How a Woman Who Pays Off Her Credit Card Every Other Week Does Money

How a Woman Who Pays Her Credit Card Bill Every Other Week Does Money

Lauren (not her real name) is 28 and works at a PR agency in NYC.

So, Lauren, how much money are you making right now?

I make $68,000 a year.

How does your income compare to your current expenses? What’s taking the biggest chunk of that $68K?

Well, absolutely rent right now. I’m paying $1,425 for a bedroom in a two-bedroom apartment with a roommate. Everything else seems like small potatoes compared to that.

So your apartment is roughly $2,850 a month for both of you? What type of apartment does that get you, these days?

Yup, that’s the total rent. It’s a nice place, judging by where I’ve lived before. I’m in a decent neighborhood in Manhattan, not cool like the West Village or anything, but there are plenty of places to eat and hang out on weekends.

It is on the top floor of a sixth floor walkup, but I can fit a night table in my bedroom and we have a hall closet and exposed brick. Winning, LOL.

That is a sign of prosperity, right there!

So outside of rent, where does your money go? Student loans? Savings? Discretionary expenses?

So, the student loan question for me is kind of interesting. I had an average amount of debt when I graduated, around $27,000, and I had been paying $282.62 every month until this past November, when a relative of mine passed away and left my parents some money. My parents decided they wanted to pay off the rest of my debt and my sibling’s (don’t hate me).

No hate sent your way. Many parents like to help their kids financially, if they’re able. We only put a stigma on that because of the American culture of individualism.

Right, and the funny part was they wanted me to have the loans so I had some skin in the game, and then they did this. Kind of a confusing message.

The most amazing thing about parents is that they change too. You don’t ever expect that, as a kid — that they’ll change as much in the years between, say, your college graduation and your adulthood as you will.

Right! it is funny to realize that we’re all evolving. It doesn’t just happen to kids/teenagers/young adults.

But yeah, so no loans anymore. I opened an investment account when they paid them off, and starting putting $175 a month in there. I also add $200 a month to my emergency fund.

Oh, nice. How many months of income are in your emergency fund right now?

I’d say about 4.5 months.

Are you planning to increase that emergency fund, or at some point will you say “I have enough in this fund” and start putting more into investments or another kind of savings?

That’s a good question, and something I’ve been struggling with since the loans went away. Ideally, I’d be super comfortable with about $15,000 in the emergency fund, and I’m nearly there. I have the investment account for a someday down payment on a home, but it’s the medium-term goals that I find tough.

Like, should I open another savings account for vacations, big purchases? I think that may be the way to go, but I’m still thinking about it.

How do you pay for vacations now?

I don’t really go on them, haha. I went to five weddings last year, so those trips were technically my vacations. I try to save money on flights by flying at the crack of dawn or late at night, almost always get an Airbnb with friends, and make sure to make our own food as much as we can while we’re there.

I remember all of our Wedding Season articles last year, LOL. Weddings are expensive!

You’ve got that right. I’ve spent over an entire month’s rent on gifts alone in the past two years.

But I’m all about getting those credit card reward points, shopping sales, anything I can do to give generously but save SOMETHING while doing it.

Do you pay the balances off in full every month?

Absolutely. My partner has told me this is a weird habit of mine, but I pay my credit card every time I get my paycheck, so every other Friday.

That sounds like a great habit! I feel like I should start doing that.

Yeah, it just is easier mentally for me. I have two checking accounts, one for my rent and savings, and the other for everything else. The “everything else” account is what gets dumped onto the credit card, and I don’t have to worry about rent and savings being impacted.

How do you decide what goes into which checking account?

A while ago I decided $900 should be routed into the “rent and savings” account, and then everything else goes into the other one — so $900 every two weeks is where the rent, the investment account for $175, and the $200 to the emergency fund comes from every month.

I love this system. I want to steal it, and I bet some of our readers will as well.

Aww yay! You’re so good with money, so I take that as a compliment.

So here’s my next question: you are doing a lot of financial things really well. You’ve got the emergency fund, you’re living frugally, etc. What are your financial vices?

Hmmm, probably have to say eating out, drinking outside the home, and ClassPass, because honestly who needs to be paying $125 a month to work out, haha.

My goal every month is to spend $400 or less on restaurants and drinks at bars. I know that sounds like a lot, but man, it goes so fast in NYC.

Oh, it goes pretty quickly in Seattle too.

Do you find that you also get benefits out of that spending? Does it strengthen friendships or build work connections? (I’m referring specifically to the eating/drinking out, but that could happen at the gym too I guess…)

Absolutely. There’s just so many amazing places here to try and enjoy, and it’s nice to have something to look forward to with friends on the weekends.

My boyfriend and I do try to eat at home as much as we can together, and then if we want to see friends, we’ll go out with them.

That makes a lot of sense.

Would you have space/time to entertain your friends in your home? I feel like so many of us go out because we don’t have the space or the money to host a big dinner, like they would have had on Mad Men or something.

Plus going to a restaurant and buying your own meal is probably going to be cheaper than making dinner for eight people! I’d have to do the math on that.

You’ve got a great point. It is just easier to meet people out, I mean no one really wants to climb my stairs, haha. If you saw the little-to-no space my kitchen has, it’s way too hard to make anything beyond food for two people. I’ve got probably an arm’s length and width of counter space.

It is my goal in life to reassure all Doing Money participants that their financial vices aren’t that bad, and that our spending is much more logical than we realize.

Haha, you’re definitely helping me. It is easy to feel like “oh I should be saving more,” but you’ve also got to live a little.

I’m trying to figure out what percentage of your income you’re saving, but if you already have that figure…

Hmm… I forgot to mention I save 10 percent of my income in my 401(K). Then through the investments/emergency fund, that’s $375 a month.

If you’re saving $200 in savings plus $175 in investments per month, that’s like 8.6 percent of your post-tax income?

That sounds about right.

I’d be happy to say that between your investments/emergency fund and 401(k), you’re putting away close to 20 percent. And considering that over 25 percent of your post-tax income goes to rent…

No wonder I feel like I have no money sometimes, haha.

I did the math, it’s much more like 35 percent of post-tax income. Rent! Yay!

Right? NYC rent, get at me. Ugh.

How did your childhood experiences affect the way you interact with money? Have you always been a saver and a frugal spender?

Yes. I had my first summer job at 15 lifeguarding. I think I made like $7.50 an hour. I saved most of that money from the summer for my “spending money” during the school year — if I wanted to go to the movies with my friends, etc., that was how that was funded.

I kept having the summer jobs all the way through college, and always had that mentality: work hard in the summer, that’s the money for the year.

When I graduated from college, my parents were able to let me live back at home for about a year, so I was able to save instead of paying rent that first year. They absolutely encouraged me to have a nice solid savings account before I moved out, and I’m so glad I did.

They’ve always been frugal in some ways, but spendy in others. Like, we didn’t live in the nicest town, but we did live in a good neighborhood, because they wanted to send my sibling and me to Catholic school. So why pay higher taxes for a school you would not be using?

For sure.

I’d like to think of myself as a saver, that’s the way they tried to teach me about money.

I think of you as a saver!

Whew — Mom would be proud.

So last question: what advice do you have for Billfold readers?

Hmmm… I love The Billfold so much, I want to make sure this is good, haha.

I would say absolutely find a system that works for you, no matter if others think it is weird or whatever. Have confidence!

I’d also advise finding a partner that’s on the same page as you about money, as cliché as it is. It makes everything a lot easier when deciding what kind of weekends you want to have together, and ultimately, what life.

What is life, if not a string of weekends?

And always bargain hunt! I literally purchase everything on my credit card for reward points, use shopping portals to get Amtrak points on top of that, etc.

That’s kind of a hodgepodge of stuff, haha.

But all very good advice.

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