How a Woman Planning a ‘Money Makeover Year’ Does Money

Photo credit: Omar Bárcena, CC BY 2.0.

Allison (not her real name) is a 31-year-old government worker in Los Angeles.

So, Allison, how much money are you making?

I make $85,000/year and my take home pay is $4,365.80 per month (I’m paid monthly).

This is unusual for my field and I’m not sure how it happened. I graduated with a master’s in 2010 and at my first job I made $55,000. I’ve had four jobs since 2010 and about nine months of unemployment.

Is it unusual in that you’re making more than expected, or less?

I work in policy and most of my counterparts make less.

So I make more than expected, but I think that’s (in part) because I’ve taken some risks and accepted two short-term jobs, and each time my pay has increased. If I stuck with one job the entire four years I would maybe be making… $70,000?

OMG, six years. Hah. Six years since I graduated with my master’s, not four.

2010 was a long time ago.

Right?! It feels like last year.

Also, it was right in the middle of that economic crisis (you know, the one that’s still kind of going on, at least in terms of its aftereffects).

Totally. That’s how I ended up at grad school to begin with. I graduated undergrad in 2007. I could have wallpapered my bedroom with all the rejection letters.

In 2010 it felt like people were doing hiring freezes and wage freezes. What do you think contributed to your landing that first job?

That first job was an internship I had in grad school. Right as I was graduating one of the full-time employees left the company and I essentially took her spot. They offered me $48K, and I negotiated up to $55K.

Tell us how you negotiated! Did you plan your strategy in advance?

Yes, I definitely did.

My internship was at a private company, but thankfully there are similar positions in the public sector that are required to post salaries. I used the published salaries, and I spoke to former graduates and asked them what they started at, and I sorta leveraged the work I did as an intern.

It helped that I had two managers that liked my work and put in a good word for me.

I also gave a range. I didn’t go in there and say “I want $55K,” I said something like “mid to high $50s” and we settled on $55K.

That is fantastic. I am so impressed!

Haha, thanks.

Have you negotiated each of your subsequent offers? And your raises? Do you do this ALL THE TIME???

Yes. I always found it important to leverage your skills, how you can add to the company, not “I want $X because I can’t pay my bills with less.”

I negotiated three of my four jobs, but the last offer was so good I thought it would be insulting to ask for more. (Does that make me sound like an asshole?) Plus I was unemployed and getting desperate, so I took that gift horse and ran.

The raises within jobs I haven’t negotiated as much. Mostly just the starting salaries.

Still, I know I haven’t negotiated as much as I should, so I’m glad to hear that you’re doing it!

Now that we know a bit about your income, I’m curious about your expenses.

Yes! This is a very exciting day for me. I just got paid and with that paycheck I was able to pay off the last of my debt.


Thank you!!!!! I never thought it would happen.

This time last year I had $9,450 in credit card debt and $5,000 left on my car. And as of THIS VERY MOMENT those are both gone. Like “poof” they never existed.


Thank you thank you thank you!

What are your other major expenses every month?

Rent is $1,055 for 450 square feet of my very own.

Utilities are included, except internet which is $39.

Cell phone is $77, car insurance is $110, and my lovely student loan is $366.

I pay about $200 monthly for therapy — those are the fixed expenses.

So 450 square feet — is that a studio or did they manage to squeeze in a bedroom?

Definitely a studio, but with a full kitchen. It’s cheap for the area. The new building next door goes for about $1,600 for a one-bedroom around 700 square feet, but I live in a historic building that lacks a lot of the amenities the other buildings have. By “historic” I mean sometimes I don’t have hot (or cold?) water.

I was wondering about that. $1,055 for Los Angeles seems lower than I was expecting.

I live in a cheaper area for sure, which means I commute lots and lots.

Do you have hot water workarounds, like electric kettles?

The plumbing is just old, so about once every other month I either don’t have hot or cold water because they are working on the pipes.

Oh, got it. I have also experienced the “sorry, we’re working on the pipes” note slipped under the door.

Oh, it’s fun.

Do you have savings accounts? 401(k)s? IRAs? How does that fit into your earning/expenses plan?

This is one of my money goals for the year.

I have a pension with the state and I also have an old 401(k) from that first job. In total I have only $25,000 in retirement at this moment.

Now that my car debt and my credit card debt are gone, my next plan of attack is to put more into retirement (even though I don’t exactly know what that means yet) and build my emergency fund. I have maybe $1,000 in my checking account since I paid off the last of my credit card debt today.

Are you comfortable sharing how you built up your credit card debt? I’m curious if it was for reasons like “a lack of an emergency fund” (and then you can’t build up your emergency fund because you’re paying off your debt, and so on).

Most of this debt was a combination of unemployment, living beyond my means, and dating a mooching man-child for a boyfriend (which is basically also living beyond my means).

The biggest chunk was unemployment for sure. I was unemployed for nine months and it slowly started to build. Before unemployment I had about $2,000 in credit card debt, mostly from graduate school, car repairs, and a few medical bills. When I started working again that debt was almost $10,000. Most of it went to living expenses, car maintenance, life in general, and then some was overextending myself while dating a man-child. Vacations too.

I should go back through all of my Doing Moneys and see how many people mention relationships as part of their “why my finances aren’t as good as they should be.”


Also, I continued with therapy through unemployment and that had to be paid in cash so it took away money for groceries and such.

It’s interesting to think about what bills require cash. Rent always seems to. My therapist did direct debit, and I don’t know if she would have taken a credit card. [ED: her website indicates she would have.]

Yep. I put my car payment and my student loan payment on hold, but the rest I had to pay.

So now that you’ve got that debt paid off, you’re going to start building up the emergency fund and retirement. Do you have other financial plans? Long-term goals?

I consider this year my “Money Makeover Year” and I have five goals:

  1. Pay off consumer debt (done!)
  2. Split checking account into two accounts, one for fixed and one for discretionary
  3. Actually use my savings account
  4. Refinance my student loan
  5. Build an emergency fund
  6. Contribute more to retirement

Okay, so that was six goals, although splitting my checking account is more of a logistics thing.

My long-term goal is to not be broke in retirement and my forever-term goal is to stay out of credit card debt as much as possible.

I love those goals and am adopting them as my own.

Thank you, that is an amazing compliment on my goals.

I love talking to people and then using what I learn from them to improve my own finances! I think that is kind of the mission of The Billfold.

I learned almost all this from The Billfold.

Once you split your checking account, how do you decide what goes into fixed and what goes into discretionary? Are you always going to fill the fixed account first, and try to work “one month behind” on the discretionary account?

It’s still a new plan, but I am going to have the fixed account for rent, utilities, cell phone, insurance, therapy — anything that’s fixed plus a little extra for my yearly bills. If I join a gym that will come out of this account too. Then I’ll just move $1,000 into my discretionary account for food, gas — things that are variable.

I’ll also move my savings into my actual savings account every payday, which I will do one month behind so I always have a little cushion.

I get paid once a month on the same day that rent is due, so I need a constant $1,000 in the fixed checking account.

Got it.

New topic: what do you think you do really well financially, and what do you wish you could do better?

I think I’ve learned to let go a bit. I used to monitor my account ALL THE TIME and use Quicken to budget to the penny. I would agonize over everything and then I had to step back and just accept that I will always spend $75 on my hair appointment and a couple hundred on food.

Is that a skill? Hah. I am also aware of everything, like I knew exactly how much I was in debt and it was at 0 percent interest, I know my loan is on a 20-year repayment plan at 6.7 percent interest. Even though I couldn’t fix it at that moment at least I knew where all the dollars were around me.

I could do better on my long term savings stuff. I’m finally at a point where “savings” can be a real thing.

I need to make sure to not allow lifestyle creep to erode my long-term savings goals.


LOL, yay! Solidarity!

Every time I earn a little more money I want to upgrade some of my stuff!

Me too! It’s that balance that makes it such a struggle. Like, “will this vacation feel better than paying off my credit card?”


Sometimes yes, but mostly I just didn’t know because I didn’t know what it was like to not have credit card debt, LOL.

So two more questions:

First, how did your family influence the way you interact with money? Did you pick up habits in childhood that stuck with you today?

Oh man. My parents are divorced and my dad paid my mom a lot of money in child support, but my mom always acted poor.

It was so bad we thought she might have a drug addiction or something because the money just disappeared. I later learned (as an adult) she had an insane amount of credit card debt at like 23 percent interest.

So my mom always said things like “we are broke” and then take us out to dinner — total mixed messages as a child and man I fought that hard as an adult. I would look at my account and go “I am broke, I can’t buy anything” and then go to a movie.

I’ve also done that, because the cost of a movie is so small that it doesn’t “count.”


There was that quote from Ester’s interview with Heidi Moore about how we buy these things even though we can’t afford them because we haven’t budgeted time for self-care.

Like we go out to dinner because we haven’t budgeted time for shopping and cooking, and so on.

Yes! So much of that. I used to have about $200 each month that I didn’t account for, so eventually I gave up and just accepted I will have $200 extra expenses each month.


So yeah, growing up I didn’t learn how to budget or plan for things. Expenses came up and we scrambled and my mom felt broke all the time, but she also never said no.

My dad was great with money and still is, but I wasn’t around him as much, plus he was a bit bitter he paid my mom so much money and the kids felt so poor.

Did you educate yourself about finances later? Or just read The Billfold for years, LOL.

It seriously started with The Billfold.

I would read finance stuff, but none of it stuck because it felt like it would never apply, like who has an extra $300 a month for retirement? So I would tune it out.

The Billfold felt real—and now that I have more cash, when I do read finance stuff more of it sticks.

Which brings me to my last question: What advice do you have for Billfold readers?

So many little things I learned here: Get renters insurance (which saved my ass when my car was broken into), get your cards at 0 percent interest if you can, put your payments on hold if you’re unemployed, have concrete goals… it’s okay to mess up, it’s just money.

For a long time I felt like my student loan and my car loan were a big mistake, like I really messed up and got in over my head, but then I came here and so many of us struggle with that.

Life costs money! We all have to figure out how to make it work, even though we don’t always make the most economically optimal decisions.

Sometimes we don’t have access to the “good” choices, other times we don’t know what they are.

And yes, it’s okay to mess up sometimes, it’s just money.


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