Reader Profile: EH

The following is the latest post in my "Reader Profiles" series. Each post in this series details the financial situation and challenges of an FMF reader. The purpose of this series is to help us all identify with people like us (in similar situations -- not all will be, of course, but eventually I'm sure you will find someone like you here), get to know the frequent commenters on the site, and hear some financial wisdom/challenges from people other than me.

If you're interested in contributing to this series, then drop me an email. The series seems to be very popular with readers and I need a steady stream of new ones to keep it going.

Next in the series is FMF reader EH. She answered my questions (in red below) as follows:

Please tell us a bit about yourself.

I am a single, 35 year old woman living in New York City.  I have been working as an Executive assistant at a pharmaceutical company for the past 9 years and recently completed my MBA with dual concentrations of Corporate Finance and Marketing.  I am seeking to change my career path to the finance or marketing fields, but am having difficulties in my search.  I find that I have so much education that I am ruled out of entry positions, but not enough experience to capitalize on opportunities for seasoned professionals who have similar educational experience.  I also have a wonderful 6 year old dog who makes me smile every day.

Describe your financial situation (who works in your family, how your income is (general), how your expenses are, etc.).

I have been very fortunate financially.  My parents valued education, and I am lucky to have gotten my BFA debt free.  My MBA was partially subsidized by my work and I paid the remainder of tuition out of my savings.  I have no student debt.  I own a 1-bedroom apartment in a co-op in Manhattan which was bought in early 2008 and I have $111k remaining on the mortgage which is a 6%/30yr  loan from my parents.  I rarely eat out.  I receive my television entertainment via an antenna and I avoid personal expenses like cabs, pedicures, housekeepers, and frequent haircuts.  Even my dog is frugal- she gets all her baths in the bathtub at home!  I pay my credit card bills in full every month.  I do not own a car (one of the benefits of NYC is the excellent public transportation).  My employer has a 401k match of 4.5% and I currently invest 9% of my income into the 401K plan.  My base salary, before overtime, is $78k.
 
Monthly Expenses:

• Maintenance and insurance: $769
• Mortgage: $1200
• Food: $250
• Utilities: $70
• Phone & Internet: $70
• Monthly subway ticket: $104
• FSA: $100
• Pets: $60 (we had a car accident last year, so this number is now higher to account for the unexpected)
• Toiletries/Shopping: $100
• Savings: $200

Household savings:

• Roth IRA: $79,000
• 401K: $161,000
• Mutual Funds: $36,000
• Laddered CDs: $37,000
• Home equity: $334,000
• Cash savings: $3,400

What are the current financial issues you're facing (saving, paying off debt, etc.)?

Currently, I’m trying to find a place of balance where I am saving an appropriate amount and not totally living like a college student off of ramen noodles every night.  I am fortunate to work a lot of overtime at present and I am plowing 100% of that income into pre-paying my mortgage.   It would be difficult to find another guaranteed method of making  >6% on that income.

What are your plans for the future (retire early, build your career, etc.)?

I have a goal of being debt free as soon as possible and having at least $50k in liquid reserves.  With my MBA, I am currently trying to build my career and expand my income.  I have no plan to retire early, but want to be sure that when I do choose to retire, I am fully prepared financially.  Ideally, I’ll eventually find someone to settle down with, maybe even adopt a child with, and hopefully they will have their financial act together.

What's your best piece(s) of financial advice and/or your general philosophy on personal finances?

I’m a big fan of using mint.com to keep track of all my finances in a one-stop-shop place.  Other maxims I have found to be useful are: Spend less than you earn.  Always pay yourself first by saving a little bit, even if you are living hand-to-mouth, week-to-week.  When you get a bonus/tax return/ upgrade in salary, try not to change your spending and instead save/invest that money.

Comments

[Paul]

Why not refinance that mortgage? 6% is pretty high in today's market, especially with so much equity built up.

[Rick Francis]

EH,

For 35 you have a really high net worth, you certainly have frugality mastered. To prevent living like a college student you might want to set aside a % of your income for spending on wants. That way you don’t ruin your savings goals, but you don’t feel like you need to deprive yourself either.
>I have $111k remaining on the mortgage which is a 6%/30yr loan from my parents
With your assets (and I assume high credit score) it seems like you could get a bank loan at 3-4% interest depending on the length of the loan. Have you considered refinancing?
>Ideally, I’ll eventually find someone to settle down with, maybe even adopt a child with, and hopefully >they will have their financial act together.
While you can’t change your someone, you can refuse to date someone that is financial train wreck. Since money is the biggest issue couples fight over I would NOT EVER consider someone that isn’t at least competent with their finances.
-Rick Francis

[brooklyn money]

Hi EH,

I am super similar to you (38, single with a Masters Degree and living in Brooklyn). I'm amazed that your mortgage and maintenance are so low! Congrats. I'm buying a place now in Brooklyn and mine will be about the same monthly cost, but with a huge tax abatement. Anyway, I agree with Rick, seems like you could get a mortgage at almost 1/2 the interest rate you are being charged now.

Congrats on your MBA. I'm sure you have thought of this, but what about asking for an internal transfer to the marketing department? Even if you started as an assistant there you would be working directly with marketing and maybe have a chance to switch to what you want down the road.

[Carol]

Forget plowing all your extra $ into prepaying a mortgage--you need alot more $ in an emergency fund. Also, are you looking to change jobs and remain in NY? I agree with other writers: refinance your mortgage.

[Mark]

If your mortgage loan is from your parents, is it formalized so you take a tax deduction and they pay tax on the income?

Several people have already noted that 6% is high in the current environment. If your parents are avoiding tax too, they should be very willing to drop the rate to around 4%.

I agree with brooklyn money: See if you can get an internal transfer. You have a huge advantage at your own company (versus a job search) since they already know your capabilities.

[Noah]

What is the maintenance and insurance category made up of? Is that for your apartment? That seems awfully high, but I don't know what HOAs cost in New York.

I'd also like to second the comment about you "hoping" to find someone who has their act together. It should be fairly easy to determine if another 35 year old is financially wise. If not, I'd recommend not getting married as the wrong person could end up screwing up your savings.

[Luis]

I completely agree with your own assessment that the biggest financial hurdle is finding balance with your savings vs spending. You do not want to be a miser forever and so I'd say seek professional help if you believe the problem is bigger than you can handle.

You are doing great financially. Mint.com should be less on your mind, and spending more than $250 on food more.

I also agree with your future plan assessment to find a life partner who will fulfill your life in ways money cannot.

I do not think you need a boost in your emergency fund since you have cash and laddered CDs and Roth IRA and home equity and a net worth of $650,000!

I'd refinance to a 5/1 ARM.

[Lance @ Money Life and More]

Congrats on your success so far! Have you ever thought about leaving NYC to find a job somewhere else?

[Old Limey]

You're in excellent financial shape for your age, well educated, and with good work experience and living in a vibrant city.

Rather than concern yourself immediately with financial matters, don't underestimate the importance of finding a partner that you can share your life with. I am 77 and will have been very happily married for 56 years this coming July. Believe me, I can see that you will never have money problems the way you are going, but money isn't everything. Enjoying life in the company of someone that you can share all of life's pleasures with is far, far more important in the long run.

My daughter divorced her husband 4 1/2 years ago, after the death of her 8 year old daughter from brain cancer and after 18 years of marriage. Her husband was a very smart attorney and a great provider but the chemistry between them wasn't there from the beginning. About a year after the divorce she went on eHarmony.com and found the perfect match on her second date and is happier now than at any time in her life. She has two adult boys, and her boyfriend has 3 adult girls. Finding a life partner seems so much easier in the computer age than it was in 1950 when I met my wife at a dance at the age of 16.

[Mike Hunt]

Hi EH,

Nice to read your profile. My recommendation for you would be to try and get a marketing project within your company... you could be the lead or a supporting team member. That way you can list out the accomplishments from the project on your resume, and it will also be a great way to apply your education. Also, since the company helped pay for your degree, one would think they would be looking to get an ROI for this.

-Mike

[JimL]

I agree with Mike. You should be working with HR and your current manager as to career planning. As about secondments or if you can shadow someone in another area.

[EXS]

Noah: NY co-op maintenance fees cover building's mortgage, property taxes, insurance, heat/water/sewer, utilities for common areas, staff if building has one, reserve fund, etc. And yes, they can be high. (For my Brooklyn 1BR, monthly mnt and mortgage payments are roughly the same. It hadn't always been that way but increasing property taxes and a couple of refinances has put them on par.) Also, a percentage is deductible come tax time.

[KaseyD]

EH,
I agree with all of the above posters who recommended seeking an internal transfer.

Your company helped pay for your MBA, now is their chance to reap the benefit their investment in your education.

But I recommend narrowing down your choice between finance and marketing in all of your job searches, even internal. Not that you can't have two different resumes, but only one focus for each company you are pursuing.

In my experience, marketing folks don't understand why anyone would want to be in finance, and vice versa.

Good luck.