How an Ad Agency Professional With a $270 Hairstyle Does Money
Claire (not her real name) is a 30-year-old ad agency professional in NYC.
So, Claire, tell us a bit about your finances.
I vacillate between feeling pretty great about my finances, and feeling slightly angsty about them.
Let’s start with the great parts.
I’ve been working, saving and investing since a young age. I was one of those dorks who started contributing to a 401(k) at age 22, the minute I got a job that offered one. I’m feeling good about the fact that next month I’m going to be starting a job with a much higher salary than what I’m making now.
I also feel good that despite my slightly laissez faire attitude toward budgeting, I always have money in my pocket for my hobbies, dinners out, weekend trips, and other indulgences.
…and now the angsty parts?
Mainly guilt that I “should” have more money saved or invested, given that I’ve had a well-paying career since I graduated from college. And slight angst that I spend too much money on clothes. This calendar year, I loosely budgeted $1200 for new clothing purchases for the year, and blew past that amount by February.
Well, let’s take a look at that guilt, then. How much money do you have saved, and how much money do you have invested? (You realize whatever answer you give is probably going to be way above the average savings/investing rate, yes?)
Given that the average savings rate is less than 0, of course!
I currently have $22,500 in my savings account. I have about $44,000 in IRAs and $91,000 in 401(k)s/rollover IRAs.
How much do you feel like you “should” have in those accounts?
I’m pretty happy about my investment balances. I’d definitely like to have more in savings though—$50-60K.
How much of your current income are you saving/investing? Do you plan to increase that with your higher salary?
Currently, I max out the amount I can legally contribute to my 401(k). Each year, I also max out my IRA contribution. Beyond that, I’m not great about saving. My savings account has been in the low $20,000s for a few years now, even though my income has increased 35 percent or more in the past 3-4 years.
When my checking account balance gets high (above $1,500 or so) I will transfer some money into my IRA, then savings. I don’t use Mint or anything, but I get text updates from my bank regarding credit card balances, checking account balances, and text alerts whenever I make a purchase or withdrawal over $50, so I keep a close eye on things.
I don’t have any debt — student loans, mortgages or otherwise.
So what has your extra income gone towards, aside from savings? Rent? Clothes?
Despite living in a high cost of living city, I currently live with roommates so my rent as share of my income is quite low—around $1,100 a month, including utilities. Beyond that, my income goes toward all the usual stuff, and I have a passion for vintage clothes so I spend way too much money on that. I also spend money for a dog walker/doggie daycare for my dog, which can easily be $200 a month or more.
I’m not huge on Seamless or fancy dinners, but I each lunch out most days. My food budget is somewhere around $300 a month—maybe less.
I also spend $200+ every couple months on a haircut and color. Haircuts come to $96 a pop, and professional color comes to $172 a pop.
Do you consider your hair/clothes a job requirement? As in, you need to look a particular level of professional at all times?
Not all times, but most times. I work in an image-conscious industry. When I upped my game in terms of grooming and clothes, the response from my co-workers and clients was extremely positive and while I was able to land a new job based on my merits, looking the part certainly helped!
So when you start your new job with the higher salary (congratulations, by the way!) do you plan to change your spending/saving at all? Or just keep doing what you’re doing and maybe have a little more left over each month?
That is the question I’ve been turning over in my mind. The temptation to spend more is going to be huge, but I need to resist lifestyle creep as much as possible. I hope to continue maxing out my IRA and 401(k), and get $50-60K in my savings account ASAP. I’m also thinking of talking to a financial advisor.
I know myself, and I know that I need to get aggressive and disciplined about saving/investing, otherwise I’m just going to fritter away the extra income.
A financial advisor makes a lot of sense, as does the idea that you’ve got to discipline yourself (or plan ahead) to save, otherwise you won’t!
On the subject of “knowing yourself;” have you pretty much been the same way about money since childhood? Or did you change your attitudes towards money when you started working as an adult?
My parents are the ultimate savers. They hate to spend money on anything, really, even something like the inexpensive Mexican restaurant in town we all loved. Their fiscal conservatism paid off, since they were able to fund my college education and other educational expenses.
I started working at 14 and started a savings account pretty much immediately. My parents definitely taught me the value of saving and investing.
But I currently feel financially secure, and I’m more than happy to spend money on indulgences/luxuries that I know bring me joy. I’m trying to shift my spending a bit away from material things (because God knows I have enough clothes, shoes, and purses) and toward experiences, namely traveling.
What advice do you have for Billfold readers?
Find the fun in investing and seeing your money grow.