Welcome to the Starting Strong blog, a personal finance blog for Generations X and Y. Whether you are just checking out the Peace Corps, are currently volunteering or are already back stateside this column will help you navigate the ins and outs of debt management, saving and investing. Knowing how to manage your money will give you the freedom to keep the work you love no matter what it pays. I welcome your comments, suggestions and questions.

Getting Started
The first step to building wealth is being honest about what you need. We all need to indulge every so often in the freedom to spend. These essential luxuries help us cope with the stress we encounter every day. If gone unchecked this need can also be expensive and addicting. The key is to find a low-cost thrill that gives you a sense of freedom. Once you find it, indulge just enough to keep you entertained and establish this lifestyle as a “need.” Everything else is a “want” no matter how bright, shiny or newly printed. Serving in the Peace Corps provides the exact lessons you need to make this distinction: the difference between survival and comfort. Creating a lifestyle around this self-knowledge will keep you centered and profitable. Now, on to the growing wealthy part.

Organizing Your Finances
The first step to organizing your finances is to put all of your information in one place. Collect all of your financial information — including the scary yet mind-numbingly boring statements — and put them all together. Then one by one organize them into three piles:

  • What you have — checking, savings and money market accounts, savings bonds received as birthday presents from grandparents, retirement accounts, even the cash you keep hiding around your apartment that you dig up when you’re really broke.
  • What you owe — these are the statements with the scarily high numbers and percentage signs. This pile consists of student loans, credit card balances, car loans, mortgages and personal loans to family and friends. Keeping on top of your debt payments is critical to maintaining a high credit score so that you can have the career and home you’ll want one day. The top healthy financial habit is paying your debts on time.
  • What you want — don’t worry if this pile is a little thin. Some people seem to know from birth exactly where they want to live and what they want to do (i.e. a seven-year-old who wants to be an actuary). If you can only picture the next 12 months you can still start building healthy financial habits that will enable you to follow your dreams once you figure out what they are.

The next step is to 1) list all that you have, as well as how much it is earning each month; 2) list each debt account by account number, balance, interest rate, monthly payment amounts and due dates — all of this information can be found in your statements. Examine this list closely — do you need to contact a lender or two to space your payments out over the course of the month so they are not all due in the same week? Compare the two lists. Don’t worry if you owe more than you have — it will all even out in time. With your interest rate information from each of these lists in hand, shop around to find better deals to increase the interest you earn and decrease the interest you pay.

Your Top Priority
No matter where you live or what you earn your first priority is to pay your debts on time. Making timely minimum payments has the largest impact on your credit score. A high credit score is critical to landing the job, car, apartment, education or home you’ve been working for. These opportunities are only available to those with excellent credit. Automate your debt payments, check your accounts every few months and you’ll come back to lower loan balances, a high credit score and a wealth of opportunity.

Stay tuned for the next installment of Starting Strong— protecting yourself from identity theft while overseas.

Good luck!

— Rebecca Schreiber