Image via Flickr by sqrpix

I feel the most pain for the college class of 2012.  These young adults are finding themselves against more experienced competitors when applying for a position.   Instead of finding jobs in their study fields, they are settling for jobs for which they are over qualified, earning slightly over minimum wage.

Additionally, a sizable percent of these young adults have practically zero net worth or are deeply in the hole with more debt than income, as a result of massive student loans.  Trying to payoff student loans and possibly credit card debt, many will be forced to delay major life events such as marriage, starting a family, or home purchases, all due to the economic uncertainties.

With all the economic uncertainties, it makes planning all that much more difficult, and no one is taking anything for granted.  An average person even with a job is equally cautious in their decision-making and possibly having to embrace new lifestyles. People are more active in developing a budget and looking for ways to better track their expenses.

The quick lesson learned during these tough times is that proper money management is critical in order to track your expenses and know where every dollar is going.  All of these are the foundation for financial stability.

Image via Flickr by Jim Larson

So, it turns out that Americans are finally starting to reduce their debt  The most recent reports from the Federal Reserve show that the household debt service ratio has dropped to 10.9%, the lowest level since 1994.  By comparison, the debt service ratio was nearly 14% in 2007.  The Fed describes the household debt service ratio as the estimate of the ratio of debt payments (meaning the estimated required payments on outstanding mortgage and consumer debt) to disposable personal income.

As Floyd Norris of the New York Times reports, this reduction is due to two factors — decreasing debt levels combined with lower interest rates (which makes servicing the debt cheaper).  The substantial majority of the reduction has come from cancellation of debt through write-offs and foreclosures.  But, a good chunk is simply due to Americans paying down their debt.

As we continue to receive muddled economic news (for example, better-than-expected retail sales but more-sluggish-than-expected jobs growth), this one is a bit of good news.  It’s a good reminder that despite how daunting and overwhelming our debt can sometimes be, there are ways to manage it.  It involves hard work — developing a budget, managing expenses, watching the credit card offers, paying attention to the small stuff, getting help from professional credit counselors if necessary.

But that hard work can pay off — and that mountain of debt can be reduced.

The common check offers I see are 0% or a low fixed rate, which makes it very enticing.  But there are a few important things to note before you sign and cash that check such as (1) what is the cost of the balance transfer fee, (2) when does that great transfer rate expire, and (3) what is the effective APR  after the transfer rate expires.

In other words, it’s important to read the fine print very carefully and do the math to make sure the benefit outweighs the cost.  As an example, the transfer fee incurred is essentially less than the interest rate you are currently paying on your credit card balance.  It can do more harm than good if you are not able to pay off the transfer within the offer period.  It can all be very tricky, so I again emphasize to read the fine prints (yes, several times if necessary) before taking action.

With that said, best advice is don’t spend what you can’t pay back.  The best practice is still to live within your means.  And frequent tracking of your expenses will help to avoid being in these situations.  And the fine print isn’t fun to read so best to avoid altogether.

Most often consumers see this as a great way to consolidate debt.  However, it’s not free money, it’s merely a well marketed and very tempting different form of debt, but still must be paid back!

JCPenney has recently announced an alternative to these with its “Fair and Square Every Day” pricing strategy.  The premise is that they’re ending the games that retailers play with their customers.  The pitch is that they’ll continue to offer great regular prices, plus better prices on featured deals for the month, plus the best prices (meaning clearance) on the 1st and 3d Friday of every month. Price tags show only a price ending in 0 rather than 99.  In their words, “Nothing complicated.  Nothing tricky.”

But even though JCPenney is done with playing games, many consumers may not be ready to give up the thrill of hunting bargains.  The doubters out there (and there seem to be quite a few), tend to agree that the strategy is a good one, but perhaps just one ahead of its time.  The sense is that consumers aren’t ready for the truth about prices.  But in a recent study of credit card disclosure rules, it turns out that consumers wanted the truth  about how long paying off their debt would take.

It will be interesting to see if Penney’s fares as well. Will consumers appreciate (and believe) the honesty of a retailer who is telling them that they’re getting good prices?  Or will they prefer to play the bargain game?

Image via Flickr by sdc2027

Do you also find yourself using more coupons?  I certainly do.  Prior to using savvy technology, my issue was forgetting to bring the paper coupons to the store.  The perfect example is Round Table, which sends periodic pizza coupons, but I’ve been out of luck when I forget to bring it.   Now I can pull the coupons up on my smartphone, and Round Table will honor them.  The internet and phone apps definitely make it easy to take advantage of the coupon offerings to help stretch your money further (especially during this recent economic downturn).

However, as with everything in life, there are pros and cons to even coupons.  The savings are great but can also cause wasteful spending.  People can be powerless against the coupon temptation and buy things they don’t need, or buy too much that ends up in the garbage.  A colleague reminded me of the advice offered by Jean Chatkzy that “just because you have a coupon doesn’t mean you should go shopping.”

To the shoppers out there, be wise with your coupons, you want it to be a money-saving experience and not an excuse for an out of control crazy shopping spree.  And as always, don’t forget to track the expenses and be proud of your savings!

Image via Flickr by Kirk Siang

The New York Times recently found that where people eat can be a  good economic indicator.

They looked at whether people dine more at full-service restaurants as compared to fast food restaurants.  It turns out that when Americans feel good about their finances they tend to dine out more frequently at full-service restaurants, where food is brought to the table.  Data over the past 12 months indicates that full-service restaurant sales were nearly 9% higher than the previous year, which is the fastest rate of growth in over 10 years.  The rate of growth is also much higher than that in limited-service restaurants.  And so, it seems to be further evidence that the economy is getting back on track.

But if we turn our attention to the servers in those restaurants, it’s not clear that it’s back on track for everyone. The food services and drinking places industry employs nearly 10 million people.  Of those, almost two-thirds of them are between the ages of 16 and 34.  By comparison, workers in that age range only account for one-third of the workers in all industries combined.  So what is keeping so-called Millenials and Gen Y’ers in the food service industry?  There are a variety of factors at play, not the least of which is that many of these workers have a huge amount of student debt.

So if you’re feeling good about your finances, keep dining out at those full-service restaurants (and be sure to track your expenses), but don’t forget about your server in those restaurants.