Your Biggest Money Problems, Solved

Managing your finances becomes tricky when you add a kid or two (or three) to the mix. After all, you can stretch your dollars only so far, making it even harder to get out of credit card debt, buy that first home, or survive on one income. Don't despair! These tips from real families and financial experts will help you over those financial hurdles.

The Problem: Getting Out of Credit Card Debt

Fifty-five percent of Americans ages 30 to 39 carry a balance. The average amount: $2,000, according to the Federal Reserve's Survey of Consumer Finances.

Simply put, your debt is making you sink deeper into debt. "If you don't pay your credit cards off every month, then you're throwing a lot of money out with the interest you're paying," explains mother of two Jean Chatzky, author of Make Money, Not Excuses (Three Rivers Press) and financial editor for NBC's Today show. In fact, you'll probably pay at least twice the original cost of something if you pay only the minimum due each month on the card you charged it on. Though settling your full balance may not be possible, pay as much as you can -- even if you just round up from the minimum.


Negotiate. "Getting your interest rate as low as possible is the most important thing you can do to get out of debt," explains Michael B. Rubin, CPA, CFP, author of Beyond Paycheck to Paycheck (Wachtel & Martin) and a father of two. This is especially true if you're paying more than the average interest rate of 14 to 15 percent. As long as you've been making the minimum payments, you're not considered a high risk, which means it's possible to negotiate. First, collect competing offers by looking at or "Next, call your credit card company and ask if they can match the lowest interest rate you find," Rubin says. "Tell them you're a good customer who pays at least the minimum each month and does so on time. If they say no or don't lower it enough, tell them you have offers for cards with lower interest rates and will close your account with them if they can't change your rate." At this point they'll usually negotiate. (And don't actually close an account, because this affects your credit score.)

Use "found" money wisely. "It was very hard to set aside money each month to pay our credit cards, so we relied heavily on lump sums of money to help us get caught up -- such as my husband's year-end bonus and our tax refund," says Jennifer Oswald, a mother of two from Birmingham, Alabama. "In just a couple of years, we were free of debt."

Charge within your means. "In order to get out of the hole, you have to stop digging," says mother of one Liz Pulliam Weston, author of Easy Money (FT Press) and personal finance columnist for MSN Money. "To help get rid of our debt and keep from accumulating any more, we created a rule that we only charge things that we currently have the money in the bank for," says Gwyne Ortiz, a mother of one from Glendale, California.

Control the must-have impulse. "Often we walk into a store, see something, and think, I need that, but this is how we build up debt," Weston says. Instead, create a pause button: write down the item you're considering, and wait at least three days before buying it. "This way, you don't forget about it, but you're also not giving in to the impulse, and you take time to seriously consider if you need it," Weston adds.

baby expenses
Linda Helton

The Problem: Surviving on One Income

Thirty-seven percent of American families live off of one individual's income. Rather than finding childcare, many couples opt to have one partner stay home with their baby. Though you do save on commuting, dry cleaning, lunches out, and childcare, you might still feel the financial sting of going from two incomes to one. "Test-drive this idea while you're pregnant by living on one income and banking the other," Rubin says. "This allows you to see if it's realistic for one of you to quit your job, and it gives you savings to use for the expenses that come with your baby."


Track spending. "In order to survive on less money, you have to see where you're spending," Chatzky says. For one month, track where your money goes in a notebook or with an online tracking site like or You'll be surprised by all the nonessentials you're buying -- think lattes, gum, and toys that your little one doesn't need. Then you can figure out where to cut back. "We cooked dinner at home instead of going out, and I made enough food for us to take lunch to work the next day," says Beverly Cheng, a mother of one from Los Angeles. "We saved about $100 a month, which is $1,200 a year!"

Discover what's free. Weston suggests a "buy nothing month" where you purchase only necessities that you define up front, such as diapers and groceries. When she challenged readers of her column to do this, they saved $300 to $400 a month and found creative ways to spend less.

Make work work for you. "I wanted to be with my daughter but also needed an income, so we've been creative with my work at times," says Corrina Castillo, a mother of two from San Diego. "For several months, I worked at a home daycare where I could bring my infant daughter, and then I spent a year watching my niece full time and a few other children part time. This way, I could be my daughter's primary caregiver while making money."

Go green. "We switched to a cash economy in our house," says Alice Hohl, a mother of two from Columbus, Ohio. "We withdraw cash on the first of the month and divide it among envelopes for things like groceries, doctor bills, dog stuff, etc. And we each get $80 to spend as we wish. This immediately made us aware of our spending, and the 'accidental' $100 Target bills ended. If we do use credit cards, as soon as we get home from the store, we move the cash out of the envelope so we can see how much we have left for the month."

The Problem: Buying a First House

Forty-eight percent of those 30 to 39 are hoping to become first-time homeowners. The American dream of buying a home is alive and well, but realizing it seems to be getting harder, thanks to the recent mortgage crisis and economic downturn. The key to preventing a disaster is making sure you can afford the house you're buying. "If you're not able to put down 20 percent of your mortgage, you're probably buying a house that you can't afford," Rubin says.


Create a budget. Being on one doesn't mean you can never go out to eat or buy new jeans. You just have to choose what you'll spend money on and what you won't. For instance, instead of dinner out, you can eat at home and go out for dessert. "Here, you give up something, but not everything, so it's less painful," says Sarah Young Fisher, CFP, coauthor of The Complete Idiot's Guide to Personal Finance in Your 20s and 30s (Alpha), and a mother of two.

Clean up your credit. In today's market, banks are reluctant to lend money to people who are considered high risk, so "credit scores have never mattered more," Weston says. "To boost your score, use no more than 30 percent of the credit that's available to you, pay down your credit card debt, and pay all bills on time," Chatzky says. The five components of your credit score are: payment history; how much debt you have; length of credit history (the longer the better, so don't close credit cards that you opened long ago, even if you don't use them); whether you've recently applied for credit such as car loans or credit cards (which makes it look like you're going to be borrowing more money, so you're a higher risk); and the kinds of credit you have (lenders like diversity in your debt).

Rough it for a little bit. "When we bought our first home, we were in the process of moving from San Francisco back to Southern California, so we bit the bullet and moved in with my parents until our home was completed," Oswald says. "It helped us save almost all of our income for six months!"

Budget for the extras. "The mortgage isn't the only financial responsibility when you have a house," Chatzky says. You'll now have homeowner's insurance and real estate taxes. If you're moving from a smaller dwelling to a bigger one, your utilities will be higher. Her suggestion: Sit down with a friend who lives in the neighborhood where you'd like to move and who has property about the same size, and ask what he or she spends on things such as heating and air conditioning.

Shop around for your loan. Check online, big banks, and local banks too. "A lot of people shop like crazy for a house and negotiate on the price, but they do no research when it comes to their mortgage," Chatzky says. "This is a huge mistake because there are lots of options out there."

Two Tips for Living Within Your Means

"The key for any couple trying to save money is that you have to spend less than you make," says financial planner Michael B. Rubin. Here are two quick rules of thumb.

  • Your housing expenses, which include rent/mortgage, real estate taxes, and homeowner's insurance, should not exceed 28 percent of your gross monthly income.
  • Your debt, including your mortgage, credit cards, student loans, car loans, etc., shouldn't exceed more than 36 percent of your gross monthly income.

Originally published in the June 2008 issue of American Baby magazine.

Updated by Linda Helton
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