Curious how your spending and money management stack up? In this Wealth + HealthSM Diary, we talk to real folks just like you, who’ve shared their tales of spending, saving, and searching for loose change.
Today, we hear from Madison, a 25-year-old real estate broker who lives in Seattle. After graduating with a degree in philosophy and not finding a job in her field, she decided to take advantage of the booming real estate market and got her broker’s license. She and her partner plan to marry eventually, but no date is set. They love to escape the city on the weekends to hike and bike. Even though retirement seems a long way off, Madison would like to retire in her mid-60s.
Industry: Real estate
Housing costs: $1,500
Groceries and home supplies: $200
Dining out: $300
Loans: $150 student loans / $450 car loan
Health, dental, and vision insurance: $300
Auto, homeowner, and umbrella liability insurance: $75
Life insurance premium: $0
Lawn service: $0
Cell phone: $75
Gym membership: $100
Clothing, misc.: $350
Credit card debt payments: $300
Financial planner: $200
MONTHLY SAVINGS AND INVESTMENTS
Roth IRA: $50
Savings: $200 a month
Employer sponsored retirement plan: $0
OUR CHAT WITH MADISON
How difficult is it for you to put money away for retirement? Have you had to give up anything?
My Roth individual retirement account (IRA) contributions are scheduled to come right out of my bank account each month, so that makes it pretty easy to save for retirement. My biggest challenge is the inconsistency in my monthly income since I’m in real estate. Plus, I want to be able to have enough saved to get through a dip should the market experience a downturn.
If you had to put away more money for your retirement, what would you cut out of your budget?
I should have my car paid off in three years, so my plan is to increase my retirement savings by my car payment amount. I’m also renting a loft in the city. I know I could reduce my living expenses if I found a starter home to purchase — plus, build up equity. Right now, I enjoy the benefits of city living, but eventually I think we’ll move to the suburbs and purchase a home. I really don’t like to cook, but I could reduce my dining out expenses, too.
What are your retirement goals? What age do you want to retire? What do you want to do in retirement?
I’d love to retire when I’m 65 and be a nomad for a while, exploring every corner of the United States. I think I’d still like to do some kind of work, but hopefully it will be more of a passion project that I can do from anywhere. I’ve always enjoyed writing, so maybe I’ll become an author. I also benefited from several mentors in my life, so I would like to pay it back and mentor others when I retire.
What does “health” mean to you?
Freedom. When I have my health, I have the physical and financial freedom to do just about anything. That’s why I hike and bike and find ways other than just going to the gym to stay active. I probably need to eat a little better and drink more water, but I’m a work in progress.
Are there luxuries that you always need to include in your budget? House cleaner? Grocery shopper?
I wouldn’t call it a luxury, but I moved away from my family when I moved to Seattle. When I did that, I told myself I would always go back for visits. So, paying for plane tickets a couple of times a year just to visit family is something I don’t want to give up.
Do you have a financial planner? If so, explain why your planner is valuable.
I recently started working with a financial planner who helped me navigate how to plan for my future when my monthly income fluctuates so much. We also discussed some investment options that I had never thought of, and I look forward to being able to build up some of those investments in the near future. My planner charges a set fee of $2,400 per year, which seems like a steep sum, but I look at it as an investment that will pay dividends down the road. As my portfolio grows, I’ll have the option to switch his fees to a percentage of the money under management, or to continue on an hourly or yearly set fee. I like that flexibility.
In addition to saving for retirement, what are some of the big picture items you want to invest in?
Well, I definitely want to buy a home within the next five years. And, I’ve always dreamed of having a vacation home on the lake where my family could all be together. That dream is down the road for sure, but it’s something I would love to invest in at some point.
What intimidates you about planning for retirement?
I guess for me it’s the unknowns. Will I have kids or not? Will I stick with real estate until I retire? Who knows? I’m focused on getting my student and car loans paid off, so I can start planning for bigger things down the road.
THE WRAP UP
Madison isn’t afraid to change up her plans to create a better life — like she did when she went into real estate. While her focus at the moment is enjoying life in the city, she is working to pay off loans, so she can shift that money into investments and her retirement.
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