Tired of Living Paycheck to Paycheck

From CNN Money:

Question: I've been trying to be a little more thrifty lately. I realize that a lot of the luxuries Americans have are "wants" not "needs." Basically, I'd like to balance my household budget so I don't end up with just $30 at the end of the month. I'd even like to start building some savings. Any suggestions? --Kim, Idaho Falls, Idaho

Answer: A lot of people are experiencing the epiphany you've had about wants vs. needs.

Of course, we also have to keep in mind that one person's indulgence may be another's necessity. For example, a recent MainStay Investments poll that asked just over 1,000 baby boomers about their attitudes toward saving for retirement found that 46% considered weekend getaways not a luxury but a basic need.

I guess I can understand that. Someone who puts in lots of hours at a high-pressure job might very well see the occasional short trip not as an extravagance but a way to preserve sanity in a hectic life. I have to admit that I'm less sympathetic, though, to the 2% of my fellow boomers who classified professional manicures and pedicures as a basic need.

But despite individual differences in what we may consider "wants," it does appear that Americans have been rediscovering thrift of late. Last week's figures from the Bureau of Economic Analysis show that Americans saved 6.4% of after-tax income in June, the highest percentage this year. Granted, that's less than the 8.2% in May 2009. But it's a huge improvement from the 1% to 3% rates that were common back before the financial crisis.

Teach Your Teen Paycheck Savvy

Summer break is here for most teenagers, which is often a time when they enter the workforce for the first time. Although having cash of their own is an exciting time for any team, it can lead to frivolous spending habits. Earlier today CNN Money posted a helpful article on how parents can help their teens manage that first paycheck. If you are a parent of a teen with their first job then I highly recommend checking it out.

Have the tax talk

Better explain the harsh realities of gross vs. net before your teen gets any big ideas about what she'll spend her wages on. She may not yet understand that taxes will be withheld from every paycheck. So sit down with your child to go over that first pay stub, explaining how and why taxes are taken out, as well as the difference between income taxes (which most teens are likely to get back when they file tax returns) and FICA taxes (which they won't). "This will be a real shock to them," says Adam.

Take it to the bank

Help your kid open two bank accounts -- one savings, one checking. Spend time together comparing fees and rates online, looking specifically for a no-fee checking account meant for teenagers. You'll have to co-sign the accounts, but it's worth it so your kid can start learning to use an ATM card and keep his balance in the black. (Just don't forget to mention the exorbitant costs of using another bank's ATM.)

Your child may balk at an analog check register but might enjoy tracking expenses online via Mint.com. To motivate him, explain about the $30 overdraft fees the bank will rapidly bestow if he messes up budget calculations. And remind him that at minimum wage, it would take most of a day's work to recoup that expense.