How a High-Earning, Settled-Down Millennial Does Money

Kristin (not her real name) is a 33-year-old lawyer in Washington, D.C.

So, Kristin, how much are you making?

My base salary is $300,000 per year, but I’m on a reduced schedule right now so I make $240,000. Starting next week that will go up to $270,000. There is also a totally discretionary annual bonus that tops out at about $110,000.

By “discretionary” do you mean there isn’t a defined set of criteria for earning your bonus?

There are criteria, but it’s not so firm as “if you meet these criteria here is what you get.” It’s more that if you don’t meet the criteria (a certain number of billable hours in the year and a high rating on the annual performance review) you don’t have a chance at getting it. But even if you do, the amount you get (if any) is up to the powers that be.

I try to not ever expect the bonus.

How does your income compare to your expenses?

I feel very fortunate in how much I have for my needs. I am married, and with my husband’s income we bring in $15,800 a month net. Our rent for a 3 bedroom, 2 bathroom house in the burbs is $2,700. We pay $3,400 a month, approximately, in childcare. Those are the two really big expenses.

After that there’s things like $175 for phones, $150 for tv/internet, $230 for various types of insurance, about $200 a month in utilities, and about $300 in metro/parking/Uber. That, apart from debt servicing, totals about $7,155/month.

What kind of debt are you currently servicing? I’m guessing student loans?

Oh my yes. I started with $98K in student loans from law school, but that’s down to about $71K. My husband has about $20K left from undergrad and another $44K from grad school. So about $135K all told. We pay $660 (the minimum) on his, and $2,000 on mine a month.

How much of your income do you save, and how much of that saving is for retirement?

I max out my 401(k) every year, and I currently have $130K in it. I save $1,000 a month to my liquid/emergency savings, which I am trying to rebuild after some unexpected expenses over the past year. I also put in $1,000 to the kiddos’ college funds every month, and $1,000 to a house fund. Right now, paying off loans is the first priority for me, which is a change in my thinking from a year or so ago.

What prompted that change?

I think it was the new baby (he’s almost a year now, so not so new I guess). Before he was born, I really wanted to own a house. Then we moved from a much cheaper place to live (a college town where my husband was in school) to here, and I went back to work after maternity leave and I felt really weighed down by the debt.

I got nervous about buying a house that would tie me to this level of income forever, because I don’t know how long I’ve got in this job (or how long I’ll want it, given how much it takes me away from my kids). I realized that if I pay off my debts, I can get another job if I want to without feeling like I’m stuck because of a mortgage payment.

That makes a lot of sense. How long do you think it’ll take to pay off those debts?

I’m hoping I can do it by the end of 2019. That feels pretty ambitious with 2017 just like RIGHT THERE, but it could happen.

We still have three months of 2016 left! That’s a full quarter of the year!

True, but time is all sorts of weird to me now. Individual days take approximately ten light years, but then I can’t tell you where the last two years went.

The days are long but the years are short, as it were.

So when you reached out to us, you called yourself “one of those high-earning, settled-down types of Millennials we hear so little about.” Does “settled-down” also mean that you feel financially secure?

Yes, I feel pretty financially secure, which is nice after not having paid nearly enough attention to my finances in my 20s. But these days, I could liquidate my house fund if I got fired and we’d be ok.

I also just feel very financially boring and non-Millennial sometimes, which might come from being on the oldest end of that generation. But I keep hearing that we are into experiences and not things, which is true for tons of people I know. But that’s just not me. I am very much in a things stage of my life.

How has your approach to spending/saving money changed since your 20s? Did you just not think about money at all? Or…???

I was such a dumbass about money when I was younger. I learned next to nothing about money from my parents, the fault for which is pretty evenly divided between them and me. So I made every cliched mistake you can think of. Max out and default on credit card in college? Yes. Mix finances with a guy I just started dating? Yup. Not pay bills and then realize they are in collections when I tried to apply for student loans for law school? Check. My credit score going into law school was 520.

So how did you get OUT of that?

Time. I paid the bills that were in collections (on a credit card — which really, should that be an ok thing to do?) and waited it out. When my income got higher, I got credit cards and paid them off religiously. I read The Billfold a lot and tried to learn how money worked.

Was earning more money a significant part of getting better at using money? Or were you able to improve your finances even without improving your income?

For me, earning more money was a necessary but not sufficient part of getting better at using money. When I started as a lawyer, I made really good money, but I still didn’t know how to budget or anything so I was pretty wasteful. It did, however, allow me to have something to work with so I could repair the earlier damage and make mistakes without them being catastrophic anymore.

Aside from The Billfold, were there any other tools or resources that helped you figure out money, saving, etc.?

I started using Mint in law school. It’s ok, and it certainly helped me learn about budgeting and setting goals and that sort of thing. At various times I’ve used other things like YNAB, and I always have a really simple spreadsheet (which I have open right now while we’re talking 😀).

For savings, online simple tools that automate it, but are still easy to adjust if I need to have worked for me. I have a Betterment account for my house fund and an Acorns account just for miscellaneous savings.

As far as the…philosophy of money, if that makes sense, my best friend helped me there. She has a great perspective on money where she’s able to think about it and make rational decisions, but also not get consumed by it or let it assume too great a place in her life.

Awwwww friendshipping!

She’s the best in a multitude of ways.

Do you feel like money is taking up the appropriate space in your life right now?

I think so. My finances are set up in a pretty automated way, so I don’t have to do much managing of them other than checking my bank account every so often. I mainly worry about getting too attached to making a lot of money. I really don’t want to do that.

How do you think your life would be different if you made significantly less money?

I think it would be really tough to afford childcare and, if the cut was significant enough, might force us to make some really tough choices about whether we could stay in D.C., which is really for my husband’s work more than mine, and whether it made sense for him to work.

To be clear, I don’t think that one parent should drop out of the workforce to care for kids unless they want to just because their salary breaks even with the cost of childcare. I mean, that is the case for us now (my husband’s take home pay is only a tiny bit higher than our childcare costs). But his future earnings, career potential, and personal fulfillment all weigh in favor of him working. For a lot of people, though, it’s not really a choice. There just isn’t enough money RIGHT NOW to pay for childcare, so someone’s got to make a sacrifice.

All very true. Last question then: what advice do you have for Billfold readers?

I often feel that I am not really in a position to offer advice to anyone about money. I fell into a high paying job that helped me course correct from past mistakes and cushions me from a lot of financial problems. That is a pretty privileged place to be giving advice from. So it’s not really advice, but just something that I try to remember, which is that most people are really just doing the best they can with what they have, and compassion for the hard financial road our society makes most people walk is good for the soul.

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