Q: I have a 2-year-old daughter & my husband & I have a combined income of $75,000/year and we just get by on our current bills. When & how should we start a college fund for my daughter?

A: Starting a college fund can never happen too early. College costs are rising at nearly three times the rate of inflation (8.5% annually versus approximately 3% for historical CPI). Put another way, college costs are escalating waaaaaayyyyy faster than normal price increases for most things we buy. With the possible exception of health care costs, nothing is growing faster. Of course, the endgame is that our highly specialized service economy has created the largest differential ever in terms of annual income between college graduates and non-graduates, so a college education becomes more important than ever.

While your finances may be tight, it is simply critical that you incorporate college savings into your monthly budget if you hope to help fund this education goal. Because your daughter is two years old, the solitary advantage you have on your side is TIME. The earlier you start saving for college, the more time you have to capitalize on the power of compounding returns. Each year that you wait to fund that college account, you not only have missed a year of savings, but also whatever growth that last year would have gained from investment, interest, or dividends.

As far as a vehicle for this savings, a 529 PLAN is almost always the best investment strategy to save specifically for higher education. 529 plans allow you to invest money in diversified mutual fund portfolios, have the money grow tax free, and also come out tax free as long as it is used for a college-related expense. Further, you as the parent (or grandparent, etc) maintain control of this asset. This is important because, unlike custodial accounts such as UTMAs or UGMAs, Junior cannot decide to blow his college fund on a Ferrari when he turns 18. Instead, it’s still your money and can be transferred at any time to a different beneficiary if your child does not need the money for college.

Since my alma mater Boston College is the only college I will pay for, I’ve not only opened a 529 plan, but I’m also scheming to utilize the single greatest college savings tool there is – grandparents. “hey Dad, did you know you can get up to $300k out of your estate today with a tax deductible gift…” Or - for those more desperate – “hey Dad, start funding the grandkids’ college fund or we’ll take the baby and spend every holiday with the other grandparents!”

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Q: My fiancé and I are trying to figure out how we’ll combine our finances when we get married. We both have student loans and debt coming into the marriage, and I’m wondering if we should consolidate our debt or keep it separate?

A: Well, first of all, everyone brings some baggage into a marriage. J-Lo and Larry King bring numerous other marriages; Britney brought annulment papers to hers in Vegas; Heck, even Mike & Carol Brady brought 3 kids each with them. So, your respective loans and debt are certainly manageable.

Seriously though, combining your finances is one of the biggest adjustments in married life and usually an issue that is poorly addressed until after the fact.

As a basic rule of thumb, it usually always makes sense to consolidate debt. Besides ease of management, the bottom line with all debt is that you should always seek out the lowest rate. The less you are paying a debtor in interest, the better. So, if you can combine your individual debts (credit cards, loans, etc.) toward the single lowest rate available, you will have done your new marriage some immediate financial good. Keep in mind that you cannot actually combine this debt until you are married for tax reasons. Consider the debt consolidation your first in a series of consolidations, compromises, and accommodations. Amazingly, you’ll both find it infinitely easier than sharing that bedroom closet or master bath.

My wife and I have married friends who literally maintain separate finances – owing each other money, deciding who should pay for dinner, and separating the bills. I personally have never understood separate checking accounts for married people. Unless you are constantly planning for divorce, what is the point of keeping these dollars which are for a mutual home (and life) separate? To me, it just seems silly to keep the finances in “roommate mode” – separate but equal – when presumably neither of you plans on ever having to leave with your half. I suppose the one exception would be a small individual account for purposes of gifts. After all, getting a gift from your spouse has a whole different feel if you get the bill for it a month later.

Another issue to consider as you prepare for the tangible aspect of the whole “for better or worse” concept, is to make sure that there is accountability for finances in your new marriage. By this I mean that it is critically important to keep written track of money (balancing checkbooks, keeping records of bills, etc.) because, for the first time, there is someone else who actually cares what’s going with these dollars. You know that brilliant little system you’ve always had for keeping track of your money – that old notepad in your car, or the famous “I keep track of it in my head”? Well, that probably isn’t going to be very easy for your new spouse to understand. Once you’re married, it’s time to write those things down. Otherwise, mistakes can and will happen as one spouse spends money that they think you both have.

Lastly, I would highly recommend marrying rich if at all possible. It solves everything above except the bathroom issue…

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Welcome to MyCity Finance Blog! My name is Azim and I look forward to great future discussions on financial topics of all kinds. Over the coming weeks, months, and years, I will be posting financial commentaries - advice, market outlooks, personal finance tips, business strategy, and just plain observations from your street to Wall Street.

We hope this site will be your first and favorite stop on the internet highways to get your financial questions answered in an understandable manner. We also hope you enjoy the topics and will benefit from reading about finance in a conversational, slightly humorous fashion. Feedback is always welcome and no question is too stupid or too hard (I hope) for our crack research staff.

Let’s get started with an overview of What I’ve Learned in the financial world. If any of you ever read Esquire magazine, you’ll recognize the monthly one pager of wisdom entitled What I’ve Learned. It’s a fantastic snapshot into the acquired knowledge of men who’ve led the most interesting lives on the planet. Check out Hugh Hefner, Homer Simpson, James Caan, and John McCain in particular from the link above. Focusing on the business/finance world, here’s my modest addition to the lot…

• Finding good stocks to buy is child’s play. Knowing when to sell is why some people are rich and most are not.
• True wealth is rarely acquired by someone whose name is not on the door.
• The only smart way to invest in China is to buy what they’re buying.
• Sorry Californians, Bostonians, and Manhattanites – if you have a 40 year mortgage and put nothing down – you are a NOT a homeowner – you just have a lifetime house rental from a bank.
• Staff meetings, conference calls, and employee “team building” exercises do not make you money. Not now, not down the road, not ever.
• BUY LOW
• Whatever you’re spending on Consultants at your business, cut the expenditure in ½ and you just saved more than they will ever save you.
• The rich get richer – truest axiom of all time.
• Never forget that Money Magazine’s day job is to sell magazines, not to help you get wealthy.
• Conversely, reading the 2 front bar columns of the Wall St Journal every day will leave you more informed that 99% of the population.
• If your boss’ boss’ boss’ has a boss – you are not very important at your company. Get the hell out and join an organization where you can have an impact and get paid.
• Learn to make money on the downside – when stock markets are down, something else is always up.
• You’ve all heard the sex partner truism – guys inflate their # of partners by 2x, girls cut their # in half. Well, the only bigger lie told by guys is about their investment successes.
• I’ve never met anyone on a plane or at a cocktail party who hasn’t made an absolute killing in the stock market. I’ve also never met anyone who ever lost a penny in the market. Amazing, huh…
• Instead of all the stuff we never use, they absolutely should teach personal finance in high school – what’s more helpful to you now – your certainty on who invented the cotton gin or the ability to negotiate a car lease?
• By the way – Eli Whitney died broke.

Hell, I’m on a roll, and life is more than finance (did I just say that out loud?) so all of you are going to get my general wisdom too, free of charge:

• Hitting a major league curveball has got to be the hardest single action in professional sports. 4 out of 10 makes you a legend - that proves it.
• Each year that goes by, our parents get smarter.
• Every college is not a “good school” despite what polite conversation may imply.
• Marriage does not have to equal the end of your guys’ nights out. If it does - you’ve got the wrong wife, not the wrong buddies.
• I love Vega$.
• Only jerks don’t root for their home teams.
• If you’ve attended 10 parties without extending a single invite, you need to look up “reciprocate” now.
• Big families are complicated, but are a hell of a lot more fun at holidays.
• Learn at least enough about wine so that you can appreciate a great one when you have a chance.
• If you don’t vote, your political opinion simply doesn’t count.
• Cats are the worst.
• Taking photos is a pain, but you’re always glad when you get them back.
• Give people a second chance, not a third.
• The use of “reply all” on e-mails should be reduced by 90%.
• Friendships can survive solely on old memories for only so long - they take effort to create new ones.
• Pepsi is better than Coke.

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