Eleanor P.’s story is fascinating. It took a major event — being sent to collections for her student loan — to start managing her money. She has some family experiences that have made her want to be financially independent, and she keeps a close budget. At the same time, she doesn’t consciously budget for indulgences like clothes, and has few people her age who she talks to about money. Take a look at Eleanor’s profile below.
Name: Eleanor P., 25
Lives in: Seattle
Income: $40,000 / year (pre-tax)
Works at: Microsoft, as a writer
When did you get started managing your finances?
I decided I needed to be more proactive. I was at a point where I was doing nothing and realized I needed to do something. A lot of the stuff I had been doing had been a whole lot of nothing. And even destructive “head in the sand” nothing.
I had gotten an MA at the University of Toronto. I had taken out a bunch of loans from the government, but I didn’t have enough $ to pay for the entire year. So I got my student loan check for $20,000, paid 1/2 my tuition, and lived off the rest for the rest of the year. I didn’t pay the university with the rest, thinking I’d pay them. I moved home, I got a job, and then they started calling me: “So, about that $10,000 you still owe us…”
Then they sent me to collections.
That was the turning point?
Yeah. I finally called them up, saying no more of this pretending. I had just been sticking my head in the sand. It was at that point that I realized I’m not making a lot, but there’s no reason to be this way. I decided I was going to make some changes. I set up a payment plan, check for $250. They were kind enough to stop adding interest. I owe them about $5k now. I’m slowly paying that down slowly. When I ran the numbers, I had an extra $200 each month that I could set aside, that I could scrape together. I decided I was going to try to invest it.
I called some no-fee financial planners. They literally laughed in my face. “How much do you have in debt? Call us when you have something to invest.” One of my co-workers got invited to one of these lunch deals by Ameriprise. No one that I knew knew anything about investments or financial planning.
What are the financial pressures you face as a woman?
My mom was a single parent, so I grew up in a household talking about money. I heard everything about money, down to “I don’t know how we’re going to pay for groceries next month.” I think this is more me, but I feel like I have to be totally and entirely 100% independent. I think that’s pretty uncommon. I know that when I meet other young men, I come across as intimidating because I’m so fiercely independent. I’m terrified that I’m going to end up in the place that my mother is in. That is, at 50, she’s disabled and does not have any retirement money to speak of–none, absolutely none–and is unable to work. She is married, fortunately, to someone that we adore, and who is willing to take care of her. But I’m terrified that I will find myself in a position where I’ll be in a position like that. So I want to build a financial position where someone doesn’t have to take care of me.
Tell me about your frustration with your bank
I’m frustrated with Ameriprise. It feels like walking into a department store to get a pair of pants that are made to fit everybody. You need something that’s a little more flexible, and custom-fit for you. I need something to grow and stretch with me to help realize that I don’t know what I’m going to be doing for the next 3 years. I feel like i explained it, and he heard me, but the particular systems are set up to not be particularly flexible. For example, I don’t even know if I’m going to be in this country in 2 years.
The fee for the year for the service is $300. Still, that works out to $25 a month, not so bad considering I’ve no idea where to start or how much I should be aiming for or anything like that.
The guy at Ameriprise set me up with a money-market account that has a sub-account. The main account is where all of my paychecks go, and all of my bills get paid out of this. Every week, $150 gets forwarded from this account to my old Bank of America acct, and this is my gas/groceries/new shirt from banana republic money. This system mostly works out — if I get stuck (about once a month), I can cover the difference with a check drawn against my Ameriprise acct. The second Ameriprise acct — the sub-acct – is my “investment” acct, and has about $1300 in it now; about $275 gets automatically transferred into this every month. Joe, my Ameriprise dude, has started pestering me recently, because I’ve reached the $1000 threshold where I can start investing (according to their rules), but for a variety of reasons, and because I’m beginning to feel like I’m wanting to bail, I haven’t been calling him back, and have just been letting the cash accumulate.
For one thing, the website is TERRIBLE. It obfuscates how much you actually have versus how much you owe, and doesn’t give you streamlined access to moving things around. I think the worst part about the website being so bad is that I feel like I have less day-to-day control over where my cash is going than I did when I was just moving things back and forth between my checking and savings account at Bank of America. The Ameriprise bill-pay section of the website has its own separate login (totally unintuitive — long stretch of ones and zeros), and you can’t look at your bills AND your account info at the same time. Genius, eh?
For example, it can take up to 5 days to transfer money. You think you can plan for it, but that’s not how I am, and I’m getting fed up with it. I’m getting bank overdrafts, when all of last year I hadn’t had an entire one. It makes me think, ‘I’m working so hard, making more than I made last year, and this stuff shouldn’t be happening.’ And so it feels like the system is inflexible.
And I’m at a loss because it feels like there’s so much information, it’s hard to parse it all, and it’s so easy to get overwhelmed. I’m a smart girl, but I don’t know where to start.
What’s surprised you about your personal finances?
My mother and stepfather finally kicked my sister and me off the family cellphone plan, the very last vestige of family support. So I had to call up T-Mobile and take control of my cellphone. And after the whole fiasco of collections, I was convinced that my credit score was just going to be in the toilet. I was prepared for them to say, “We’re going to put you on the probationary plan,” and I’d be embarrassed. And then the rep said, “You have really good credit!” And I said, “Seriously?” (laughs). I guess that putting all your bills on automatic payment does wonders. That was really surprising! She said, you’re in one of our top tiers!
What’s your budget like?
I make $663/week after-taxes. $800/week pre-tax. (Her hourly rate is $20, making her income about $40,000 per year.)
$150 week: Goes into BofA account. This is my cash for spending: Gas, grocery, daily incidentals, going out.
$100 /month car insurance
$550 / month for rent
$50/month for utilities
$50/month for choir I sing in
$100/month for paying off dentist
$320/month savings account at Ameriprise
$250/month to University of Toronto (no interest rate)
$226/month goes to Sallie Mae (4%)
Let’s talk about women and men and money. How do you think you differ from a guy your age when it comes to money?
I don’t drink much. I don’t play video games. So I don’t spend a lot on gadgets. …It’s probably easier to think that a lot of guys spend less emotionally than women do. It’s easier for me to buy myself a shirt as a pick-me-up. The process of buying new clothes is comforting. (I don’t do that very much, though.) I feel like guys probably spend more money on toys. And we spend more on clothes.
You mentioned buying as a pick-me-up, as a comfort. What is buying something comforting from?
It’s kind of exciting to get something new, you know? It makes me pretty, and I think that there’s something nice about rewarding yourself. And that having something — within reason — that you can put on…that makes you feel like you stand a little bit taller. Whether that’s to catch a certain guy’s eye, or to give you a different feeling in a job interview, those are all things that you need. If you earn an extra $50 and you’re having a crappy day…sometimes that’s $50 well spent.
What’s your philosophy on managing money?
Sometimes I think that managing your money is knowing when to spend your money, because it’s not worth it to be wealthy and miserable. You don’t want to be someone who has to buy love, or buy happiness and continue to spend money to feel good about yourself, of course. But sometimes that little extra indulgence can be the difference. A nice pair of earrings. It’s that little bit that can make the difference.
When was the last indulgence you had?
The last indulgence I had was 3 days ago. I bought a blouse from Anthropologie that’s made of summery cotton. It’s very pretty, quite flattering.
You know, before, I was working and didn’t make very much, so I got a part-time job at Ann Taylor, where I got a spectacular discount. I stayed at that job partially because I could build a wardrobe.
I noticed you didn’t put in an amount for shopping in your budget.
Yes…um…that’s sort of a bone of contention. If you run the numbers, there’s about $300-$400 each month. That’s sort of cushion money, or if I decide I really need a shirt from Anthropologie.
What’s the best financial move you’ve ever made?
Calling up the University of Toronto and setting up a payment plan. The woman I spoke to was so sweet, kind, so nonjudgmental. She said, “I’m so glad you called us up. We’ll work something out.”
How informed are your friends about money?
Not very. It’s kind of an uneasy topic. I find that I’m a lot more outspoken than my friends about it. There’s still this feeling that money isn’t something you talk about. Money, sex, religion…things you don’t talk about. I’m in a choir, and the women in their late 30s to 40s, are a little bit more willing to talk about it. But they still don’t speak in specifics. My younger friends are wide-eyed at all of it.