How a Communications Professional Near Detroit Does Money

Rachel (not her real name) is a 38-year-old communications professional living outside of Detroit.

So, Rachel, tell us a bit about your finances.

Sure. I’m currently making $70K/year. I have no outstanding debt — I recently paid off my car, I have no credit card debt, and I was fortunate enough to have college paid for.

A year ago I sold my house and combined households with my boyfriend. So, I’ve been concentrating on household stuff and savings. I’ve got a nice 401(k), a life insurance/investment account, a mutual fund, and a savings account.

Oh, and travel. We’re either spending large sums of money on the house or on trips.

This sounds great. I don’t even know where to start. So let me ask you this: you sound like you’ve got a pretty good financial setup. What is currently worrying you about money?

Well, like everybody I’ve certainly done dumb stuff in the past. Typical, not paying attention to the bank account, using the credit card like I’d never see the bill behavior. I realized I made too damn much money (not baller money, obvs, but still) to be pulling this crap. That was the first round of getting my act together.

The next was buying a house with somebody that had no interest in managing their finances, leaving me to be the CFO. When I took over the house myself, I really needed to be secure.

And then the general terror of being a broke old lady. I don’t want to be nearing retirement, see the market tank and have to put off my plans. I want to have enough laying around to fix the roof or bounce off to Europe if an exciting offer comes along.

My financial planner totally makes fun of me. “You’re so young! It’s great that you’re planning, but you can calm down a bit!”

Ha ha, well, you and I are both of an age where we’re “young” but also not. Retirement approacheth!

Exactly. I thought of him last night when I was gathering all the same info I take to him… he always giggles at me for being so organized.

So how much credit card debt did you end up paying off, and how long did it take you?

Oh, boy. It was 10+ years ago… so maybe $5K? It took a year or two, I think. I called both of my cards and got them to drop my rate to something insane, like 3–4 percent. Nothing anybody would do now! And then I put them away. If the cards aren’t with me, they can’t cause any trouble.

I’ve paid the bill at the end of every month since.

Now that you’re in your new living situation, about what percentage of your income is going towards the cost of living, what’s going towards discretionary/fun, and what’s going towards saving/investing? I’m assuming you have a lower cost of living post-move?

Our combined cost of living is now so low! My household expenses are about $700. Mortgage, utilities, etc. I put $200 in savings each month. It’s direct deposit, so I don’t even see it. $350 goes to the life insurance/investment account, also via direct deposit.

As far as the fun money… I don’t really have a budget. We’re certainly done with big events this year. We also just financed new windows for our entire house. We live in a house built in the 1920s, so it was expensive.

Wow. My household expenses are almost twice what yours are, and I’m living in much less house! Is your location generally a low cost of living area, despite your expensive 1920s house?

For sure. I also work from home, so transportation costs are super low. The area we live in is on a major upswing, housing-market-wise. When I moved in and we refinanced, the house was appraised far above what the original mortgage was for. We also both have credit scores over 800 so we got a really great rate.

The expensive thing about a house this old is that every single thing you do is custom, because there weren’t standard building codes back then. You know you’re in trouble when the person giving you a quote hears the year it was built and sighs. And they do every time.

I bet a lot of people don’t think of that re: old homes, so that is super-useful information.

Seriously. A random exterior door that anybody else could go to Lowes and fetch for $250 was $650 and had to be special ordered.

It looks like you started out in a home situation with someone who was maybe not as financially savvy, and now you’re in a better situation with someone who supports better financial choices. Is that a fair assessment?

Yes, exactly. And, thanks to lessons learned, we certainly had some big conversations before that happened.

And the follow up is, of course, how can you tell whether you’re picking a person who is good or bad with money in advance? Do you have tips or thoughts?

How are they paying their bills? What dollar amount do they consider a big purchase? Are you going to share a bank account, is one person going to act as CFO? How does that work?

I’m (clearly) a high strung, organized Type A person. There was a big conversation about that.

Meeeeeee too.

We also had an agreement — I was selling my house, losing equity and moving into a house that needed major work. I’ve piled a lot of money into a place that I do love, but requires so much work I would not have agreed to it at the time of purchase. So, the deal is, he’ll be making me a co-owner outright.

So I did not ask earlier re: retirement: how much do you have in retirement savings right now?

Oh, sure. Full breakdown: 401(k): $150K (fully vested); investment accounts: nearly $20K; savings hovering right around $9K.

Have you done the calculations to predict how much you’ll have when you retire?

Not that specifically, but thanks for the nudge! I totally should. I think I’m still in “how many adventures can I have” mode.

Well, I think we can do a quick estimation right now:

If we combine your two investment accounts and use $170K with a very conservative 3 percent rate of return for the next 30 years… you’ll have $412,634.62 at retirement if you make no new deposits.

That is the most conservative of estimates, so clearly some more contributions to those accounts are in order! But it sounds like you have that pretty well under control.

Big time!

They’ve all been growing pretty rapidly. I’m not unhappy but I’d certainly like to retire before 78. I suspect I’m going to be a rather cranky old broad, I will not be workplace friendly!

By then we’ll all be telecommuting into robot bodies, so that’s okay. Last few questions: What did you learn about “doing money” as an adult?

Financial freedom, even on a small scale, is amazing. Being able to say yes without sweating the cost is excellent. I’m not talking trips around the world, but Prince tickets or a quick weekend away.

Always see Prince if you have the chance.

Trust me, I hopped on the Prince tickets.

What surprised you about money in adulthood?

This sounds so bitchy, but I’m so surprised at how little people think ahead. How can you afford what you’re doing? Are you banking college funds for the kids or blowing it at the mall?

Did your childhood experiences affect the way you did money as an adult?

My parents were always really cautious. And they’re living a hell of a retirement now because of it. They spend their winters on a beach in Florida, the rest of the year either on the lake here or traveling.

That sounds amazing.

It is. I’m mostly an airport hotel/shuttle to them.

And finally: what advice do you have for Billfold readers?

Have a financial conversation before you shack up. It will save you so much misery. And, it’s not nerdy to be super engaged in your financial life. I try to always think about future Rachel and what sort of hijinks she’s going to want to get up to. She’s gonna need funding.

We are currently looking for more Doing Money volunteers! If you’d like to chat with The Billfold about how you do money — and yes, you can be anonymous — email nicole@thebillfold.com.

Photo credit: Dave Hogg

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