A Hard-Core Spender Turns Herself Around
BY: VERONICA DAGHER
January 31, 2016 10:01 pm ET
A publicist bounces back from credit-card debt to become a responsible saver and investor.
In the space of a few years, Rachel Griffin, a 37-year-old Los Angeles publicist, transformed into a saver from a spender.
When she graduated from college in 2000, she had racked up nearly $20,000 in credit-card debt, thanks in part to a move across the country, dinners out, travel, clothes and other expenses.
“I charged everything,” she says.
She also had $30,000 in student loans.
After graduating and working as an executive assistant, she found a job in public relations. For a while, Ms. Griffin says, she played the “credit-card shuffle,” repeatedly transferring balances to 0% interest credit cards, and scrambling to live from paycheck to paycheck. But she quickly realized her credit-card debt was a problem.
By limiting new charges and working a second job as a waitress on the weekends for two years, she managed to pay off her credit-card debt after about five years.
But in 2007, she decided to quit her job and backpack through Europe for four months. During this time, she again accumulated credit-card debt. “The trip was worth it,” she says.
Then Ms. Griffin moved to New York to take care of her sick mother. This enabled her to minimize her expenses and not use her charge cards while she did public-relations consulting part time.
But when her mother died, Ms. Griffin had trouble finding a full-time publicist job again. She worked in a diner for a while, then moved to London to live with a friend and work as a waitress. During this time, Ms. Griffin vowed not to charge up her cards again. Her two 401(k)s grew in value as well.
In 2009, she landed a new job in public relations, in California, and started to save as judiciously as she once spent.
Today, Ms. Griffin is senior director of public relations at a toy maker and no longer carries a credit-card balance from month-to-month. She has more than six months of expenses in an emergency savings account, and roughly three years’ worth of expenses in three 401(k)s, which include stock and bond mutual fund investments.
She has several thousand dollars in a 529 college savings plan for future children, and a small amount in “penny stocks” that some clients recommended to her. “That’s my ‘play’ investment money,” she says.
In addition, she has a timeshare in Arizona and is a small investor in a bar in Los Angeles named Now Boarding.
She rents her Los Angeles apartment but would love to buy a home once the real-estate market cools. Meanwhile, she limits herself to two restaurant meals a week. And when she travels on business, she tries to tack on a few days to be with friends and family. She takes a more expensive trip for herself every two years.
She donates at least $1,000 a year to children’s charities. She also budgets about $1,000 a year to take part in triathlons.
And while she can’t imagine retiring, Ms. Griffin stays familiar with her Social Security statement so she knows how much she may receive of the benefit down the road. “It keeps me motivated to make more money and save for experiences, not things,” she says.
ADVICE FROM THE PRO: Rachel gets big kudos for paying down her credit-card debt and building an emergency fund, says Stacy Francis, a fee-only financial planner in New York.
Now Ms. Francis says she should transfer her old 401(k)s into a rollover IRA, since the former have more limited investment choices, and maximize her contributions to her current 401(k) to make sure she’s on track for retirement and make up for any missed contributions.
The adviser urges Ms. Griffin to start saving for a home down payment. “Purchasing a house sooner than later would be ideal to take advantage of still-low interest rates,” she says.
She could also “supercharge” her house savings by cashing in her penny stocks and the investment in the bar. “These investments are very risky and typically not appropriate for someone who hasn’t completed their retirement savings,” Ms. Francis says.
While Ms. Griffin gets high marks for planning ahead, putting money away for a future child’s education may not be the best plan, Ms. Francis says. “No one will give Rachel a loan for retirement,” she says, “however, her child may be able to get a loan for college.”