6 Financial Makeovers

6 Financial Makeovers

altToday, we're proud to present our first-ever Money Makeovers.

Consider it a LearnVest reality show of sorts: We'll follow these women for the next eight weeks to record their goals, the progress they make and their struggles along the way.

Here's how it works: We gave each member free access to the LearnVest My Money Center and to Lauren, a Certified Financial Planner and expert in our Advice Center. You can think of her as their coach and mentor, creating a road map for them to achieve their goals (the Tim Gunn to their Project Runway, if you will).

As the series progresses, they'll be working hard on their finances in real time. So, cheer them on in the comments and follow along with the instructions for whichever story is closest to your own.

In this "reality show," there won't be any backstabbing or tearful confessions. We promise.

Macy, 22

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Location:

Cedar Rapids, IA

Occupation:

Marketing Strategist

Goal:

Buy Her Dream Home

Salary:

$36,000

Why She Needs a Makeover:

Macy moved back home after college and has found herself surrounded by all the financial tasks that come with being a new college graduate: student loans and credit card payments, retirement account options and the best part—a paycheck. She knows she needs to figure out how to responsibly allocate her income, but what she really wants is "a loft with large windows and lots of sunlight, in a city, with a farmers' market and nightlife I could walk to." She’s hoping saving for her dream loft fits into her “responsible” savings plan.

What Lauren Says:

“Even if you're not bringing in the big bucks yet, owning a home is absolutely an attainable goal. In fact, having that large goal is likely to motivate Macy to stay on track with other aspects of her financial life—like student loan payments, budgeting and managing her career. The trick will be balancing everything. If she’s serious about that loft, her spending choices today will make a huge difference in whether or not she reaches her goal.” 

Macy's Homework:

Before diving into her financial goals, it’s important for Macy to have a basic understanding of what financial planning involves:

  1. The fastest way to get up to speed on her looming money tasks is to enroll in LearnVest's Personal Finance 101 Bootcamp. Going through the bootcamp will help her feel confident that she isn’t missing something important.
  2. Macy described her spending as “yo-yo” spending—and her Financial Inbox reflects this. Since Macy has never had a paycheck (or budget) before, it’s important to start with tracking her expenses. For now, she just needs to keep foldering her transactions—we’ll use that information to create a budget a little later on.
  3. Macy needs to establish a financial system for managing all of her bills, like setting calendar alerts or automatic payments. This will create a great foundation of good habits for paying bills on time, which will be critical when she becomes a homeowner. 

NEXT TIME: We’ll check in to see if Macy has kept up with foldering all of her transactions—and if doing so has had an impact on her yo-yo spending!

Ashley, 29

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Location:

New York, NY

Occupation:

Attorney 

Her Money Goal:

Save for a Baby

Salary:

Between $90,000 and $100,000

Why She Needs a Makeover:

She has about $230,000 in student loans from undergrad and law school. She is also the primary supporter of her household for the time being because her husband, who is from the Dominican Republic, is awaiting his green card. They paid for their own wedding, which pretty much wiped out their savings—but they are planning to have a baby and move to Ohio in the next three to five years.

What Lauren Says:

"Having a baby is expensive, and if Ashley and her husband are serious about doing it in the next year, they need to say goodbye to the glory days of taking taxis and attending benefits. Between her student loans and the credit card debt they have left over from the wedding, they’ve got a lot to balance right now—especially since Ashley is the sole earner until Jonathan’s green card comes through.”

Ashley's Homework:

Ashley's homework for the next two weeks is to start cutting back on spending:

  1. Ashley got used to the cushy lifestyle of her old law firm—where taxis and working lunches were the norm. Since she changed jobs, she can’t afford that anymore and needs to get serious about changing her spending habits. She should enroll in LearnVest's Cut Your Costs Bootcamp to find other ways she can cut money drains from her life.
  2. Ashley’s living well beneath her means when it comes to fixed expenses like rent (their two-bedroom apartment is only $1,735 a month) and fixed costs ($138 for two cellphones, $0 for cable), but they’re still not able to save each month. That’s because those previously mentioned money sucks (taxis, lunches) really add up. She needs to create a folder for each of them in her Financial Inbox. That way she can track exactly how much she’s wasting on those conveniences each month.
  3. Ashley and Jonathan already have a joint high-yield savings account with a few hundred dollars in it. They should rename this the “Baby” fund and start depositing in this fund the money they save on taxis and lunches each month. Plus, it’s more fun to take the bus instead of a taxi if you know it’s going toward your future child.

NEXT TIME: Can Ashley break the taxi habit and readjust to taking the subway or bus instead? We’ll check in next time to find out!

Elisabeth, 41

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Location:

San Rafael, CA

Occupation:

Fertility Coach

Goal:

Save for Retirement

Salary:

$37,000

Why She Needs a Makeover:

The good news: After many years of working hard, Elisabeth's cash flow is increasing because her business is growing (from $25,000 to $32,000 to $37,000). The bad news: She has four credit cards to pay off and minimal savings for herself. With retirement not too far in the future, she needs to get started on planning for retirement. Another challenge: Elisabeth has been avoiding dealing with her money for years.

What Lauren Says:

"Now in her 40’s, Elisabeth has finally decided she needs to face her finances head-on. After two decades of money avoidance, that change will not come easily. She’ll have to power through the moments when she feels discouraged or wants to return to her old ways of ignoring her finances. Taking baby steps will help Elisabeth work her way through the money blocks she’s built up over the years so she can start planning better for her future.”

Elisabeth's Homework:

Over the next two weeks, Elisabeth will be starting out slowly, but we’ll build momentum from small victories. Her homework is:

  1. Money isn’t just about numbers—it’s very emotional. For someone who has been avoiding her money, laying it all out on the table is often the biggest barrier to getting started. After years of unopened statements, knowing what you have (and don't have) is the most important first step. Elisabeth should link up all her accounts to My Money Center, and dig through her statements to find out other details. This will lead to her knowing her net worth—the starting point for reaching financial goals.
  2. Elisabeth has been using one checking account for both her personal and business expenses—which isn't ideal. She's not ready to use two separate accounts yet, but for now she can use the folders in her Financial Inbox to begin separating business and personal expenses. To help keep things clear she should use a different color for each.
  3. Since Elisabeth is working for herself and reinvesting most of her extra cash into her business, coming up with a budget that incorporates her business expenses will help her stay on track for her goals—personally and professionally. She should enroll in the Why A Budget Is Your First Step course, which will help take the edge off budgeting—and hopefully make her feel less intimidated by it.

NEXT TIME: Can Elisabeth paint a clear picture of her financial situation so we can calculate her net worth and begin to map out her budget? We’ll check in next time to find out!

Minling, 29

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Location:

Los Angeles, CA

Occupation:

Adventure Philanthropist

Goal:

Pursue Her Dream Career

Salary:

$0

Why She Needs a Makeover:

After making $95,000 a year at a large corporation, Minling left to pursue her dream: joining a start-up called RoadMonkey, which hosts trips combining adventure and philanthropy. As a part owner, her new gig provides equity but no salary for now, so she moved back home. She thinks she can survive on her $30,000 of savings for the next year, after which she hopes to start earning income. She recognizes that drinks with friends and private yoga sessions are out. "I'll really miss Lululemon," she confesses. "My goal is to learn to budget despite my drastically reduced income."

What Lauren Says:

"Leaving the security of a full-time job with great benefits to join a start-up with no guaranteed income is a huge risk. Minling is fortunate to have a few things working in her favor: the support of her parents, reasonable retirement savings, an investment property and a chunk of change that she can use to cover her living expenses while the start-up gets going. I think it’s great that after putting in nearly a decade of hard work and saving, Minling is cashing in to follow her dreams. But she should give herself deadlines on this adventure. If after a year she still isn’t drawing an income, it’ll be time to start sending out résumés for full-time jobs again.”

Minling's Homework:

  1. Minling hates budgeting. She doesn’t necessarily need to know exactly where each dollar goes, but she does need a sense of how much she's spending in total. When she’s setting up her My Money Center, she should create a folder for every fixed expense—and then another one labeled "Everything Else."
  2. Her fixed expenses are very low due to the fact that she’s moved back in with her parents, but she doesn’t want to count on them for long. She has earmarked about $30,000 to cover her for the next year, which means she has about $2,500 a month for her living expenses. She’ll need to track that “Everything Else” folder very carefully. After all, she'd be broke by the new year if she were to blow through $5,000 each month.
  3. To stretch her savings account, Minling could bring in extra income on the side. As a certified yoga teacher living in Southern California, she should have plenty of opportunities. A good goal would be to pay for her fixed expenses out of her savings account and cover “Everything Else” with money she earns from teaching yoga.

NEXT TIME: We’ll check in next time to find out if Minling is having buyer’s remorse on leaving her stable job or if it’s smooth sailing with her new non-budget budget.

Daina, 25

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Location:

New York, NY

Occupation:

Fashion Illustrator

Goal:

Afford the Big City

Salary:

$48,000

Why She Needs a Makeover:

Daina's student loan debt is standing in the way of living the life she wants in expensive NYC. "When I was 18, I was so excited about college that I followed the advice of my school's "financial advisor," who had me apply for private loans. I am now almost $80,000 in debt and completely overwhelmed." Daina is supposed to re-sign her lease, but the new price is $1,450. She can technically afford only $1,200 based on her salary, but she doesn't have cash on hand for the deposit on a new place. Another option: Her boyfriend lives in Canada and she's considered moving there ... (Read our recent Money Mics on how moving in with your significant other can affect your finances.)

What Lauren Says:

“Daina is talented—she’s out-earning most of her peers at this stage of the game, but she’s still barely scraping by due to those predatory student loans and a rent payment that is a few hundred dollars above what she can afford. If she could turn back time, she would make different choices with regard to funding her education, but what’s done is done—and at least she pursued something she loves. She knows she has to make drastic changes now, and she’s finally ready to shake off the financial paralysis she’s been stuck in for the past year or two.”

Daina's Homework:

Daina knows she needs to make some changes, and fast. Her homework gets straight to the point this week:

  1. Daina recently missed a few student loan payments, which will definitely have an impact on her credit score. Missing a payment can cause a drop of up to 100 points or more. It might hurt to see, but she needs to gather up the courage and check her score for free at CreditKarma.com. (They also provide tips for how to improve your score.)
  2. Daina’s days in her $1450 per month apartment are numbered. Based on her salary, she absolutely has to reduce her rent below $1,200—ideally even under $1,000. She may have to share a room or endure an hour-long commute, but it’ll be worth it to get her finances back in order. She’s been considering relocating to Canada to live with her long-term boyfriend, and now may very well be the time—though that would mean getting creative with her career. She has until the end of the month to make a decision on whether or not to resign her apartment lease.
  3. She should enroll in LearnVest's Take Control Bootcamp to further shake off any powerlessness she’s felt in years past. She needs to educate herself so that she never falls victim to bad financial advice again.

NEXT TIME: We’ll find out what Daina decides about her apartment and where her credit ended up after those missed payments. 

Hannah, 32

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Location:

Miami, FL

Occupation:

Marketing

Goal:

Rebuild After Divorce

Salary:

$70,000

Why She Needs a Makeover:

Hannah's divorce left her in extreme debt with no choice but to file for bankruptcy. "I am now rebuilding financial stability," she says. "I receive no child support and went from being a stay-at-home mom to a working mother almost overnight. Prior to my marriage I had stellar credit, but now I'm lucky to get a credit card with a $200 limit! And I have no savings. I need to save for my—and my children's—future."

What Lauren Says:

"Even with two master's degrees, Hannah wasn’t prepared for being married to a 'financial fraudster,' as she describes her ex. Now, she’s ready to start with a clean slate and move forward. In many ways she’s starting from ground zero, but she’s moving full speed ahead—she’s already contacted old work contacts and started securing consulting contracts. Rebuilding after a divorce and a bankruptcy always presents challenges, but Hannah is well-equipped to conquer them."

Hannah's Homework:

  1. Rebuilding her credit after bankruptcy will take time, but unless she’s applying for a mortgage tomorrow, it’s okay if her credit isn’t perfect yet. Hannah should check her credit score on CreditKarma.com and review LearnVest's tips on how to raise your credit score. She should set a recurring reminder to check back in on her score monthly—it’s important to stay on top of it after the bankruptcy.
  2. Hannah needs to look into the ways she can cut back her daily expenses as she begins to rebuild her financial life. She should enroll in the Cut Your Costs Bootcamp to find creative tips she may not have thought of yet.
  3. As Hannah starts to find savings in her budget (and as she starts to bring in more income), her first priority will be to open a high-yield savings account and start contributing to an emergency fund. She should aim to save a year of living expenses as a parachute. (Most people should save six to nine months, but the self-employed need to save more because of the variability in their income.)

NEXT TIME: We’ll find out where Hannah’s credit score is and learn what steps she’s taking to cut back her expenses so she can start saving for her emergency fund. 

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