-to-school dining deals.

The good news: deals abound. Read on for dining discounts in honor of Labor Day, back-to-school season and grandparents and free waffles, among other deals!

1. Waffle House

Get a free Apple Cinnamon Oat Waffle when you use a print out coupon (spotted via RestaurantCouponsandDeals.com). Participating locations only. Offer expires September 17.

2. Bloomington Grub Club

Pay $20 for a Grub Club card and get $75 worth of food at 10 restaurants in Bloomington, Ind. Deals include a free regular entree at Dats and two free slices and a drink at Butch’s.

3. The Old Spaghetti Factory

Bring a grandparent in for lunch or dinner September 12-14, and get their entree free with the purchase of another. Dine-in only. Participating locations only.

4. The Skipper

Use a print out coupon to save $3 off lunch and a cocktail or dinner and a cocktail for each person in your party at the Cape Cod, Mass., restaurant. The Skipper has also been running a deal for two dinners for $28.

5. Boston Market

EatDrinkDeals.com spotted a print out coupon good for 50% off a family meal or market feast. Must be used on Labor Day (September 6). Participating locations only.

6. The Cosmopolitan Restaurant

Donate school supplies at the Vineland, N.J., restaurant through September 3 to receive a coupon good for 15% off your next meal.

7. Buca di Beppo

Save $10 off a purchase of $20 or more through September 12 with a print out coupon. Participating locations only.

8. Las Vegas Restaurant Week

Through September 5, participating restaurants will offer three-course meals for $20.10, $30.10 or $50.10.

9. Quiznos

Get a regular sub, regular fountain drink and chips for $5 with a print out coupon. A second coupon on the same page gets you $1 off a regular sub or $2 off a large one. Participating locations only. Both deals expire September 12.

10. Washington Platform

Buy one of the day’s lunch special at this Cincinnati, Ohio, restaurant and get a second of the same item for just $1.

11. Ruby Tuesday

DealNews.com found a print out coupon for a free entree worth up to $10 when you purchase one of several select entrees.

12. Flavor Palm Beach

Through September 30, participating restaurants in Palm Beach, Fla., will offer special three-course lunches for $20 and dinners for $30.

Frugal Foodie is a journalist based in New York City who spends her days writing about personal finance and obsessing about what she’ll have for dinner. Chat with her on Twitter through @MintFoodie.

I was going through some old financial files and came across an old E-Trade statement which was my first brokerage account and found my first shares of stocks ever purchased in August of 2001. This was after the dot-com bubble burst, and I was still in grad school. I had managed to save up $1,000 and promptly invested it after pretty much zero research:

• 11 shares of Budweisder (BUD) at $43.04. Budweiser was bought by foreign conglomerate InBev in 2008 at $70 a share, but after that I’m not sure how to evaluate performance.
• 12 shares of Pfizer (PFE) at $38.31. As of yesterday 9/2/10, PFE closed at $16.40 with about $0.75 to $1.25 a year in dividends.

Beer and prescription drugs… I guess I figured that was a growth industry.

Do you have any special memories attached to your first stock purchase?

photo: bitmask

Why does it take forever and a day to get an answer to a customer service complaint?

Like reader Michael Trout, who filed countless grievances and waited a year before his auto insurance claim was processed. Or William Osuna, whose airline ticket took almost two years to get refunded. (Ironically, or perhaps appropriately, the airline is now out of business.)

Truth is, many customer inquiries are addressed quickly and to everyone’s satisfaction. A 2010 survey found that 75% of all call center questions were resolved in a single conversation. And not only that, but they were fixed quickly – it took less than 30 seconds to answer the call and slightly more than five minutes, on average, to address the problem.

Not bad.

But not good, either.  After all, a 75% success rate is a gentleman’s “C” at best. And there’s no telling how long the more serious complaints take to resolve. Also, the survey doesn’t mention email complaints, although past research has show that the simple ones normally get an acknowledgment in less than two days, and sometimes within minutes.

There are, however, the not-so-simple cases. Roughly one-quarter of the complaints fall into this category. This is when the call-center worker must defer to a supervisor or place you on “hold” or ask you to put your grievance in writing.

And so the wait begins.

Here’s how to speed things up:

Don’t wait to complain

If you’re experiencing a service problem, like a bad restaurant meal or an inadequate hotel stay, don’t wait until you get home to let your displeasure be known. Say something now.

Service employees are trained to make the situation right by comping your meal or offering you a room discount. Once you leave the business, it’s going to take a lot longer to get the problem fixed.

Write, don’t call

Many consumers feel the phone is the best way to resolve a complaint. It may be the worst. Why? First, there’s no paper trail, unless you record the conversation, which may not be allowed under state law. Without proof that someone said something, it may be impossible to collect any compensation. Also, call centers aren’t equipped to handle some of the more complex service issues. Instead, write a brief, polite email.

Make it easy to fix it

Resist the temptation to go on a rant. Instead, explain how a company can fix the problem.

And be realistic: A company that thinks you’re trying to take advantage of a situation may be less inclined to take you complaint seriously.

Be patient, but not too patient

You should get an e-mail form response back from a company after you send your complaint. After that, it can take anywhere from three working days to two weeks for a meaningful response. After two weeks, you can assume you’ve been ignored. Time to escalate your complaint to a manager.

Make a polite appeal, but be persistent

Taking your complaint to the next level will ensure your grievance isn’t overlooked. Here’s where good manners will serve you well. Angry emails tend to get “overlooked” while polite appeals are far likelier to get the attention they deserve. Keep the company on a short leash, checking back every two weeks to see the progress of your case.

Call in the big guns

Stuck in a holding pattern? Hiring an attorney or asking a third party like the Better Business Bureau or a consumer advocate like me to get involved is a proven way to move your complaint to the top of the heap. But use this only if you’re certain that you’ve exhausted all of your appeals. Think of it as keeping your powder dry.

All told, it shouldn’t take you more than two weeks to resolve even the most serious complaint. If it takes any longer than that, skip to the final step. Chances are, the company has no intention of responding to your grievance.

Christopher Elliott is a consumer advocate who blogs about getting better customer service at On Your Side. Connect with him on Twitter and Facebook or send him your questions by email.

But as always when I take a short break, I’ll actually be working behind the scenes. Next week is Book Week at GRS, so I’ll be reading and reviewing at least three books. Plus, I’ll be writing the first batch of articles for my animal blog (as part of the GRS blog project) and editing the articles that will run while Kris and I are in Europe next month. So, even though GRS itself is on holiday this weekend, I’m not!

Before the break, however, here are a few financial articles from around the web:

First up, Erin Burt from Kiplinger has a round-up of her favorite fabulous freebies for 2010. This list of 33 items includes things like free car-repair help, free financial apps, free stock-portfolio analysis, free credit reports, and more. It’s a great list. The only puzzlement is why the web version doesn’t include links to all of these sites. (Sometimes old-media companies are baffling!)

Next, USA Today has an article about how the current generation of investors could become a “lost generation”. Mutual fund companies worry that investors are on strike. From the article: “The fear on Wall Street is that this buyer’s strike will linger for years, resulting in a lost generation of investors similar to what occurred after steep stock declines in the 1930s during the Great Depression and early 1970s, a recessionary time punctuated by high inflation.” It’s an interesting article with lots of info about the pros and cons of investing during a rocky market.

A GRS reader — whose name I’ve forgotten (sorry!) — sent me a link to this BBC article about The Age of Debt. Author Adam Curtis cites recent scholarship that says that the West’s recent debt-fueled economy came about because the rich were getting richer. The only way for governments to help the middle-class sustain their lifestyles was to encourage them to fund consumption through debt. His article includes several great old videos about debt. Interesting stuff, regardless of whether you agree with the premise.

One final note: This weekend, I’ll be a guest on the syndicated radio program Your Money Matters with Marc Pearlman. On Monday, Pearlman and I chatted about debt, investing, and the psychology of spending. Check your local listings to see if the show is broadcast in your area. If not, you can listen online, download the show from iTunes, or visit the website to find the show in the archives.

Have a great holiday, everyone!

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Related Articles at Get Rich Slowly:

• A Short Holiday
• Daily Links: Food and Inflation Edition
• Daily Links: Stuffed Turkey Edition
• Daily Links: Holiday Tipping Edition
• Daily Links: Fundamentals Edition

Beyond supporting entire industries, it can leave a hole in many people’s budgets, too. Consider this: on average, the parents of a newborn can expect to change 6,000 diapers during the first two years. During that time, they’ll spend about $1,600 on diapers, not to mention the added costs of wipes and diaper rash ointments. Meanwhile, the average American household spends nearly as much each year on having its septic system pumped and sending its waste into the sewers as they do on soft drinks (not that we’re implying any connection – beyond the place those soft drinks ultimately end up, of course).

In our latest infographic, we take a crack at the economy of sewage in America.

Shane Snow runs the online printing site, PrintingChoice, and draws infographics for the CreditLoan.com network.

photo: edenpictures

Banks seem to have a bad reputation don’t they? They charge you for every type of service imaginable. Labeled as profit mongers who invent outrageous fees and give mediocre customer service, banks have not made a good impression on consumers. As a result, many of us end up looking for alternatives.

One option: a credit union.

What is a credit union?

Credit unions are not-for-profit cooperative financial institutions that are owned and controlled by their members. A credit union is democratically governed, each member has one vote, members elect the board of directors and the union is volunteer-based. Unlike a bank where customers are just that, customers – in a credit union, members are also owners.

The average cost to purchase a credit union share is $5 – $10 and typically just a few shares are required for you to open an account. (Those shares are then deposited in your savings account. If a credit union requires you to purchase at least five shares at $5 each to become a member, that means you need to make an initial $25 deposit that will then remain in your account as long as you are a member.)

The profits credit unions make are passed onto members in the form of dividends or lower fees. That is why credit unions typically offer higher rates on savings, lower fees and lower rates on loans than banks. They also offer online banking, ATM’s with no surcharge and overdraft protection, but credit unions offer financial education and counseling without giving potential customers a hard sell on their products.They focus more on service and less on profitability.

A little bit of history

According to the National Credit Union Administration, credit unions first appeared in Germany in the mid 1800’s in the form of financial cooperatives. German farmers, devastated by the crop failure and famine of 1846, decided to organize a cooperatively-owned mill and bakery that sold bread to its members at a discount.This idea developed into addressing the credit needs of farmers. In 1850, the first cooperative credit society, known as the “people’s bank” was initiated.

In the 1920’s credit unions became popular, especially with the working class. Commercial banks and savings institutions were not providing consumer credit, creating a growing interest in the affordable credit unions. Credit unions provided a much-needed source for inexpensive credit. Fast forward to today, credit unions have become increasingly popular throughout the United States. According to NCUA, currently there are about 7, 950 active federally insured credit unions with almost 90 million members and $679 billion in deposits.

Membership

One big difference between banks and credit unions is that while pretty much anyone could become a bank’s customer, you actually need to qualify for membership in a credit union. Credit unions use a variety of criteria to determine eligibility. Employers who sponsor their own credit unions allow employees to join, for example. If you are a member of a church group, school, labor union, or homeowners association, you might also be able to participate in a credit union. Credit unions also serve people who live in certain geographic locations.

Several credit unions are not exclusive at all. Consumers Credit Union (CCU) is open to everyone; it is one of the largest credit unions in Illinois. CCU offers checking accounts, debit and credit cards, vehicle loans, consumer loans, savings, money market accounts, certificates of deposit and mortgage products plus regular, jumbo and IRA plus vehicle loans.

Insurance

Banks have the FDIC to insure consumer’s deposits; Credit unions have the National Credit Union Share Insurance Fund. The National Credit Union Share Insurance Fund (NCUSIF), which is managed by NCUA, is a government-backed insurance fund. Deposits are insured by the NCUSIF up to $250,000 per depositor and backed by the full faith and credit of the United States Government.

Compare before you sign up

When comparing credit unions to banks, follow the steps below to find the institution that best fits your financial needs:

* Find out what products and services each institution offers. Generally, banks offer a more varied selection of financial products and services than credit unions.

* How important is customer service to you? Credit unions are often smaller, have less employees and less customers, so the customer service experience at a CU might be different than the one you get at a large bank with millions of customers and a call center overseas. At the same time, if having access to a branch in multiple locations is your priority, you may be better off at a large bank.

* Do you need to borrow? Loan rates tend to be lower at credit unions, so if you are in the market for a loan, a credit union loan might be your best bet.

* Find out how much interest you will gain on your savings account, or deposit accounts as some credit unions call them. Both banks and credit unions offer checking accounts, savings accounts and CD’s, though you could expect to find higher rates at credit unions.

* What fees and penalties, if any, can the credit union charge? How do these compare to the bank’s?

Still can’t decide? Don’t fret: you can have both. There’s nothing wrong with spreading yourself out to get the most for your money!

Treasury Department Announces New Pilot to Help Deliver
Safe, Low-Cost Financial Accounts to the
Unbanked and Underbanked During Tax Season

Pilot Delivers Targeted Offers for Individuals to Sign-up for
New Accounts to Receive Their Tax Refunds through Direct Deposit

Tax Season Provides Critical Opportunity to Help
Unbanked and Underbanked
Americans Strengthen Their Financial Futures

WASHINGTON – Today, the U.S. Department of the Treasury announced that it will launch a new pilot program to help capitalize on tax refund season as an opportunity to provide unbanked and underbanked Americans with access to safe, low-cost financial accounts. This pilot will deliver targeted offers to certain low and moderate income individuals to sign up for new accounts with debit card access at tax time in order to receive their refunds through direct deposit. It will also test offering accounts that can be used year-round in the future to deposit other sources of income, store money safely, make purchases, pay bills, withdraw cash, and build savings.

"Far too often, unbanked and underbanked Americans are forced to turn to high-cost alternative financial products – such as check-cashing and other services – that take a big bite out of the savings of those who can least afford it," said Michael S. Barr, Assistant Treasury Secretary for Financial Institutions. "For many individuals, a tax refund is the single largest payment that they will receive each year. That's why tax season is a great opportunity to deliver safe, low-cost financial products to the unbanked and underbanked that will help those Americans build stronger foundations for their financial futures."

The pilot is expected to launch during next year's tax return filing season. Treasury will reach out to eligible taxpayers in early 2011 through two methods:

• Direct Mail. Treasury will mail information about how to sign up for the new accounts to low and moderate income individuals who have received paper check refunds in prior years or who otherwise have not provided bank account information to Treasury.   
• Payroll Outreach. Treasury will partner with the private sector to insert offers to enroll in the pilot into the paychecks and paystubs of select individuals who are not currently using direct deposit to receive their tax refunds.

The offers to enroll in the pilot will include instructions on how to use the account.  Treasury will evaluate the results of the pilot to inform future decisions about the viability, structure, and timing of offering similar accounts as an integrated part of the tax filing and refund process.

According to the Federal Deposit Insurance Corporation's (FDIC) 2009 National Survey of Unbanked and Underbanked Households, there are an estimated 9 million households without bank accounts. Another 21 million households are underbanked, meaning that they have a bank account, but these accounts do not fully meet their needs, and they still rely on high-cost check cashing services or other costly financial service providers.  

The use of safe and appropriate financial services and products can help households maintain financial stability.  Unbanked and underbanked individuals often face difficulties saving and planning for their financial futures, making them more vulnerable to medical or employment emergencies and threatening their ability to invest in continuing education, purchase a home, or send their children to college. The unbanked are disproportionally low and moderate income.  According to the FDIC's 2009 National Survey, a person making $30,000 or less is more than 7 times as likely to be unbanked as someone making $50,000 or more.

This pilot will build on the Obama Administration's continuing efforts to assist the unbanked and underbanked as well as empower Americans to make informed financial decisions. Social Security and Supplemental Security Income benefit recipients can currently receive their payments through the Direct Express^® Debit MasterCard^® card, a program established pursuant to terms approved by Treasury.  By 2011, Direct Express is expected to expand to all individual federal benefit programs.  Additionally, President Obama has requested $50 million in his FY 2011 Budget for a new "Bank On USA" initiative designed to bolster state and local efforts to help low and moderate income Americans obtain access to safe and appropriate financial services and products.

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The summer heat has taken a toll on my debt snowball. Two months ago, I paid off the last of my credit card debt, but I still have thousands of dollars in loans. I started the summer with over $10,000 in my savings account, no credit card debt, and a solid plan to pay off my remaining loans within the next few years.

Then life happened. I’ve been living out of suitcases for the past two months, traveling to New York, Buenos Aires, and Bangor. (I’ve blogged quite a bit about how travel is one of my budget weak spots.) So I spent some money. Not as much as I was afraid I might, but more than I probably should have.

Also, I have kids. Those of you with children may have noticed that they’re expensive. There are a thousand articles out there on how to keep the cost of having children to a minimum. I’ve written some of those myself. But I’m here to tell you that whether you do your back-to-school shopping at Bloomingdale’s or Goodwill, kids will add to your monthly expenses.

So here I am. Summer’s ending. I’m writing from the lake house in northern Maine where I’ve been holed up for much of the past few months. In the peaceful quiet hour around sunset, I finally steeled myself and looked at my bank balance.

Resting on my laurels
It’s not as bad as I’d feared. The numbers are still solidly in the black. My savings have a dent in them, but a smaller one than I expected. My checking account is in good shape. My bills are paid.

The shadow in this rosy picture: I haven’t made any extra debt payments all summer. The hot weather arrived, my credit cards were paid off, and instead of rolling that debt snowball right into my car loan, I sat back on my laurels. No wonder I have more money than I expected: I’ve been letting all my debt snowball money (which adds up to almost $2000 a month) sluice around in my regular budget for two months!

I was going to try to slide this under the radar. I figured I’d turn a new leaf when the leaves changed colors, keep paying my debts off as quick as I can, and no one needed to be the wiser.

But then J.D. pointed out that my recent posts here haven’t had a lot of “me” in them. That’s not just because I’m focused on other things. It’s because I don’t want anyone looking too closely at me. I’m a little ashamed of where my finances are.

Not that there’s anything wrong with taking a few months off from my debt snowball. I wanted to do something indulgent and special to celebrate being out of credit card debt. Taking a summer off would have been an expensive but reasonable choice.

The problem is that I didn’t choose it. It just sort of happened. I let things slide. I put “set up increased loan payments” at the top of my financial to-do list in June. (A to-do list I literally left sitting on my desk when I packed my bags and left for the summer.) But I neglected to do set up those payments, or to do any other active management of my household finances for months. There was money in my checking account, and that was good enough for me.

Now there’s a familiar sinking feeling in my stomach as I look at my bank balance and have no idea where my money has gone or what the numbers mean.

Failing forward
I’m not actually in any financial trouble. But my timeline for being out of debt has slipped, and it’s slipped through some of the same cracks that led me into debt in the first place. I don’t know where all that extra money went. Some of it went into preschool tuition and plane tickets and new shoes for the kids. Sure. But I was also careless budgeting for groceries and any number of small purchases. Those add up to a lot of dollars.

My shame isn’t about my bottom line. It’s about my bad habits. I’m making some of the same mistakes I made for years. The mistakes I’m prone to making with money when I don’t pay attention. That’s embarrassing, no matter what my bank balance is.

Of course, shame and fear about money was what led me into this debt trap. I didn’t want to look. For years, I simply refused to know what my spending habits were, or even what my regular bills added up to. By the time I turned 30, that head-in-the-sand approach had saddled me more debt than the total income I’d earned in my life. I’ve spent the past two years digging myself out, and I’m starting to see a light at the end of that tunnel.

I’ve been living on a skinny budget for years. I’ve paid off a mountain of credit cards. But even though I had a lot of credit card debt, the credit cards were still the low-hanging fruit.

Now I have to pay off loans. They have lower interest rates and higher balances than my credit cards did. The bills just come quietly every month and I pay them. The balances only move down, but they move down slowly.

There’s no exciting struggle. No relearning old habits to keep the plastic in my wallet and out of my hand when I’m standing in line at the checkout. No lifestyle changes that will suddenly free up hundreds of dollars to wipe out the debt.

I just need to roll that snowball over and keep paying it. I suspect that even being very aggressive about my debt payments, it will be two years before I hit another financial milestone worth throwing a party about. This approach is effective — but boring. That’s what getting rich slowly is all about.

It’s the beginning of September. The beginning of fall, and of a new school year. A great time for new beginnings. I’m back on the wagon with my budget, and making those extra loan payments this month.

I’m writing about all this publicly in the hopes that it’s a teachable moment. The lesson I’ve learned so far: Sometimes we all slip. The key is to fall back on the skills and strengths you know you have, and start over from wherever you are.

What else can I learn here? You’re a bunch of extremely smart readers. What do you do to stay motivated while paying down debt or saving towards a goal? What helps you keep your good financial habits going?

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Related Articles at Get Rich Slowly:

• Free Debt Snowball Spreadsheet
• Ask the Readers: How to Live Debt-Free?
• In Praise of the Debt Snowball
• Ask the Readers: Emergency Fund or Debt Snowball?
• Ask the Readers: How to Prioritize Savings Goals?

Now that I’m flying a lot more again, I’m back in the hunt for some frequent flier perks. I just came across the new Continental Airlines OnePass Plus Card from Chase, which has a pretty nice mix of perks for travelers.

Sign-Up Bonus: Free Flight

• 25,000 Bonus Miles after first purchase (no minimum amount) for first-time Continental Airlines personal Cardmembers. That’s enough already for one free roundtrip airfare within the continental US.
• No annual fee the first year. The regular annual fee is $85, but is waived the first year.
• 5,000 Bonus Miles for adding an authorized user to your account. This is another easy one to get. Remember, just because you add someone doesn’t mean you have to give them the card.
• If you spend $25,000 on the card annually, you’ll get another 10,000 bonus miles. Since you earn 1 miles per $1 spent as well, this works out to 1.4 miles/dollar when you reach that mark.

Travel Perks

• Free checked bag. If you fly on Continental, you and up to 9 travel companions will all each get your first checked bag for free. That’s a savings of $50 roundtrip, per person.
• Primary rental car insurance. Almost all personal credit cards only offer secondary rental car insurance, which means you have to file a claim with your own auto insurance first, which means you have to pay the deductible and possibly face higher future premiums. With primary collision damage waiver (CDW) even for personal use, you get coverage for damage or theft without having to make a claim.
• More travel insurance that isn’t on all cards, like trip cancellation insurance up to $1500 for a illness with doctor’s note , delayed baggage coverage up to $300 if you have baggage delayed more than 18 hours and need to buy items to get by.
• If you decide to keep this card past the first year, you’ll get two free passes to their First-Class airport lounge.

As you may have heard, Continental and United are merging, and the resulting airline is supposed to have the name United. Here’s a chance to rack up some miles that will eventually merge together – this card and bonus may not be available in the future. Until when they actually do merge, I should also note that Continental’s OnePass is known as one of the better programs when it comes to redeeming miles for trips.

Besides the OnePass Plus card, you can get a more flexible $250 sign-up bonus but less travel-specific perks from the Chase Sapphire Preferred Card. Actually for you can also trade the $250 cash bonus for $312.50 in airfare through their rewards site.

(Hugo90)

Financing a small business is rarely an easy task. Unless you have spotless personal credit, getting a corporate credit card will be difficult. Without a large savings account, bootstrapping is also problematic.

So what’s a creative-minded entrepreneur to do: give up? Of course not.  Businesses throughout history have grappled with the financing problem, and the successful ones all found ways around it. More often than not, the very same strategies can be used to get over your personal financing hurdles.

“Cash Floats”

Despite being remembered as a towering business legend, Henry Ford did not begin as a wealthy man. Quite the contrary: as Ford Motor Company (F) explains on its corporate website, Henry came from humble roots and never forgot them. Despite deriving greater financial security from a job promotion at Edison Illuminating Company in 1893, he did not have the luxury of a large cash reserve with which to start Ford Motor (the epitome of a capital-intensive business.) The way Henry Ford managed to start, sustain and grow his business was by using so-called “cash floats.”

Ford knew he could never afford to pay for all the materials needed to build a car up-front. So instead, he negotiated deals with dealers obligating them to pay cash for his cars. Then, he convinced suppliers to let him pay for the materials 30 days after receiving them. In this way, Ford could get his parts right away, build his cars and sell them to dealers at a profit before any of his expenses came due.

Silent Partners

(Beneath_B1ue_Skies)

Another creative financing technique at your disposal is to seek out a silent partner. A silent partner is any investor who puts money into your business in exchange for future profits but does not have a voice in decision making. This could be a wealthy relative, a co-worker or anyone else you can persuade to invest. Be careful, though, not to accept silent partner investment from just anyone. The ideal scenario is taking a little from someone who has a lot, as such people are unlikely to freak out about the inevitable ups and downs of a new business venture.

Conversely, taking $50,000 from your retired Aunt Mildred could cause her to be extremely antsy about every little cash flow problem.

Consulting Work

(aWee)

In his essay How To Fund a Startup, Paul Graham of the venture firm Y Combinator writes that consulting work can help provide early seed money for new businesses:

“Another way to fund a startup is to get a job. The best sort of job is a consulting project in which you can build whatever software you wanted to sell as a startup. Then you can gradually transform yourself from a consulting company into a product company, and have your clients pay your development expenses.”

While Graham’s advice was admittedly tailored to technology startups, it is easy to envision the same model being applicable to other service businesses. Someone looking to start a small to medium-sized accounting firm, for instance, can take on freelance jobs in the early going and resolve to put most or all of that money toward growing his company. Different types of services businesses could conceivably do the same.

Hard Money Lenders

(taberandrew)

If your business is in a pinch and absolutely needs money by yesterday to capitalize on an opportunity, there are always hard money lenders. Payday lenders, for instance, make short-term loans at high interest rates.

But beware: there are very few circumstances when going to this type of lending establishment makes sense. The correct time to utilize a payday lender for business purposes is when you face a money-making opportunity that is certain, but fleeting, and which requires cash at once. If you can get the money quickly and use it for a deal that returns $50,000, what does it matter that you paid $5,000 in interest to get it? Then again, consider this your last resort for financing, to be approached only if you’ve exhausted all other options listed above.