More often than not, that’s all that Jackie Kane, a health-insurance troubleshooter from Kirkland, has to live on for about a week each month.
After her first-of-the-month rent and bills are paid — and before cashing her second twice-monthly paycheck — Kane, 27, is like many other single, working college grads her age.
“I buy generic groceries, split the rent on a small house with my roommate and cheer when I find quarters in the bottom of my purse,” she says.
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When the Seattle Seahawks were in the playoffs, Kane pinched pennies to make sure she could meet friends at a local sports bar and chip in for pitchers of beer they ordered.
It’s a far cry from her more comfortable days growing up in Port Angeles, where the former high-school soccer player recalls watching her mom and dad write — and meet — deadlines for bill payments on the large family calendar posted in their home.
“I was really lucky that my parents helped me understand the value of money and the importance of paying bills on time,” she says.
Now, from her $1,900-a-month take-home pay, Kane’s split on her house rental is $500. Her half of utilities runs $135. Though she doesn’t have time or money to play organized soccer, Kane works out at a gym with $72 monthly dues and runs on the weekends with her dog, Murphy, a retriever/poodle goldendoodle with professional grooming needs that cost more than her own haircuts.
She owns a 2004 sedan she purchased after working part time while attending Washington State University, but these days it mostly sits in her driveway. Her dad helps pay her auto insurance, but tolls on the Highway 520 floating bridge, the price of gas and downtown Seattle parking fees forced Kane to start bus commuting months ago.
Though a lot of her friends tell her they are in the same financial spot as she is, Kane looks at her life — with no college debt and less than $500 owed on her credit card — and still worries.
“I struggle with living from paycheck to paycheck,” she says. “I’d like to get a new car, and I’d like to be able to pay all my car insurance myself. I can’t sleep at night because I’m wondering ‘is there something I’m missing?’ ’’
That’s why the insurance problem-solver decided it was time to get some free troubleshooting of her own. She completed an online survey to participate in a free financial makeover from a member of the Puget Sound Chapter of the Financial Planning Association.
Within a month, Kane was paired with Angela Giboney, a certified financial planner at Mill Creek-based AFG Financial in Snohomish County. Giboney, a 23-year veteran of the financial-services industry, sat down with Kane to craft a set of goals and a 10-point “action plan” to achieve them.
The first step: Get some envelopes. For Kane and others who struggle with stretching limited dollars, these become handy tools for switching from plastic to cash.
“Go to a cash basis for everything you don’t already have a bill for — except you can use your debit card for gas,” Giboney told Kane. “Take out cash twice per month, on the 1st and 15th” and “place the allocated amount into envelopes for categories you will likely not spend each month, including clothes, gifts and personal care.
“When the money is gone, you are done spending,” she says. “Anything you still have after that, you keep as additional spending money for the next half of a month.”
This system “gives people more freedom because if you go to all cash, you will spend less,” Giboney says. “Studies show that card use — both debit and credit — increases spending by 17 to 30 percent. A lot of young people are so used to using their debit card that they tend to overspend.
“When going to cash envelopes, the key is to do it twice a month — not more, not less. That’s because doing it twice a month means that the amount you have in an envelope is large enough that you can take advantage of sales, but small enough that you know you can make yourself wait a few more days for the next envelope if it’s something you really need. This way, you don’t run out of money at the end of the month.”
Next up: Kane needs to get rid of her credit card’s annual fee.
If the company holding Kane’s current card won’t eliminate that, Giboney urged her to open a new credit card.
“You can check with your current bank, BECU and bankrate.com to see what is available,” she continued. Once a new card is set up, Giboney advised, pay off the old one and close the account.
Nearly any credit-card annual fee “is too much,” Giboney says, pointing to “a few exceptions: if someone is using a benefit from that particular card to earn plenty of rewards and mileage, but even then they should look for cards without a fee.”
Meanwhile, Kane would also benefit from making sure she’s getting the most from her checking and savings account. Giboney recommends switching to her credit union’s “Member’s Advantage account, as they pay 6 percent APY (annual percentage yield) on the first $500 in the account.”
With these early steps, Giboney says, Kane should begin setting up an “emergency fund of at least $1,000 so that when the unexpected happens, you don’t have to go to the credit card. It also really helps overcome that feeling of not having anything for all your work.”
Even before this proposed plan begins to work, and Kane begins saving more money, Giboney wants Kane to begin weaning herself off the $300 in auto-insurance support she receives from her parents. The planner encouraged her to start shopping auto and renter insurance rates. Brokers can be found online, the planner added, and “in this budget you could contribute up to $115 per month, hopefully less … You can always get quotes and then share them with your current agent and see if he can match them or get close.”
Even though Kane arrived at her first meeting with Giboney feeling financially squeezed, Giboney praised her spending habits. “You are doing a good job with your income-tax withholdings set at the level where you get a return of about $500 each year,” the adviser told her. “You are also doing a great job of not spending money on things you don’t need and not overspending on things you do need.”
Giboney also praised Kane for securing a rental home within her means.
“The biggest thing” Giboney thinks that she can recommend to renters is to make sure their rent “is somewhere around 25 percent or less” of their take-home pay.
“When it’s higher, it limits your ability to make other good choices, like putting money into a 401(k).”
By November, Kane should have enough savings not only to reduce her stress, but to working toward retirement and other future goals.
To prepare for that, Giboney urged her to meet with her employer’s human-resources staff to get “a good understanding of what is available and how the 401(k) matching works and your investment choices. This will also help us determine when it makes sense to open a Roth IRA and begin contributing to it, as well.”
Giboney offered a few smaller, simpler routes for Kane: “Consider dropping HuluPlus (a subscription service for Internet access to streaming video of TV shows and movies viewed instantly on a TV) and using Redbox or the library. Consider a lower-cost gym that is convenient.”
Since she’s not using her car for a work commute, even fewer oil changes might make a difference, she adds. Some vehicles don’t need servicing every 3,000 miles.
The planner has a backup plan for anyone who needs help. “If numbers are not your thing, don’t be afraid to ask a friend who is good with numbers to help you with your budget,” Giboney says.