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| The Basics | One year of financial sanity
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Our 10 Women in Red spent 12 months helping each other learn to budget and save. Here are the tactics that helped them take (almost) total financial control.
By MP Dunleavey
Editor's note: Columnist MP Dunleavey and eight other women have come together online to strip away the myths surrounding money, lay bare their assets and liberate themselves from debt. Follow the quest for financial fabulousness of these "Women in Red" every second Monday in Dunleavey's column on MSN Money.
As den mother of the Women in Red, I admit that I had high hopes for their progress this past year.
Luckily, I am well-enough acquainted with my own financial foibles that I kept my expectations in check. The best-laid money plans don't always pan out -- for the simple reason that life and human weakness tend to throw a wrench into our goals.
Still, I was pleasantly surprised to find that:
- Everyone made progress toward her goals in 2005.
- Some people made progress toward goals they didn't know they were going to have.
- We're all on the way to becoming fabulously, filthy RICH!
OK, not really. Not yet. But despite a few setbacks -- not sticking to the 60% Solution budget, giving in to old habits, a tragic shopping incident or two -- I was impressed by everyone's determination to keep moving forward. And by their commitment to the group.
I hate to whip out the old "it takes a village" clich -- but it does seem that having a few buddies to back you up makes a big difference when you're seeking financial sanity.
The envelope, please
Rather than list everyone's highs and lows for 2005, I'd like to hand out a few awards to highlight the WIR's achievements.
Related news and commentary on MSN Money
Most-dazzling performance on a small income:
Tricia, 39, a single mother of three, managed to get one son through technical school, send her second off to college -- and start a consignment shop for formal wear with a friend -- all on a $31,000 income.
Even more impressive, using her slow-but-steady system of paying off debt every week, Tricia has paid down her balances from $4,000 to $3,200 -- and hopes to be debt-free by July.
And with both the prom and wedding seasons coming up, she thinks her new business will be in the black a year from now.
Her goals for 2006: Subdivide her 40-acre property and sell a couple of parcels so she can build an emergency cushion, and save more than $10 a week for retirement (which is still pretty good, considering).
Most perseverance toward a goal:
At the opposite end of the income curve, Carole, 39, has been trying to save enough money for a down payment for an apartment in New York. Even on her $130,000 salary, this has been hard because:
- She admits that she enjoys a pretty free-spending lifestyle.
- You need at least $60,000 for a down payment in Manhattan.
- Those two things arent compatible.
So in 2005 she set up a Save First system, socking away an additional 7% of her income (on top of the 10% she's always saved for retirement) -- and she has stuck with it. That's key.
She also made the bold decision to put her retirement savings on hold a few months ago, and is now putting that cash (about $750 a month, but alas, no longer tax-deferred) into a savings account to help toward her purchase.
Lastly, she signed up for a mortgage program that caters to middle-income folks who otherwise can't afford to buy in their overpriced local markets -- NACA -- and may be approved for a loan in early January.
"I know I've said this before, but the group has really helped me to keep moving this project along," Carole says.
Most-honest self-assessment:
A tireless worker, Lyndsey more than earned the nice raise she got in October, which bumped her income from $42,500 to $50,000.
But, despite an extra $400 net per month, "it doesn't feel like much," she says. She hasn't been consistent about paying off her debt -- and shopping is still a problem, she says. "When you pull an $88 tank top out of the closet that's never been worn, there's a problem."
I appreciate her honesty, because it helps to explain why Lyndsey's original $12,000 in credit card debt is now down to about $10,000 -- when it could be lower. She knows she could be much more aggressive. And she plans to be. "I really want to be more accountable in 2006," she says. "I want to pay off that debt and start focusing on savings."
I was thrilled to learn she's already doing just that. Months ago, she didn't want to talk about retirement. Now she's doubled her 401(k) contributions from 2% to 4% of her salary.
Best strategy for a turnaround:
In some ways, Marian, 51, has had a difficult year. A single mom with three kids, no child support and a shaky income, Marian had to find a way to earn more, dig herself out of debt and pay for her oldest child's special-education tuition.
Not an easy goal, given that her income wavered between $24,000 and $48,000 -- and her son's tuition last year was $3,500 a month, seven times her mortgage.
But Marian was determined to turn things around. She took a big-picture approach. She got a family loan to pay some of her basic expenses these last five months, decided that after this spring her son will rejoin his public high school and, in order to boost her income (and pay those tuition bills), she's starting a temp agency for paralegals in her tri-state area. "It's a service we badly need out here," she says.
Given her situation -- three kids heading toward college in the next three to 10 years and herself facing retirement with nothing saved -- Marian's primary goal for 2006 is making her business a success by years end.
Best all-around improvement:
When Stephanie, 28, looks back on the young, nave girl she was when she joined the WIR, she can't believe it. "So much has changed!" she says. I'll say.
She and her husband both got substantial pay raises -- hers from $37,000 to $44,000; his from $32,000 to $40,000. Their total debt, including college loans, was close to $30,000; now it's down to $22,000.
With so much more money coming in, Stephanie admits they've been enjoying some lifestyle upgrades, but in 2006 she wants to put more toward debt. And now that she's eligible for the companys retirement plan, she is signing up to contribute 6% of her salary in order to get the full match -- a smart idea. These small steps will add up to big money in the years to come.
Most grit, gumption and inspiring good cheer:
Despite being laid off in June, Beth, 39, has had a remarkably steady financial year. While we are all in awe of her, she gives a lot of credit to the 60% Solution budget.
Because she and her husband were in the habit of trying to keep their expenses as close to the 60% target as possible and were monitoring their spending and saving, they were able to adjust when her salary dropped from $54,000 to about $20,000 on unemployment.
They put all savings, including retirement, on hold. Despite having about 40% of their income sheared off, they haven't acquired any new debt and can pay all their bills.
Her new focus for 2006 is going back to school to become a licensed massage therapist. (What is it with all the new enterprises among the WIR?) As she and I agreed, what better time to change careers than when you're already strapped! Seriously though, if she'd attempted this while she was employed, the leap would have been too stressful.
On the sidelines
Not everyone was able to fully participate this year. Anna, 41, not only had a baby on her hands (her daughter turned 1 in October), but she was seriously injured: A Jeep hit her in a crosswalk, breaking her leg.
The good news is that she and her husband were able to resolve a big financial issue in 2005: child care. He now stays home part of the time and Anna works from home the rest of the time.
Jill, 35, has hovered on the edge of the group, unsure if she wanted to commit, while staying in touch with me and other members. She decided to become a fully active member in 2006 "because I really need to start saving." At the moment, on $90,000 a year, she admits that she isn't saving one red cent.
That said, Jill and I kept our commitment to roll over our sad sack IRAs into bona fide investment accounts at Fidelity. And I literally wouldn't have gone to that 8 a.m. meeting without her.
Brice, 38, managed to keep her pinky in the group, but found herself so busy with work that she couldn't always participate. However, her larger income -- increased from about $40,000 to about $55,000 -- allows her to start saving money for the first time. "And I paid off a third of my debt," she says, from $18,000 to $12,000 and counting.
It was inspiring to me that not only did everyone want to renew their membership for the coming year, they all want to be more accountable.
That's because, while it's possible to move forward on your own, everyone noticed that you make more progress when you know others are there, watchful and supportive.
To that end, we'll be posting all our goals -- and monthly progress reports -- in the "bio" section on the left side of the WIR blog.
The other tool the group has yet to fully embrace is the 60% Solution. But we must. You can't move ahead financially without clear targets, so my plan is to hold everyone accountable to those percentages.
Thanks to the 60% Solution, I've achieved something very close to financial sanity. My husband and I are both freelancers, so our income tends to fluctuate. Still, on a gross monthly income of about $7,000, we put $1,000 toward debt (14%), $350 toward retirement (5%), another $300 into short-term savings (4%) and $100 into long-term savings (1%).
Clearly we need to save more for retirement. But that's our big goal for 2006.
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