Guidance, nudges when needed

At the beginning of every new year, so many people promise to get their personal finances straight.

They vow to budget, save or get out of debt -- or do all three. In 2007, according to a survey by Money Magazine and the market research firm ICR, 37 percent of Americans say they plan to make a financial New Year's resolution.

Unfortunately, many of those promises will go unfulfilled. The survey found that of those who have made financial resolutions in the past, only 24 percent were successful.

Why do so many people fail?

Because they don't have a plan from the start. Or they falter because they aren't accountable to anyone. If no one is tracking their progress or pushing them to succeed, they fall back on bad habits.

For 2007, I've vowed to break that cycle by helping four people -- two single women and one couple -- achieve their financial resolutions. I'm calling this the Color of Money Challenge, and I'll be following the decisions the participants need to make to strengthen their financial lives.

As part of the challenge, I'll help them stick to a budget, pay down their debts and save for emergencies and their retirement. I will hold them accountable and push them to do what they couldn't do on their own.

These three households represent what many Americans are going through right now. They are living paycheck to paycheck.

About 65 percent of Americans rely on their next paycheck to meet living expenses, according to an online survey conducted for the American Payroll Association. Last year, for the first time since the Great Depression, the national savings rate dipped below zero.

Ask yourself whether you are one missed paycheck away from a major money crisis. Even if you aren't, someone you care about probably is. Easy credit and insufficient financial training at home or in school have left many people unable to manage their money.

It was easy access to credit that hobbled Carlesa Washington, one of my Challenge participants. Washington lives at home with her mother -- rent-free. Instead of banking most of her pay, she has racked up about $6,500 in debt.

"I am lost as to where I should start," Washington wrote asking to be a part of this New Year's challenge. "I want to buy a home, raise a family, and be debt free."

Then there is Annie Schleicher. Schleicher watched her homemaker mother struggle after she separated from her father. Schleicher said her mother, who died 10 years ago from a rare cancer, made her daughter promise to be a better money manager.

It was a promise she hasn't kept.

She does not live an extravagant life. Still, she just can't seem to save anything or make a dent in her debt.

"I really want to pay off my debts and create a realistic savings plan," Schleicher said. "I want to maximize my retirement. I want to stop living paycheck to paycheck. I want to be the woman my mom wanted me to be -- strong and independent."

Trouble saving was a common problem for all the participants. It certainly is for Tania and Carl Chandler.

From outward appearances, the Maryland couple is doing just fine. They have good jobs and own a large and beautiful home.

But one major illness, layoff or large unexpected expense could cause their financial world to crumble.

"Our savings, or mostly lack of, isn't worth mentioning," Tania wrote. "We talk about doing better, but it's just that, talk."

The Chandlers are going to start doing more than talk. And as with the other two Challenge participants, I'll be there all along the way to keep them on the right path.

THE COLOR OF MONEY CHALLENGERS