6 Financial Makeovers: Watch Week Three Unfold

Carrie Sloan
Posted

Have you been following our Financial Makeovers? Six real women, each working toward a long-term goal, whether it’s to pay off debt, save for a baby or land a new job. They’re from all across the country and all walks of life, but they have one thing in common: Each wants to do more with the money she’s got.

Call it the LearnVest version of a reality show. (Only instead of trying to land bachelors, these ladies want to finance their dreams.)

To help them do just that, we had them link their accounts to the LearnVest My Money Center and gave them access to Lauren, a Certified Financial Planner and expert in our Advice Center.

We also asked them to keep money diaries, spilling everything that happens (financially, and otherwise) in the course of these eight weeks. Now that we’re nearing the home stretch—next time, all six will get their final, personalized prescription for financial independence—brace yourself for some huge realizations.

It turns out, once you really take charge of your money, amazing things start to happen.

Ashley, 29


Location:

New York, NY

Occupation:

Attorney

Her Money Goal:

Save for a Baby

Salary:

Between $90,000 and $100,000

Why She Needed a Makeover:

Ashley has $230,000 in student loans left over from law school. Her husband, Jonathan, hasn’t been able to work, since he’s awaiting his green card. Plus, they want to start trying to have a baby by next summer but haven’t begun to save. (Read more from the first installment.)

Ashley’s Homework From Last Week:

Now that Ashley’s created a budget using the LearnVest Budgeting Tool, she knows exactly what she can afford to spend. Lauren asked her to give herself and Jonathan $800 per month to cover their variable expenses—and work together to stay within that range.

Her Week Three “Aha” Moment:

How much the power of two can save you.

“Jonathan and I have had fun curbing our spending,” says Ashley. “We’ve started doing DVD workouts at home until we figure out whether it’s worth it to renew our gym membership, and we’ve actually been working out more.” They’ve also been cooking together and eating at home at least five nights a week.

Ashley put most of her $1,000 work bonus toward paying down their $11,000 in credit card debt and is also working with Lauren to consolidate her federal student loans, which could save the couple $400 a month.

And there’s another huge change to their financial picture: Jonathan’s application for his green card was approved, and he’s starting his job search immediately.

Lauren’s Next Steps for Her:

Now that Jonathan can start working, his salary will be extremely helpful for their top priorities: paying down their credit card debt and building up savings.

  • Ashley needs to keep consolidating her student loans. If she qualifies for income-based repayment, she’ll save a few hundred dollars each month that can be put toward credit card debt (since the interest rates on her cards are higher than on her loans). She has good credit, so she may even be able to consolidate her private loans. This has become harder in recent years, but it’s still worth researching in case she can lower her interest rate (and thus her monthly payment).
  • Jonathan and Ashley also need a system for combining their finances. They have a joint savings account but also need a joint checking account and a joint credit card as a means of keeping track of shared expenses, like groceries.

NEXT TIME: Check in on Jonathan’s job search, and get a sneak peak at the couple’s future budget—built for three!

Macy, 22


Location:

Cedar Rapids, IA

Occupation:

Marketing Strategist

Goal:

Buy Her Dream Home

Salary:

$36,000

Why She Needed a Makeover:

Macy moved back home after college and wants to know how to handle all the financial responsibilities that come with having her first job. She also wants to start saving for her first big purchase—a downtown loft of her own. (Read more about where Macy started from.)

Macy’s Homework From Last Week:

Last time, Lauren encouraged Macy to rent a truly affordable apartment for now (meaning something under $650, or 30% of her take-home pay) and price out the dream loft she eventually wants to own.

Her Week Three “Aha” Moment:

How scrimping now can help you reach huge goals later.

Macy managed to find an apartment within her budget. “It is $595 a month, plus $50 per month for a garage—the Iowa winters get pretty bad, so that’s a necessity,” says Macy. “But it comes with free internet and cable and a 24-hour gym.”

One cost she hadn’t bargained for? The $500 security deposit. ”And now I’m having to buy things like glasses and new pots and pans. So far I’ve either lived with roommates who owned some things, or with my parents.”

She did price out her dream loft, as Lauren had asked, and it’s not in Cedar Rapids: She looked at properties in bigger cities and put the price tag between $200,000 and $300,000.

Now that she’s got a firm handle on her finances, she feels ready to tackle a goal as huge as buying a home. “The biggest takeaway I’ve had so far is just how to get organized,” she says. “I’m excited to move forward!”

Lauren’s Next Steps for Her:

  • Macy should make a list of everything she’d like to buy—from paper towels to a blender or new bed. Then, she should categorize them into “must haves,” “nice to haves,” and “would rather move into my dream loft sooner.” To keep saving in the front of her mind, I’m enrolling her in LearnVest’s Cut Your Costs Bootcamp.
  • Her long-term goal will be to save at least $50,000—a starting point for buying a home in the $200,000 to $300,000 range. (See LearnVest’s: I Want To Buy A House/Apartment checklist.) If she were able to save $500 a month, she’d be close to buying her dream loft by 30. But Macy has many goals right now, including starting an emergency fund and contributing to retirement. I’ll help her create a strict budget.
  • In the meantime, I want Macy to ask for a raise: She started her first job five months ago, so it’s almost time for her six-month review. This is a great time to negotiate. But she’ll have to do research and present a strong case for why she deserves an increase. (Find out the best way to ask for a pay raise: read this.)

NEXT TIME: We’ll reveal the budget that will get Macy saving toward all of her goals.

Elisabeth, 41


Location:

San Rafael, CA

Occupation:

Fertility Coach

Goal:

Save for Retirement

Salary:

$37,000

Why She Needed a Makeover:

Elisabeth owns her own business but has next to nothing saved for retirement. Before her LearnVest makeover, she’d been truly afraid to take an honest look at her financial picture. (Read more about where she started from.)

Elisabeth’s Homework From Last Week:

Last week, Lauren asked Elisabeth to get in the habit of saving for the first time ever. Now that she’s successfully paid off four credit cards, she can use the money she’d previously been putting toward those to save $500 a month.

Her Week Three “Aha” Moment:

How earning more can help her save more.

Elisabeth blew her budgeting this month: “I am a bit aghast over what I spent and what I brought in,” she says. This month she cut down on clients, which meant less income coming in—and thus less ability to save. But it was for a good cause: She just finished writing a book, If I’m So Smart, How Come I Can’t Get Pregnant? about her coaching strategies—which she submitted to her editor.

In fact, she’s realized that with a book in hand, she can start to expand her brand and perhaps bring in additional income. Elisabeth would like to increase her web presence to include new offerings—and sell inspirational products through e-commerce.

However, she’s still desperate for a strict budget that will make her commit a “minimum and realistic amount” to both an emergency fund and her retirement.

Lauren’s Next Steps for Her:

Elisabeth had an interesting couple of weeks—by cutting back on clients, she realized just how dependent she is on that income to meet her monthly expenses. You don’t want to end up in the red when you’re nearing retirement. With that in mind, here are her assignments:

  • In the past, Elisabeth treated saving as a luxury, rather than a necessity. She did a great job paying off her credit cards by making automatic payments. Now, she needs to treat her savings accounts the same way, and route money to her emergency fund and her retirement account every month—even if it’s just $50.
  • As Elisabeth has seen, being self-employed means your income varies from month to month. Diversifying her sources of income will help protect her. She should create a plan to use her brand to bring in income that is not directly dependent on her: Her book could be a good start, as could a webinar with her advice, or e-commerce.

NEXT TIME: See what effect Elisabeth’s passive income plan—and automatic savings—have on her bottom line.

Minling, 29


Location:

Los Angeles, CA

Occupation:

Adventure Philanthropist

Goal:

Pursue Her Dream Career

Salary:

$0

Why She Needed a Makeover:

After making $90,000 a year, Minling left her corporate job to pursue her dream career at a start-up called RoadMonkey. Now she has no salary—just equity—and is trying to see how long she can stretch her $30,000 in savings. (Read more about where she started from.)

Minling’s Homework From Last Week:

Lauren asked her to get serious about finding extra sources of income, such as teaching yoga, and save that money in a separate checking account. Ideally, Minling should be paying only her fixed costs from her savings.

Minling’s Week Three “Aha” Moment:

“I don’t have to spend money to have fun.”

“I’ve been very conscious of what I spend, and if I really need something,” says Minling. She’s even found ways to partake in her favorite pastime—yoga—for free. ”I am doing work exchanges. I just went to an amazing yoga festival called BhaktiFest where the entrance fee was $300,” she says, “but it was waived in exchange for doing 20 hours of work. Doing that, I met some amazing people.”

In hopes of earning money on the side, Minling has gotten creative: She’s getting trained in kundalini, a different form of yoga, and has applied to a variety of studios to teach. Since photography is also a hobby of hers, she’s taking headshots of yoga teachers … for profit.

She’s taken Lauren’s advice and opened a separate checking account to hold her “play” money. “Being new to working on my own, I didn’t have this set up. Now I can see just how much I earn from doing odd jobs,” she says.

Lauren’s Next Steps for Her:

Yoga may be a way for Minling to earn extra cash, but right now it’s draining her savings. Even with the work exchange program, she spent over $500 on yoga-related expenses this month. If she keeps that up, her savings will be gone in ten months, rather than 12.

  • Minling has a choice to make: Since she spends so much on yoga, she could set up a separate account just for that with a slush fund of $5,000 to cover a year’s worth of expense. That would be funded out of her savings but would leave her a lot less for her fixed expenses ($2,000 a month instead of $2,500). Only Minling can decide what makes the most sense to her.
  • Being a business owner means keeping up with your taxes, and any freelance income Minling brings in will also be taxed. The government expects self-employed people to pay quarterly, but they make it easy to do so: Minling needs 1) An accountant,  2) A business credit card to track the expenses she can deduct, and 3) A savings account where she can put 50% of any money she earns to pay her quarterly tax payments, as well as anything she owes come April 15th.

NEXT TIME: See if Minling can curb her spending to make her savings last.

Daina, 25


Location:

New York, NY

Occupation:

Fashion Illustrator

Goal:

Afford the Big City

Salary:

$48,000

Why She Needed a Makeover:

Daina got bad financial advice back in college: She wound up with $80,000 in student loans and poor credit—a combo that left her feeling powerless. But she’s young, has a great career in fashion and is finally ready to make some changes. (Read more about where she started from.)

Daina’s Homework From Last Week:

Last time, Lauren asked her to report in with an update on her living situation: If she was truly going to take the leap and move to Canada, she needed to make a plan, sell her furniture and look into local jobs.

Daina’s Week Three “Aha” Moment:

Mastering your money leaves you free to pursue your dreams.

Daina has officially made up her mind: In November, she’ll be moving to Calgary to live (rent-free) with Oliver, her boyfriend of three and a half years. ”This makeover made me re-evaluate everything: what I was happy with and what I wasn’t,” says Daina.

It’s a move they’ve been discussing for years, but Daina’s also taking a break to pursue a new career direction: fashion design. “I started as a designer, and I’ve been interviewing and getting good feedback, but people say they need to see more from me. This will be an ideal time to sketch out collections and build my portfolio,” she says. She knows a key person in the growing Calgary fashion scene and is already putting out feelers for freelance work.

She has a couple of thousand dollars saved up and is excited about the budget that Lauren will create for her. In the meantime, she’s subletting her place and selling her stuff—but leaving one key thing behind: fear.

“I’m never going to forget any of these financial things that I’m learning,” she says, “and I’m never going back to that paralyzed place where I was before.”

Lauren’s Next Steps for Her:

Even though Daina felt paralyzed before, making these changes now will ensure she’s able to truly reach her dreams—and pay all her bills in the process.

  • Daina recently missed a loan payment, which can wreak havoc on your credit score, so she needs to get back on track. Her full payment is about $1,600 a month, but making interest-only payments, for now, brings her monthly total down to $625. She should also call her lenders and find out what she can do about the missed payment. Regardless of the debt (mortgage, student loans, credit cards), if you can’t afford a payment, it’s better to call the bank to see if you can work something out.
  • Since her apartment is furnished, she could charge a subletter $1540 (10% above her $1400 rent)—and ideally find someone who would want to keep the apartment—and buy her furniture—past her lease. This amount, combined with her paycheck, would leave her with about $4,000 in savings. Once she has a job in Canada, it will be fairly easy to get a work permit. She should find out if freelancing works the same way.
  • Since Daina is so creative and has so much momentum right now, I want her to create a “Savings Vision Board”  of things that inspire her. Finding new work in Canada will inevitably be draining, so she’ll need inspiration to keep chipping away at her financial to-do list.
NEXT TIME: With no rent to pay, see how much Daina needs to earn during her stay in Canada.

Hannah, 32


Location:

Miami, FL

Occupation:

Marketing

Goal:

Rebuild After Divorce

Salary:

$70,000

Why She Needed a Makeover:

Hannah is trying to rebuild after a divorce left her finances in tatters and forced her to declare bankruptcy. She’s raising two children, living paycheck to paycheck and, just this past week, lost her job. (Read more about where she started from.)

Hannah’s Homework From Last Week:

Go on a “money fast” with her two children to see how long she could go without spending anything, even on little things. And talk to them so they understand why the family has to cut back right now—but still make them feel secure.

Hannah’s Money “Aha” Moment:

Realizing your natural talents are your biggest asset.

These past two weeks, Hannah has taken the money fast seriously. “I’ve had to explain things to my son, who’s 6,” she says. “Now that he’s started kindergarten, he’s always asking for money ‘like the other kids.’ I explained to him that his lunch was paid for, and he has a snack, but we’re not spending anything extra right now.”

She also sucked up her pride and—after her car battery died last week—asked her parents for help. “It was really humiliating,” she said, but it was helpful that they paid the $500 repair. Behind the scenes, she’s been working hard to start her own marketing consulting business.

To do so, she’s falling back on natural talents: “I’m a really good networker,” she says. “I set up my page on Facebook. I have thousands of contacts on LinkedIn.” After answering a job ad, she met a mentor who she’s teamed up with: “He’s a guy who has been in my industry for 35 years,” she says, “and he’s taken me under his wing.” Hannah’s hoping this will help her grow her client base quickly.

In the meantime, even though times are tight, there’s one expenditure she won’t give up: “I have been giving some money to charity,” she says, “just $10 here or there. I figure, if I put that out there, it’s got to come back to me.”

Lauren’s Next Steps for Her:

Given Hannah’s qualifications and contacts, and the sluggish job growth right now, setting up her own shop is well worth trying. But a few good clients right now doesn’t mean she can start living large.

  • She should continue to scrimp and put everything additional into an emergency fund with about 12 months of living expenses saved up—people who are self-employed need a bigger cushion.
  • Like Minling, she’ll need to start thinking about all the things that come with freelancing—from making sure her interests are protected in this new mentor relationship, to setting aside money to pay taxes. She’ll likely qualify for assistance from her local Small Business Association. Women and minority-owned businesses usually qualify for services ranging from free legal and accounting advice to help writing a business plan.

Next time: See if Hannah has begun a true turnaround—getting her business off the ground.

  • Jenny

    A good idea for Ashley, since she has a good credit score would be Lending Club or something akin to that.  She can consolidate her credit cards at a lower percentage rate.

  • http://senseofcents.blogspot.com/ Michelle

    These are all great.  Reading all of these is very helpful!

    Also, good job Macy on finding a place to rent that’s below ($5 is a start!) what you wanted.

  • http://senseofcents.blogspot.com/ Michelle

    These are all great.  Reading all of these is very helpful!

    Also, good job Macy on finding a place to rent that’s below ($5 is a start!) what you wanted.

  • Yvette

    I don’t normally have the energy it takes to read through too many newsletters but I do read my Learnvest.  When i came across this story i was excited to read about a mom motivated to create a financial life for her.  I can’t wait to keep reading and see what she does.  GOOD LUCK!

  • http://www.bmwysp.deviantart.com Jennifer Megan Varnadore

    I think that these women have gotten great starts doing what they are doing, and these makeovers can potentially be assets to others just by reading them. I say that, because they inspire me as well. To help me to curb my savings so that I am able to actually save things I have gotten a savings and checking account. There is only five dollars in my savings account at this moment, but I had 17 dollars already going to my church, and three to go to my best friend Holly for the violin she gave me. The rest I gave to my fiance for bills. This next 100 I get though, I’m putting some in savings, 10 to the church, and some in checking. The rest can go to bills, but having that cushion of savings alone makes me feel so much better. My fiance has to finalize a divorce before we can get married. That money can be saved up for that, and the ability not to touch it as easily makes it more likely to stay there. :)

  • ChiTownAdams

    I am actually really disappointed in the result for Daina.  Not everyone has the option to leave behind their rent and job to shack up with a boyfriend for free.  I was hoping for more day-to-day advice on living in the city (Chicago, for me) on a small income.  But I guess it does make the point that sometimes you have to look at the larger picture for other options to make the most of your financial situation.