Here’s my next video on debt management. I hope you enjoy it?

You: Is the volume going to be a problem again?

That depends.

You: On?

On whether you want to hear it.

You: Of course I want to hear it!

Good. Then just increase the volume.  But keep in mind – in a work setting, far better for a video’s volume to be set too soft than too loud.  Especially when we’re talking about debt.

Enjoy and please let me know what you think.  Like videos? Want more? Podcasts instead? What topics?

When I ended my keynote presentation last week at New Hampshire Jump$tart’s MoneySmarts, I was asked several questions.  (Candidly, the Q & A portion of any seminar is highly enjoyable because it always varies significantly. You really never know what you’re going to be asked.)  With an audience of about 150 teachers – mostly of high school – I knew I had an intelligent and motivated audience.  To paraphrase the question one woman asked:

What do you say to the newly graduating college seniors who are overwhelmed with enormous student debt obligations and low starting salaries?

To the best of my memory, here was my response:

Of all the challenges twenty-somethings face, I believe that the increased student debt burden is both the scariest and the newest. By new, I mean that it is a phenomenon that this generation faces that previous generations of twenty-somethings did not. While college tuition has never been free for the average student, the rise in the cost of tuition has risen well above the rate of inflation for decades. It’s causing huge problems.

I contrast this to many other challenges that twenty-somethings face that are not new.  I point them out now because some people feel as though the entire “struggling college graduate” package is new – it’s not. Twenty-somethings have always wanted more than their entry level salaries could provide.  They’ve also felt they deserved more than their entry level salaries and may have even wondered if college was worth it, given how little they are earning.

But those are not new phenomena.

While I believe there should be a huge national initiative investigating and even pressuring universities to reduce the cost of education, I won’t go into that here for two reasons.  First, it’s an inherently political topic and I see no point in opening that can of worms. Second, I won’t go into that any further because it won’t help the people who have already graduated deal with their loans – and that’s who your question concerned.

Instead, today’s twenty-somethings need to focus on what they do control.

Yet, I’ll tell you, I’ve been on college campuses a few times since I graduated about 15 years ago.  Have you? Have you seen what the dorms look like now?  You can tell I’m not 70 years old but the difference in the 12 x 12 room I had with another guy and the suites I see today is striking. When I see pictures of other dorm room, I feel like I went to college in the Stone Age.  Even the cafeterias look like restaurants.  Not only does this increase the cost, but it also changes what feels tolerable and appropriate for new grads to “endure” when they graduate.

The most striking circumstance is their living arrangements.  Rent is a huge twenty-something expense. Often, it’s their largest, so it’s an area of focus.

Don’t worry, I’m not advocating for returning to Mom and Dad. I didn’t do that and I turned out fine – at least financially speaking.

But think about renting a somewhat beat-up small apartment – with another person living with you to share the rent.  If you’re coming from the type of college housing I was used to, such a place represented a minor step-up. In fact, my rent did go up – but only by fifty cents per month.  Today’s college graduates have a harder time doing what I did because the places they’re living – palaces compared to what used to pass as standard college housing – are so much better than the small beat-up apartments I just described.  Furthermore, they may never have had a roommate, so sharing an apartment – even though they’d have their own room – doesn’t seem like enough of an upgrade to their current situation.

Today’s college graduates should – like the rest of us – only focus on what they control.  Ten minutes after the graduation hats land on the ground is not the time to think about how their student loans might have been a lot more manageable had they gone to a less expensive school.  Instead, they should concentrate on what they can do to keep their expenses down during the next couple of years. If that means living at home, so be it – especially if there’s no job waiting. But far better, in my opinion, is to find a very affordable residence and share it.  It won’t get easier to keep your housing costs down as you get older – in fact, it gets more difficult. When you start a family, it’s awfully hard to downsize.  Start by living at the smallest place you can afford and be comfortable.  From there,  and you can increase your standard of living steadily, while giving yourself a fighting chance to aggressively pay off that debt and – one day – to save.

When I finished my answer to the question, the head of NH Jump$tart said, “Now you know why I want to adopt this guy. He gets it.”

It nearly made me blush.  What does my answer say to you?

Credit cards can change your life.

You: Excellent!

Not necessarily for the better.

You: Oh. I mean . . . right.

There are some upsides to credit cards for those who use them responsibly.

You: Such as?

Benefits include building a credit history, the convenience of not carrying around a lot of cash, the ability to pay for things many days after you enjoy them, and, often, obtaining some form of customer protection if what you purchase turns out not to be any good.

You: A ha!  I was just saying credit cards aren’t totally bad.

And they’re not. But they’re not all good either, especially when they are used by people who don’t truly understand how they work.

You: Does anybody really understand how they work?

A few members of the legal department at most credit card companies understands how their product works.  In addition, some credit card experts truly understand their chosen specialty.  But the average consumer has, at best, a limited understanding of the little piece of plastic that enables most of their life to function.

You: Why is that?

Because the terms and conditions are written in a microscopic font that, even if it were in large type with pictures would bore a hyperactive debt professor. The content is simply not stimulating and, consequently, few people – even motivated – can get through it.

You: So what should I do?

Focus on the most important parts of debt and credit card management, like never borrowing what you can’t afford to repay and understanding how your finance charges are calculated.  With all of this in mind, I recently spent some time on LifeTuner’s new micro-site Don’t Get Swiped, part of their campaign to shed light on how credit cards affect young consumers and how credit card debt can impact their finances through the future.

Don’t Get Swiped does a great job highlighting, often in a humorous fashion, the common ways in which credit cards begin to overwhelm their users.  Several videos comically demonstrate the aforementioned difficulty in paying attention to terms.  Another page shows the common excuses (i.e., inadvertent lies) people tell themselves as to why they need to use credit cards for a certain item.  (Plus, you can add your own excuse if you want).

A separate resources page lists places to learn even more about managing credit card debt.  As part of LifeTuner, the micro credit card site also often leads you back to LifeTuner’s core content, where you’ll have the opportunity to post questions and have them answered by experts (including yours truly).

Take a gander at Don’t Get Swiped and let me know what you think.

The sign says “Pay nothing until 2012!”

You: Seems to be good to be true.

And, therefore, it probably is.

You: I knew that.  But why, again?  I mean for, ah, my friend . . .  could you explain it again?  She didn’t think it was a bad idea.

I’d be happy to help your friend.  Tell her to read Why a ’same as cash’ deal is NOT the same as paying with cash

Last week I discussed Why the drop in late credit card payments doesn’t excite me. Then, I covered The real unemployment rate just this past Monday.

To continue my little rant on misleading statistics today I discuss the phenomenon of lower credit card balances.  Analyzing TransUnion data, the AP reported the credit card delinquency decline here and a Fed G19 study further analyzed by Credit Cards.com here discussed the decrease in revolving balances.  So, there’s a good deal of excitement.  After all, lower credit card balances are a good thing.  Notwithstanding the government’s obsession that we “spend our way out of this,” I believe that people shouldn’t spend money they don’t have. (I also believe the same rules should apply to governments of either ruling party but that’s a whole ‘nother discussion.)

But why are credit card balances lower now than they were previously?

Best I can tell, there are three reasons for the credit card balance decline:

1. People are using their credit cards less. Call it the fear factor, but there’s nothing more influential in increasing your savings rate than seeing a friend or loved one lose their job.
2. People have had their credit limits cut. Some folks would probably continue to use their credit cards as they have in years past but now, quite simply, can’t.   The banks won’t let them.
3. Banks have issued massive write-downs. We’ve read about government bailouts of big financial institutions  because of their bad debts.  Guess who else has been issuing bailouts?  Yup, the banks for certain borrowers.  When you can’t pay and convince the bank you won’t, the bank eliminates the amount you owe.

All three of the aforementioned factors must affect our nation’s average current outstanding credit card balance.  I see a lot written about the impact of the first reason, a little about the second factor, and virtually none about the third component.

An article I was interviewed for earlier this week, Consumer credit card balances fall again in October, Fed says fairly summarizes my position.

What do you think?  Are people really changing their credit card utilization or is that only part of the cause of the balance drop, since many others are spending less on credit cards simply because the banks will no longer allow them spend like they used to?

As reported by the AP on MSNBC, Late credit card payments drop in 3rd quarter.  With a headline like that, I decided to read the article.  According to the referenced TransUnion study, late payments on credit cards during the third quarter (ending at the conclusion of September) were lower than they were in the previous quarter.

You: So does this mean the post office is doing a better job with its deliveries?

Probably not.

You: Darn it.

Perhaps people are choosing to (and are able to) become ever so slightly more responsible with their borrowing.  Maybe they understand the importance of paying their debts back and the incredible costs (e.g., interest, late fees, uncomfortable phone calls) of failing to do so in a timely manner.

You: So what is the percentage of credit cards that are paid late?

Approximately 1.1%

You: That’s it?

That’s all.

You: I would have thought it would have been higher.

In certain parts of the country, like the housing bust states of Nevada, California, Florida, and Arizona, it’s a fair bit higher, but in no case is it higher than 1.5%.

You: So why does the media make it sound like the sky is falling, economically?

This is just one measure. Furthermore, it isn’t that hard to simply be on time with you credit cards yet be in a personal financial crisis.

You: What do you mean?

To be on time, one only needs to make a minimum payment, often as low as 4% of the total outstanding balance.

You: Just 4%?

That’s it. Look, if you owe $5,000 on your credit card bill, are paying 25% APY, and earn $20,000 a year, you’ve got serious financial issues.  But if you cam come up with just a $200 a month, you’re not delinquent on your credit card bill and you’d show up as doing just fine in the statistic reported.

Yet another reason not to get excited about headlines.  The devil’s is always in the details.

Today, I’m featuring a quick compilation of links I’m sure you’ll find interesting:

• Bankrate.com recently published a story Should you pay debt before savings? It’s a good write-up of an important question for those living Beyond Paycheck to Paycheck. Plus, I was quoted for the piece.

• Social Security recently announced that there will be no increase in monthly benefits checked sent to retirees during 2010.  Until now, retirees have almost always had an annual increase for inflation.  But not for 2010. If you’re still working, it won’t affect your day-to-day life too much.  But it might make for an interesting conversation with the folks, especially about this special $250 payment the government is considering. Over at my About.com site, we’ve started a spirited conversation and poll about the $250 payment.  Check it out or join in.

• I was also quoted in Credit card APRs fall slightly, reversing recent rate-hike trend, an article at CreditCards.com.  Many of the changes to credit cards are beginning to affect even those who pay off their balances every month.  We’re starting to see increased annual fees, reductions in available credit and outright cancellations, even among “good” customers. Make sure you’re paying attention and using your cards appropriately.

I’m off to Las Vegas for a speaking engagement tomorrow – have a good week.

You: You’re watching pre-season basketball?

No.  Honestly, I might even watch golf first.

You: What’s wrong with watching golf?

I find it more boring than the prospect of playing it.

You: Wow.  So what’s with the “fourth quarter” reference then?

I’m talking about the fourth quarter of the year, which begins today.  For better or worse, many companies – especially those which are publicly traded – tend to focus on a time period of three months.

You: Why is that?

Typically, corporate earnings must be reported on that basis.  While much has been written  about how quarterly reporting leads to short-term thinking at the expense a of proper long-term outlook, such criticisms typically don’t provide an alternative frequency for managing goals.  While I agree that three months is often way too short to judge an entire company’s progress, Beyond Paycheck to Paycheck is a personal finance blog (and book).  When it comes to personal finances, three months IS long enough to assess your progress towards your goals.

New Year’s Day is exactly three months away.  You have an entire quarter of 2009 remaining.  That’s enough time to make a sizable difference in what your financial situation looks like when you once again make those resolutions.  Here are some suggestions for what you can easily accomplish between now and then (if you’ve already done some of these things, congrats – less to do!):

• Q4 Task  # 1: Start saving. If you’ve already started saving, try to save some more.   Either way, remember: Save early, save often.

• Q4 Task # 2: Begin paying down your debt. But do it with a strategy.  The most important rule of debt management is to Get rid of expensive debt first.

• Q4 Task # 3: Decrease your income tax refund. If you consistently receive a sizable income tax refund, stop the madness. A refund does not represent the government giving you money. Instead, a refund is the government giving you your money back because you allowed them to take too much all year long.  A tax refund is not a savings program.

• Q4 Task # 4: Take advantage of your match. I’ve yet to meet a more compelling retirement planning opportunity than the 401(k) match.  The only reason you might not be taking advantage of the match is because you lack a fundamental understanding of how it works. Change that, first by reading An employer-match is not a corporate dating service. Then do something about it.

• Q4 Task # 5: Make sure you and your family are protected. This could mean insurance. it might also mean passing on insurance.  The most important rule of insurance: don’t risk a lot for a little.  Second most important, don’t pay to protect what you can easily afford to lose.

Just five little things to do to really begin to get your personal finances in order.  None of them will take very long nor require much money.  Just a small investment of both and you’re on your way.  It doesn’t have to be today or tomorrow, but give yourself a deadline.  There’s a quarter of this year left – plenty of time to take the lead in life’s “game” of personal finance.

You:  It’s not lighthouses.

Probably not.

You: Or millions of acres of corn fields.

Not likely.

You:  What is it?

Very high average student loan balances.

You: How and why would you know this?

Late at night, after we get the kids down, one of the things I like to do to relax is study student loan patterns by county.

You: For real?

Heck no!  I was just reading the carnival of personal finance, hosted by Living Almost Large and noted an article by Broke Grad Student called Average Student Loan Debt By State. Inside the artcile is a map of average student loan debt by state.  (I will admit to being a bit of a map geek).

The states with the two highest student loan burdens are Iowa and New Hampshire.  Broke Grad Student and several commenters weighed in with their theories as to why.  Not surprisingly, factors include the cost of the schools in the state, the extent of state support to the public schools, cost of living, and cultural factors.

Check out the carnival, article, and map. How does your state fare.  Are you surprised at all by the results?

I’m always eager to share articles written elsewhere that are useful to Beyond Paycheck to Paycheck readers.  That’s one reason I read the Carnival of Personal Finance every week. This week’s version, hosted by fellow New Englander David from Money Under 30, includes my post Should I Repair My Car or Buy Another One?

Of the more than 100 articles at the carnival, one immediately caught my eye: The Digerati’s Balance Transfer Credit Card Tips, Facts and Traps.  While much has been written on this topic, few writers have tackled the balance transfer “opportunity” as succinctly.  More importantly, Silicon Valley Blogger includes a little table summarizing where the current opportunities. Alongside, the accompanying text highlights your key personal considerations. Like most other personal finance considerations during a downturn, opportunities abound – just not in the same place nor in the same way as a few years ago.

For anyone with existing credit card debt, his article should be considered required reading.  Note: your individual conclusion may be to do absolutely nothing.  And that’s okay too.