Financial Literacy

Mint Money Audit: 34 and Living Paycheck to Paycheck

Each month I’ll be helping a Mint user analyze their financials in an effort to offer some strategies and ideas for saving better, squashing debt and in, some cases, earning more. [If you’d like to be considered, just email me Farnoosh@Farnoosh.TV]

This week we begin with Rebecca [name has been changed to assure privacy] from St. Louis, MO, one of Mint’s original “beta” users since 2006. The 34 year-old government worker says she loves the money tool because it helps keeps her organized and on track.

Still, she’s struggling to boost savings, repay debt and raise her income. She’s living paycheck-to-paycheck and wants to get ahead. [As a homeowner, she’d also like to tackle a few home renovation projects.]

A little more about Rebecca and her Mint profile:

  • Annual salary: $65,000 (before taxes, health insurance & retirement contributions)
  • Monthly Expenses: $2,200 a month.
  • Biggest Monthly Expense Categories:
    • Mortgage $986
    • Food, Gas, Laundry, Entertainment, Misc.: $760
    • Condo Fees: $307
    • Student Loans: $22,900 (monthly payment is $285)
    • Credit Card Debt: $10,900 (monthly minimum payments total $200)

In our conversation I had the chance to learn a little more about Rebecca’s financial profile and the moves she’s willing to make to create some much-needed breathing room in her budget.

Here are a few of my recommendations:

Cut the Cord on Cable

Of all her expense, Rebecca and I discussed that cable is the least desirable and least needed. [I cut the cord back in August and use mainly Netflix and my Apple TV to access my favorite shows] Her cable bill amounts to $60 a month. Slash it and she can save $720 a year.

Save on the Go

Rebecca is conscious about saving. She uses Digit, a new mobile app that saves nominal amounts for you every few days or once a week. It bases its savings decisions on your flow of income and expenses. Since last fall, Rebecca has saved over $400 using Digit. I recommended she stick with it, since it’s totally painless and can serve as a nice “slush” fund for her when she wants to splurge on herself once in a while.

Take on a Side Gig

Because has a government position, Rebecca’s pay is very structured and it’s not likely she can receive a raise just for asking. She does anticipate a 1.6% raise this year, but I thought that wasn’t really enough to move the needle as far as saving more and squashing debt. (I mean, that’s only a tad better than the year-over-year rise in inflation!) My recommendation: Start looking at private sector jobs. Rebecca has a Master’s degree and could make probably twice what she’s earning now working for a company – or for herself! It’s something she’s considered and will be more proactive about it in 2017.

Meanwhile, how about a side gig? Rebecca works from home some days and has a nice two-bedroom house. While she wasn’t keen on my idea of renting her second bedroom out once in a while via sites like AirBnB, she did think she could have fun dog-sitting once or twice a week. We decided this might be an easy way to not only earn extra income. It can also, depending on the dog, serve as a nice stress relief!

At Rover.com and DogVacay.com, for example, sitters and dog walkers that take on gigs on a regular basis can earn $1,000 or more per month. Per night, pay can range and vary slightly depending on the neighborhood, but you can earn between $25 and $35 per night.

If Rebecca dog-sits twice a week, she could earn an extra $200 to $300 a month. In a year, she’ll have up to $3,600 in her pocket.

Maximize Your Tax Refund

Rebecca says her tax refund – combining Federal, State and Local tax refunds – will be around $4,000. My suggestion was to place most of that or $3,000 towards her credit card debt and save $1,000 in her bank account.

A tax refund can be a huge help in getting you to your financial goals faster. If you have credit card debt, it’s wise to first use the refund to pay that down. And if you lack emergency savings, use some of the IRS windfall to bolster your rainy day account.

Transfer Debt to a 0% Balance Transfer Card

Rebecca pays a little more than the minimum on each of her two credit cards. Together, her cards average an interest rate of about 10%. On a nearly $11,000 balance, she’ll be paying down this debt for the next 6 years.

But if she commits to all of the above and applies to her card debt:

  • Existing $200 she is already contributing to
  • Savings from cable ($60)
  • Earnings from dog sitting ($300)
  • A majority or $3,000 of her tax refund

AND transfers her credit card debt to a 0% balance transfer card then she could be out of debt in about 15 months or so, by the time some balance transfer cards end their 0% introductory rate.  [Her credit score is well in the 800s so she shouldn’t have a hard time qualifying for a great card.[

Audit Conclusion: By transferring her credit card debt to a 0% balance transfer card, cutting cable and taking on a small side gig, Rebecca will be able to be credit card debt free in a little over a year – as opposed to six! After that, my recommendation is to PRETEND the debt still exists and allocate a minimum of $500 a month towards emergency savings. This time next year, I hope she’ll also have found a new job that pays her more for her skills and education. A greater income will mean she can finally work on some of her pet projects around the house!

 

Have a question for Farnoosh? You can submit your questions via Twitter @Farnoosh, Facebook or email at editor_mint@intuit.com.

Farnoosh Torabi is America’s leading personal finance authority hooked on helping Americans live their richest, happiest lives. From her early days reporting for Money Magazine to now hosting a primetime series on CNBC and writing monthly for O, The Oprah Magazine, she’s become our favorite go-to money expert and friend.