Learn how to be a financial lifesaver

Vancouver family proves pinching pennies can lead to stability even in tough times

By Gordon Oliver, Columbian business editor

Published:

 
photoTerry and Dusty Barrow and their children, from left, Lynnese, 15, Aadina, 17, Shamar, 11, and Terry Jr., 14, say the lessons they've learned from personal finance classes helped them save money that they hope will allow them to buy the house they've long rented.

(/The Columbian)

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Terry and Dusty Barrow project an optimism born of their confidence that, despite their challenging financial circumstances, they're well in control of their personal finances. They're even tantalizingly close to finally owning the home they've rented for years.

More information:

• Washington Saves Week is Feb. 25 through March 2, and a variety of informational services are being offered through the Washington Jump$tart Coalition, the Department of Financial Institutions, and other organizations. Information about local events is available at http://dfi.wa.gov/financial-education/calendar.htm.

• Clark College offers personal finance classes through its Continuing Education program. Its spring schedule will be on its website (http://cce.clark.edu/community-education) on March 4 and will be delivered by mail in mid-March. Spring quarter classes start April 8. Registration is available by calling 360-992-2939, Option #1. Registration forms can be downloaded from the spring schedule and mailed, delivered to the college, or filed online at http://cce.clark.edu.

• The Community Housing Resource Center offers free walk-in orientations to its financial education/credit counseling services at "Get the Facts" orientations held at 6 p.m. the first and third Wednesday of every month. The free, drop-in sessions are held at the center's office, 103 E. 29th St., Vancouver.

Why budget?

  1. A budget guides you in the direction you want to be headed financially.
  2. A budget lets you control your money instead of your money controlling you.
  3. A budget will tell you if you're living within your means.
  4. A budget can help you meet your savings goals.
  5. A budget helps you prepare for emergencies or large unanticipated expenses.
  6. A budget can improve your marriage or relationship.
  7. A budget reveals areas where you're spending too much money so you can refocus on your most important goals.
  8. A budget can keep you out of debt or help you get out of debt.
  9. A budget actually creates extra money for you to use on things that matter to you.
  10. A budget helps you sleep better at night because you're not worrying about how you're going to make ends meet.

To get this far, the couple — raising their four children in a rented home in Vancouver's Rose Village neighborhood — undertook a series of small steps to rein in their spending. No more coffee stops at AM/PM — they bought a $10 coffeemaker for home brew. No impulse purchases — they think twice before they buy, which often means they end up not buying.

And no applying for credit cards from offers they started getting in the mail as their credit rating started to rise. Those offers go straight into the shredder.

"We're not playing around with this stuff anymore," said Terry Barrow, who's been out of work since his most recent employer, a shuttle transportation company, filed for bankruptcy last spring.

"Your credit rating — that's what's going to make you," he said. "That's your character."

The tools of financial self-discipline tapped by the Barrows are as time-tested as the adage "A penny saved is a penny earned." But the message takes on fresh resonance these days as families dig themselves out of the personal financial messes that flowed from, and contributed to, the Great Recession. Americans have lowered their personal debt, in many cases through painful personal bankruptcies and housing foreclosures. A study released last week by the Pew Research Center found that from 2007 to 2010, the median debt of U.S. households headed by people aged 35 and younger fell by 29 percent — from $21,912 to $15,473 — while debt of older Americans fell by just 8 percent, to $30,070.

Still, Depression-era Americans were legendary for careful spending and deep savings. Those traits didn't always get passed down to today's much more consumer-driven, credit card-toting generation.

Dennis Breitenstein, who has taught community-based personal finance classes for almost three decades, says families and institutions have not created mechanisms to pass down financial wisdom to new generations.

As a society we make sure everyone gets an education as the key path to financial success, said Breitenstein, founder and financial adviser at Vancouver-based City Financial Group, but "we never teach anybody what to do with their money once they get the money."

Neal McKeever, a program manager for financial education at Community Housing Resource Center, where the Barrows took classes, puts it more bluntly: "Americans have a real dislike of talking about money," he said. "We'll talk about personal relationships but we won't talk about money."

Recognizing the need

Increasingly, educators see a need to fill that void by talking about money with high school and middle school students. Junior Achievement, a long-established nonprofit that works to cultivate entrepreneurship in high school students, has made personal finance management a major push.

The national organization is launching a major financial literacy initiative in April, said John Hancock, president of Junior Achievement for Oregon and Southwest Washington. The launch of JA Finance Park, an extension of its existing JA BizTown program aimed primarily at middle school students, is intended to help people avoid poor money decisions that could lead to lifelong financial burdens.

"We are deeply concerned about the issue nationally and locally," Hancock said. In the wake of the recession, Hancock said, "probably more people are paying attention now." Locally, Junior Achievement will launch the program with an evening kickoff April 4 in Portland's Pearl District.

The Vancouver school district is also scrutinizing its financial literacy education, in part in response to surveys showing that recent graduates wished they'd learned more about personal finance while in high school, said Layne Curtis, the district's director of curriculum and instruction. The district is revamping its curriculum to focus on personal finance. It's now midway through a pilot project that incorporates personal finance knowledge in math classes and elsewhere in the curriculum.

While the district feels that it does a decent job in teaching financial literacy, "I have to tell you, we see a need to do more," she said. The recession has added to the urgency. "Many students are aware of changing circumstances families are in," Curtis said.

Free and low-cost community education classes are available through Clark College and through government and social services programs throughout the county. Breitenstein said his classes attract far more women than men, and he offers tips on how to navigate the challenges of a household pulled between a spender and a saver.

"The bottom line is: Look at what your necessities are. Get rid of your debt. Everybody's said that 8,000 times, but everybody has to have it strike them in certain ways."

Building up savings

The Barrows — Terry, 39, and Dusty, 37 — say they've lived through hard times, but they'd also moved into middle-class status for a time, holding jobs that paid decent wages.

"We've struggled in our lives with nothing," Dusty Barrow says. Now they're grateful for what they have, and they've passed that thought along to their children who, they say, are willing to work to pay for things they want.

Key financial advice

  1. Plan for future purchases and expenses.
  2. Set financial goals. Set short- and long-range financial goals.
  3. Know your financial situation. Compare outgo to monthly net income. Be aware of your total indebtedness.
  4. Develop a realistic budget. Follow your budget. Evaluate your budget. Compare with actual planned expenses.
  5. Don't allow expenses to exceed income.
  6. Save ... Save ... Save. Save for periodic expenses. Accumulate three to six months' salary for an emergency.
  7. Pay your bills on time. Maintain a good credit rating.
  8. Distinguish between wants and needs. Money should be spent for wants only after needs have been met.
  9. Use credit wisely. Don't allow your credit payments to exceed 20 percent of your net income.
  10. Keep a record of daily expenditures.

These days the couple brings in about $3,400 per month from unemployment and other sources, including payments for two children with disabilities and for Dusty Barrow's physical disabilities. They pay rent of almost $1,000 monthly for their three-bedroom home.

Terry Barrow says he's always been frugal. But saving money took on new importance when the opportunity arose for the Barrows to purchase their house.

The Barrows say the "Finance Smart" classes he took through the Community Housing Resources Center helped them focus on long-term financial goals. The couple put their savings into an Individual Development Account, taking advantage of a program for households of modest income that encourages savings by providing a government-funded double match to savings.

"They helped us get where we are," Dusty Barrow said of the nonprofit agencies. "These people want us to succeed," her husband added.

The house will cost them about $120,000. If all goes well, they'll be homeowners by summer.