Comments on: Eleanor P., 25, talks about money, frustrations with her bank, independence, and indulgences

By: Anne

Anne — Wed, 18 Jul 2007 14:59:30 +0000

Ameriprise is not a good firm. It has 37 regulatory actions against it (check them out on NASD Broker Check). The ‘financial advisors’ there are really salesmen, pushing products. Go to the Ameriprise website and search on ‘conflict of interest’ and ‘revenue sharing’.

You will not be ‘advised’ to get into low-cost Vanguard index funds. I know you are in loaded, expensive funds, probably with 12b-1 fees.

This is what happens to your investments when you pay these kinds of fees (look at the chart):

http://www.retireearlyhomepage.com/advise.html

I bet you were not clearly told about all the fees you are paying. Do you know what you pay a year for fees in total? Expense ratios, loads or wrap, transaction costs, etc? This comes right out of your investments.

When you say sub-account, that scares me. Are you in a VUL or an annuity?

Look here:

http://WWW.AMEXSUX.COM

I suggest either:

A. Get your monry away from Ameriprise and into a good Vanguard (or Fidelity) Target Retirement fund, or

B. Take some time to learn to do your own investing (it’s easy) and DIY.

http://advisor.morningstar.com/articles/Doc.asp?docId=4482

By: Kibrika

Kibrika — Fri, 13 Jul 2007 15:50:14 +0000

Thanks for the post!
I agree that the actual numbers are nice though I’m too lazy to translate them into some currency that I understand.
I enjoyed the “chatty” style. Didn’t notice any mistakes.
I was happy to hear that others have a similar outlook on buying clothes and stuff:)

By: Wouter

Wouter — Sun, 08 Jul 2007 04:04:57 +0000

Ramit, great post – I’d love to read more profiles like this as well.

People, please read the posts more carefully before jumping to conclusions. Eleanor did not say she spent $300-400 a month on clothes at the Anthropologie. But if she did, IMO that type of amount for clothing only would be excessive at a 40K salary, especially if you’re working for Microsoft (I worked there for a while and dress-code is VERY informal). My wife and I are making approx. 200K gross/year and if she wanted to spend that much a month on clothes, we’d have a serious fight on our hands.
From where I sit, I’d ditch Ameriprise as a bank, switch to Tracfone as cellphone (I don’t need a lot of minutes, I spend less than $10/month on my cellphone), and I would pay off all loans agressively before starting to invest. The Sallie Mae interest is pretty low, and it’s nice that the University of Toronto does not charge any additional interest, so theoretically you could be better off investing savings rather than using it to pay off debt. However, debt is debt. I’d pay it off first so there are no surprises when circumstances change.

Just my opinion of course. I have great respect for Eleanor , I may disagree with some of the points in her plan but the important part is that she HAS A PLAN.

By: Nate

Nate — Fri, 06 Jul 2007 14:21:48 +0000

Wow! People are really fast to dish out the criticism, huh? Ramit, I think this is a wonderful profile for the following reasons:

1. Profile of subject clearly laid out (age, sex, location, income).
2. Detailed monthly budget laid out in the article, and
3. Most importantly, a brutally open and honest “confession” of this young woman’s finances and her views on not only her finances, but the role her life situation plays in developing those views.

Just the fact that Eleanor offered to do this interview/profile says a lot about the value she places on her personal finances.

I’d love to read more profiles like this. Keep up the good work!

By: Lauren

Lauren — Thu, 05 Jul 2007 17:16:17 +0000

serpah, unfortunately I don’t have a good answer for you. My husband is in love with Giada de Laurentiis, looked her up online and found that she’s married to a designer for Anthropologie. That got him interested in the store, so he looked it up and found the statistic. Since we just recently fell into that income range, he told me about it, being shocked that they determined that we could afford to shop there. I have no more info on stores demographic ranges. Sorry.

By: Matt

Matt — Thu, 05 Jul 2007 14:34:41 +0000

Eleanor might consider a Roth IRA, for the fact she can withdraw contributions early without penalty. Considering the short time frame involved where she might move out of the country, it is not as likely she will have a huge amount of gains on the investments anyhow. If she ends up staying, then these savings will have the largest impact on her retirement nest egg.

By: Raven

Raven — Thu, 05 Jul 2007 13:27:03 +0000

I was shocked by the Ameriprise description. What a waste of $300/month. It sounds as though Eleanor has begun to “solve” her problems by turning them over to someone else instead of thinking them through and educating herself. She sounded pleased with herself for taking hold of the situation, but in reality she had taken only the first step (recognizing it), followed by the second step (Ameriprise), which was obviously ill-advised. She could do much better by severing her ties with Ameriprise (assuming she hasn’t been hoodwinked into a long-term contract), putting the $25/month into savings, retaining the Ameriprise budget in a self-directed manner until she develops the knowledge and gumption to revise it, and budgeting a realistic amount for clothing and “feel-better” purchases. Then she needs to take *full* responsibility for her situation by studying the basics of personal money management, reflecting further on her own (perhaps subconscious)attitudes toward money and their effect on her current situation, and evaluating her finances regularly to see what adjustments need to be made.

By: April D

April D — Thu, 05 Jul 2007 13:18:37 +0000

I don’t think Anthropologie should be off limits to Eleanor because of her income. Some people prefer to make purchases less often in order to buy something they really want or something of higher quality. I’d rather save for months for a good pair of jeans than to buy a cheap pair that don’t fit as well. To each their own.

As for others’ comments on the editing, I think that making the profiles personal and using correct grammar, capitalization, and interruptive punctuation are two very different things. At the very least, add in a [sic] to let us know that the errors were left in on purpose. Sorry to wave my red pen around, but the English language gets enough abuse as it is!

By: serpah

serpah — Wed, 04 Jul 2007 20:33:27 +0000

Lauren, I was curious about your comment mainly because I’d like to find out what stores are my “target market” and where to find that information. I find it fascinating, really.

In my opinion, the best thing to do with “little money” is to set up a small account using ETFs (see http://en.wikipedia.org/wiki/Exchange-traded_fund) that give a nice mix of diversity and don’t charge insane management fees. Stay away from mutual funds. Build up on your ETF, which is actually traded like a stock, and has fractions of a cent on the dollar in terms of management fees. I don’t know if they have a Dividend Reinvestment Program (DRIP). If so, get on board..

That should have you starting out with a good mix of diverse stocks that will have your investments performing around where the stock market performs, which averages out to a nice fat 7% a year (I believe).

By: beth

beth — Wed, 04 Jul 2007 15:50:36 +0000

That was a great profile. I suspect that Eleanor is holding off on retirement savings because she’s not sure if she’s still going to be in the country in a couple of years. I infer that she’s Canadian, and the possiblity of moving back to Canada would probably wreak havoc with retirement accounts that exist under our country’s laws. I’d be curious to know if that is in fact the case.

I ran the numbers and she’s got $6,324 in slush funds – $527 per month on top of the $150/week allowance. That doesn’t seem egregious to me when you consider travel, gifts, clothing, car repairs, etc. It might be better accounted-for, but I think Eleanor’s headed in the right direction.

And, as a side note, I’m envious of the no income tax you’ve got in Washington.