Today’s Yahoo!Finance column looks at the financial challenges that face prospective parents. I interviewed a couple from Seattle, Patrick and Suzy, who are doing all the right things with their money but still feel overwhelmed by the financial issues related to having a child.

One of the biggest challenges is that they bought a home near a city they love, but one that’s thousands of miles from their famillies. Because of the expense, they both have to work full time, and yet they lack the support network extended family can provide when the kids come along.

Their story resonated with me, because I faced similar questions about compromise when we started our family. Like them, I am originally from the Midwest and fell in love with the vitality and creativity of the best city in the world (New York). It presented wonderful career and cultural opportunities and still does. We are an hour from the mountains and an hour from the ocean, 35 minutes from Broadway shows and the best museums in the world.

But back when I started having kids, I thought seriously about moving to Chicago, even asked my boss about a possible transfer. Our cost of living is significantly higher here than in the Midwest, which requires us to work harder to afford those museums and Broadway shows (and property taxes) — which ultimately gives us less time with our kids. (Although I work mainly from a home office, which helps.) I would love my girls to have the same relationship with my mother that their cousins in Chicago do, but that’s impossible when you only see each other a few times a year. They do, thankfully, have my husband’s family nearby.

But that’s life — it demands compromises. Would Patrick and Suzy be happier if they moved back to the Midwest, where they could afford a better lifestyle and be close to family when they have their kids — and give up the city and friends that make them happy? Should someone make career satisfaction a higher priority — even if it means moving far away from extended family? Or should you settle for a less satisfying career to sustain closer family ties? I’d love to hear your thoughts and experiences. You can comment here or email me at laura at laurarowley.com.

A new survey by Mainstreet.com names three Midwestern states tops in terms of financial happiness — Nebraska, Iowa and Kansas. Mainstreet’s “Happiness Index” ranked states according to household income, non-mortgage debt as a percentage of household income, employment and foreclosures. (It’s a new take on the old Misery Index, launched in the 1970s.)

My home state, New Jersey, ranked 29th; New York, where I spend a lot of time, ranked 14th. At the bottom: Oregon, troubled by high unemployment and foreclosures; read this recent Yahoo!Finance column for some background on the state, and one bank’s attempt to deal with the deflated housing market.

MainStreet.com general manager Harleen Kahlon told Good Morning America: “I think that on the coasts — in New York and California — we have a lot of people living beyond their means. But in the Midwest that’s often not the case. Maybe the takeaway is that living large is not the answer.” So maybe my Midwest roots (Illinois) inspired my live-within-your-means mantra. Actually, it was mostly my mom and my dad, who would have been 80 years old on April 6. Miss you Dad!

The authors of the recent book Spent ‘Til the End recommend Cedar Rapids (next door to Iowa City, where my sister lives — happily I might add) for people looking for the best living standard. Co-author Lawrence Kotlikoff, a Boston University economist, says Cedar Rapids’ low-cost environment provides a 78 percent higher standard of living than Seattle, and 34 percent higher than Tampa.

 Spend ’til the End advises consumers to “price their passions” — that is, calculate the living-standard effect before they get married, have many children, divorce, or move to a big city. “It’s important to make these choices ahead of time, to think about what really makes sense in terms of everything you want,” Kotlikoff told me, “because people do make critical, life-altering geographic decisions.”

Have you ever made a decision based on a passion and lived to regret it financially? Have you ever based a choice on a passion and had it turn out to be the best thing you ever did financially? You can comment here or email me at laura at laurarowley.com.

More than half of homeowners were at least 30 days behind on their mortgage payments six months after having their loans modified, according to new data from the Office of the Comptroller of the Currency. Highlighted in today’s Wall Street Journal, the OCC data also show that more than one-third were behind just three months after having their loans modified. The numbers come from the nation’s 14 largest banks, and represent 60% of the mortgage industry.

The OCC doesn’t know if the modifications weren’t radical enough to make the loan affordable, or if the mortgages were so badly underwritten they couldn’t be fixed. (Or perhaps the homeowner’s financial circumstances have deteriorated since the modification, i.e., a job loss.)

Rep. Barney Frank (D-MA) has said he may tie up the rest of the $700 billion in federal bailout money unless some of it goes to keep people out of foreclosure, suggesting this is what most Americans want, according to an AP report.

But I’m not sure that’s actually the case, at least judging by the response to last week’s Yahoo!Finance column. In that piece, I suggested the government consider a refinance plan for homebuyers who saved up a downpayment and have never been late in their mortgage payments. That will free up dollars to be spent or saved, benefitting the economy.

This was not a tongue-in-cheek column. Anecdotally, I’ve found over the years in covering personal finance that many of the people who dig themselves really deep into debt tend to stay bogged down in the issues that got them in trouble. The 360-degree turnaround is the exception, not the rule. So I’m not all that surprised that large numbers of homeowners are behind in their modified loans.

What I am surprised about is that Congress continues to allow banks to hose the American public with a range of egregious practices after we’ve provided them with the bailout money. A few examples:

-The average costs of checking-account fees, including ATM surcharges, bounced-check fees and monthly service fees have soared to record highs, according to a new study by Bankrate.

-The average bounced check and overdraft fees could hit an average of $40 by the end of 2009, according to one analysis.

-Credit cards are now increasing interest rates on customers who have had no change in their finances; while the average rate is about 15 percent, someone who pays late just once could see their rate top 30 percent. Here are few tips to deal with abusive bank practices from an appearance over the weekend on Fox New York:

My Yahoo!Finance column that posts August 7 looks at the silver lining in the real estate downturn: The possibility of challenging your property tax assessment. Some jurisdictions make the process incredibly easy – even sending you the form to fill out to make your case. Others are complex, have tight deadlines, and don’t tell you exactly what proof is required.

For example, in my home state of New Jersey, the state relies on a “presumption of validity” standard – in other words, the tax assessor is always right unless you can prove him wrong. The homeowner’s evidence has to be “definite, positive and certain in quality and quantity to overcome the presumption” – which in terms of grounds for protest, has to be about as vague as it comes. (For instance, see this 2007 Superior Court ruling for an example of a Jersey man who bought a property for $40,000 in 1991, and the county reassessed its value at $360,000 in 2004. He appealed. And lost. Ouch.)

In that case, you may want to hire an attorney or other tax consultant to protest your assessment. Tap colleagues, friends and family first for recommendations. When you contact the attorney, ask for four to five references and documentation of his case record (you can also obtain this at the county government offices.) The attorney should be a member of the International Association of Assessing Officers, the group of professionals who do tax assessing. Ask how his fees are structured, and whether he would be willing to work on a contingency basis (a percentage of the tax reduction).

My Yahoo!Finance column that posts on May 23 looks at getting the best deal on a home purchase now. Following are the top 20 overpriced markets (ranked from most overpriced on down) and the most underpriced (ranked from the best deal on down), according to Moody’s Economy.com.

The company determines an “equilibrium price” for the market based on its analysis of long-term supply and demand trends. The ranking “highly overpriced” indicates that the current market house price is more than two standard deviations above its historical relationship with the equilibrium price. A “highly underpriced” ranking indicates that the current market house price is more than two standard deviations below its historical relationship with the equilibrium price. 

Top 20 Highly Overpriced Markets

1. Lynchburg, VA
2. Roanoke, VA
3. Asheville, NC
4. Brunswick, GA
5. York, PA
6. Lancaster, PA
7. Harrison, VA
8. Richmond, VA
9. Knoxville, TN
10. Grand Junction, CO
11. Lewiston, ID
12. Auburn, AL
13. Charlotte, NC
14. Charlottesville, VA
15. Bend, OR
16. Charleston, SC
17. Pascagoula, MS
18. Savannah, GA
19. Harrisburg, PA
20. Miami, FL (metropolitan area) 

Top 20 Highly Underpriced Markets

1. Sandusky, OH
2. Toledo, OH
3. Lafayette, IN
4. Canton, OH
5. Muncie, IN
6. Dayton, OH
7. Akron, OH
8. Youngstown, OH
9. Memphis, TN
10. Terre Haute, IN
11. Columbus, OH
12. Cleveland, OH
13. South Bend, IN
14. Rochester, NY
15. Rocky Mount, NC
16. Kokomo, IN
17. Springfield, IL
18. Cincinnati, OH
19. Jackson, TN
20. Fort Wayne, IN 

My Yahoo!Finance column that posts on May 23 offers tips on getting the best value out of your home purchase. For parents, of course, perhaps the most important aspect of the search is the quality of local schools.  

As I mention in the column, start your school search with a website such as greatchools.net and schoolmatters.com, which offer data on school size, class size, household income, household education levels, ethnicity, number of single-parent households, district expenditure per student, teachers’ educational achievement, performance on state tests, and percentage of students who go on to college.  

Double check what these sites say about class size. I noticed schoolmatters.com stated that a school near me had 12 students in a classroom, when the school web site said the number was 20. States may report smaller class sizes because they are dividing the number of children by all instructional staff – including reading or math tutors, teachers’ aides, etc.

When you’re looking at instructional staff, especially at the high school level, ask how many teachers are certified in the subject area they are teaching. Also ask about trends in test scores, says Susan Shafer, director of marketing communications, for School Evaluation Services at Standard and Poor’s. “A spike in reading scores might be because they changed the test,” she says. Look at the financial data for the district and state, and see where the money is being spent – on administration, teachers in the classroom, buildings, etc. 

Go beyond school rankings in the media. Newsweek, for example, assembles its annual “best high schools” list (just out this week) based in part on the number of students who take and pass Advanced Placement (AP) and International Baccalaureate (IB) exams – courses designed to replace introductory-level college courses. Yet 40 percent of U.S. high schools don’t offer AP courses, and some highly regarded school districts are eliminating them.

Meanwhile, “just because school ranked doesn’t mean it’s going to be best for your child,” says Shafer. “We try and focus on how well a school serves kid at every level – how well they are educating kids on the bottom and kids in the middle as well as the top.”

Look at the school’s web site, and see if extra curricular offerings jibe with your child’s abilities – whether its sports programs or a chess club, she suggests. “The biggest mistake is listening too much to what other people say,” she says. “Don’t go by the fact that people say it’s a good school. You have to do your own homework.”

I loved this piece, “Every Penny Counts” in The New York Times Real Estate section on July 29. It profiles four new homeowners who came up with downpayments to buy co-ops and condos in Manhattan by super-saving.

All of them made significant lifestyle changes in pursuit of their homeownership goal – giving up smoking, cooking instead of dining out, taking advantage of free cultural events, eliminating spontaneous purchases over $50; one even sewed her own clothes. Over a period of several years, they managed to save from $17,000 to $98,000, on salaries of $85,000 to $100,000.

I saved for my home downpayment the same way – walking to work, taking the subway instead of cabs, brown-bagging my lunch, shopping sample sales for clothing, getting the best deals on vacation flights and hotels (or scheduling vacation days around a business trip). Frugal habits tend to become ingrained, which is a good thing, since now I’m saving for my kids’ college educations.

The story underscored a couple of key lessons for would-be savers:

Get a mantra. When tempted by a purchase, new homeowners Janey Lee and Pablo Aguero would ask themselves: “Do I want an iPod or a house? Do I want a latte or a house?” Believe that every penny counts.

Make friends with people who support your goals. One of the men profiled, Obi Onyejekwe, moved from Atlanta to New York, and talked about how difficult it was to save after making new friends. He said he found himself going out three or four times a week, and when he relocated to be closer to his friends, his rent went from less than $800 a month to $1,350.

How did he get back on track with savings? By making friends with people who were also obsessed with owning real estate. Together they found fun, affordable dance parties and restaurants. All eight of his co-workers were able to buy apartments as well.

Frugality is not about denial – it’s about creativity. It’s also about admitting we’re not Bill Gates – we can’t have everything. We have to make choices about how we’ll spend the money we have, and the best way to do that is to set goals based on your values, and prioritize them – whether it’s paying off debt, buying a house, or saving for college. Then be creative. Mr. Aguero described it as a mind-set: “If you want to own a place, you have to do everything to own a place and everything else comes second.”

Click here for ten ways to cut costs and save money for your goals, and here for an overview of savings accounts. Did you fulfill a dream by saving carefully over a long period of time? I’d love to hear how you did it.   

In today’s column in Yahoo!Finance, I discuss research that shows some people who pay down their mortgages early may be better off putting that money into a tax-deferred retirement plan, such as a 401(k). Here’s a simple formula to figure out which option makes the most sense for you from a wealth-building perspective:

1. Take your mortgage rate, and subtract your interest expense deduction (your tax bracket multiplied by the mortgage rate) to get the after-tax cost of your mortgage.

2. Look at the rate of return of a conservative investment in your 401(k), such as a government bond fund. Subtract the after-tax cost of your mortgage.

Example: Bill has a 30-year mortgage at 6%, and he is in the 25% income tax bracket.

1. 6% – (6% x .25) = 4.5%
2. Bill can invest in a conservative bond fund in his 401(k) that yields 5.5%. He effectively earns 1% more on his money by putting it into the 401(k) versus an extra mortgage payment. (5.5% – 4.5% = 1%).

More importantly, if Bill’s employer offers a match on 401(k) contributions, it’s a no-brainer to put the money in the 401(k).

I used to make an extra mortgage payment every year, but switched to investing the money when yields on conservative investments started to rise. For some folks though, this is not a mathematical issue but one of security — they just want that mortgage paid off. For people who are very debt-averse, the peace of mind of paying off the house more quickly is worth the price.

Just when I thought the real estate boom had expired, a home in my town went for $100,000 over asking price last month. Marissa DiNatale, economist with Moody’s Economy.com, tells me that New Jersey is one of a select handful of real estate markets continuing to appreciate in value. “The greater New York City area in general is doing well, although the rest of New York state is seeing declining house prices,” she says.

Other areas still enjoying single-digit growth: Philadelphia, parts of Delaware, northern California; Ventura County, California; and the Pacific Northwest, including parts of Washington state and Oregon. “Very few places are seeing double-digit growth,” she says. “But it’s all relative – you can have a year-over-year price decline, but if bought three years ago you’re okay.”

According to the National Association of Realtors, these are the 25 markets that enjoyed the most appreciation the last five years.

My March 30 column on Yahoo!Finance outlines the top five preventive maintenance projects for spring – tasks that can save tens of thousands of dollars in repair or replacement down the road. You can find the first five tips at this link: http://finance.yahoo.com/expert/article/moneyhappy/27797. The other tips that didn’t make the column follow.

(Not a homeowner? For more tips on saving, getting out of debt and managing your money, click this link www.moneyandhappiness.com.)

6. Test your air conditioner as soon as the temperature rises above 40 degrees. If you wait until the first hot day to try it out, you may find yourself waiting a week or more for a repairman in the event of a problem. Ask your contractor if they offer an early-bird discount.

7. Inspect decks and patios. If you have a deck, sometimes the fasteners will back out, and the deck boards will warp slightly. Screw them back in with drive-it type galvanized screws rather than nails, recommends David MacLellan, author of The National Home Maintenance Manual. Wash and seal the deck with an ultraviolet-resistant sealant. As for patios, look for heaves and cracks, especially if you put salt down in the winter, which can eat away at the top surface. Brush down the areas affected by salt and power-wash the patio. See this link for information on renting the right kind of power washer. http://www.ehow.com/how_172493_rent-pressure-washer.html Replace crumbling concrete or stone.

8. Inspect fencing and grounds. If you find nails sticking out of fencing, remove them and replace with a larger nail in the same hole. Take a walk around and inspect the grounds of your property, keeping an eye out for critters that have taken up residence under decks. If you have firewood stacked near the house, move it at least 30 feet away to avoid termite infestations. Cut back bushes or other landscaping that scrape against the home’s exterior. We have several trees in our yard that are more than 100 years old; we call a tree service this time of year to make sure they’re still in good health (and not in danger of falling on the house in a storm).

9. Have your chimney professionally cleaned. This removes the build-up of tar and creosote from the flue, and helps avoid flue fires.

10. Test your landscape irrigation system now, before your plants are dying for a drink. There may be sprinkler heads that have broken open or valve that’s malfunctioning. Test each station; MacLellan recommends having two people do it together with cell phones, one at controller, and the other verifying whether or not it’s working. “If a valve is broken, you can buy a new one for $20 and screw it into valve top,” says MacLellan. “If the head is bad, you just have to dig it up, cut the pipe and glue on new pipe and head for less than $100.” Make sure the sprinklers do not hit the house or other structures on the property.

10. Remove the drain traps and get the gunk out. See this link for a how-to. http://www.mrrooter.com/plumbing/guide/drain_traps.aspx

11. Test your sump pump. Before the first April showers, pour water into the silo until the pump clicks on. See this link for more info: http://www.ehow.com/how_16652_understand-sump-pump.html

12. Replace the batteries in your smoke and carbon monoxide detectors and check that fire extinguishers are still in operating order. 

You can download a free Home Maintenance Guide and Checklist at http://www.housefixit.com/.