This 25-Year-Old Has a Smart and (Relatively) Simple Budgeting System

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Welcome to Racked’s How Do You Shop? series, in which we ask a variety of people some deeply personal questions about how they earn, save, and especially spend their money. If you know or are someone with an interesting relationship to $$$, email alanna@racked.com.

This week we talked to Dana, 25, a New York-based publicist working in consumer PR and making $58,000 a year. She uses a budget that’s a lot like the envelope system, just with bank accounts instead of, you know, envelopes.

Rent per month: $950, with one roommate

Average money put toward savings: $100 into long-term savings

Average money put toward clothing: “Recently I’ve tried budgeting $300 over two months at the beginning of the season to pick up anything new and exciting or replace something I truly need. I’ve liked the system so far, as I can buy stuff when the weather shifts, but I’ve been a little bummed to miss out on end-of-season sales.”

Most she’d spend on jeans: “I usually get my jeans on sale at the Gap for $50 or on super sale from Madewell. The most I’ll spend is $80, typically when Madewell has their 30% off sales and they have a trendy style I’d like to try.”

Most she’d spend on a T-shirt: “$20 is about average, but I’ve spent up to $35. I really like the T-shirts from Everlane; in my dream world, I’d have 10 of them.”

Most she’d spend on a bag: “The most I’d like to spend is $100 for a daily work bag. On average, I’ll spend around $60 on a bag, typically purchased from the Baggu sample sales.”

Is your salary significantly different than when you started working or is it pretty much in step?

I started out at a PR firm where I was actually making $12 an hour, and I did that for almost eight months, and I worked a job on the weekends to make ends meet. Then I got bumped up to $40,000, and then got bumped up to $58,000 recently. How I break out my budget is that I live on the same salary as I had before, and I took my raise and I basically set it aside each month for big expenses.

How do you organize your money?

My friends think I’m very crazy. I have two checking accounts and three savings accounts. They’re in between two banks.

I have a checking account that’s attached to my debit card that I use for daily expenses. Then I have another checking account to put my rent and utilities money, as well as my MetroCard money. One of the worst parts of New York is you have to pay your landlord via check, and so they could pull the money out of your checking account at any time. I was getting to a point where I had this extra $1,000 sitting in my checking account halfway into the month, and then I wouldn’t really know how much money I had left to just spend. I’ve never made enough money to where I can’t watch my spending very closely, so I created that second account.

I have a separate savings account that is still attached to my bank so it’s easy to access; I move $400 per paycheck into that account knowing that I'm likely going to use it within the month on something like clothing or plane tickets.

About how much per paycheck would you say you’re putting into each of those accounts?

$525 for rent and utilities into that one checking account, and then $120 for the subway goes in there, too. Then for my day-to-day debit card, there ends up usually being around $600 in there for the two weeks. Then for that savings account, that’s about $400.

You mentioned you had two other accounts, right?

I have a different bank that has a really high interest rate — it's almost 1 percent. It’s Capital One 360. What I like about it is that they don’t have any minimums and you are allowed to create as many sub-savings accounts as you want.

I have one that I put about $100 a month into — that’s my long-term savings — and that was a number that I could do that didn’t really affect me. I don’t have very much in there, though, because I basically am still trying to break even on a regular basis.

Then I have pretty much a rogue second savings account that I use. I tried using it for different things, like long-term vacation savings. I had planned a trip to Mexico City, and I planned for that trip financially for about six to seven months. I wanted to keep it far away from my normal accounts, something simple that I could easily look at but also pull from relatively easily when I needed to pay for my flights, so I use it for vacation. I tried doing one where I put in $20 to $30 per paycheck just as a nice little shopping fund, but it didn’t really work.

How come?

You really need a lot of money to shop. I want to spend, like, $100 on a pair of shoes, and if I look at that account and I have $40 in it, I don't know how much that really helps me.

How much would you say you tend to spend on shopping, and how does that fit into your sense of budgeting for yourself?

I very much treat shopping as a utility. I’m a stylish person; I like getting dressed, I love clothing, but when I look at my budget, I just don’t have enough income to really shop. At the beginning of a season I’ll set aside a certain amount of money over two months, pulling from that $400 account that I put away per paycheck. I’d be like, okay, I can spend $300 on clothes in March. Then I’ll do it again in May when I think I’ll need more. I’ll sit down, I have a Google spreadsheet, and I figure out my large expenses that I have coming up and then spread it out based on need. I still can’t figure out how to casually shop on a month-to-month basis, so I really don’t anymore.

When you do shop, where are the places you tend to go?

I got a ton of summer stuff from Uniqlo because I really like buying natural fibers, and that’s a place where I can get a lot of that. I also love Beacon’s Closet. I love the Gap. And I love Madewell.

Do you find that you regard your wardrobe the same way you do your budget in terms of putting in the same amount that you’re taking out?

I very much believe that my wardrobe is cyclical. I think part of that is being jaded after working in PR or marketing; I really don’t believe in that statement, "You’ll have this forever," because your tastes change and what you care about changes. I very much look at getting things that I feel like will hold their value for me for a while but also that I can sell back to Beacon’s Closet easily.

Have you had any student debt, credit card debt, anything of that nature?

I have no student debt. I’m very lucky. I went to a school in Georgia that I had a full ride scholarship to.

I had a little bit of credit card debt, I would say $2,000-$3,000, after those first few years of living in New York. The first year of having that internship was difficult. If I had to buy something, I would have to put it on a credit card. I couldn’t even break even making $12 an hour. It just wasn’t feasible.

Then I also had three months where I was unemployed and living in New York, so I had to rely on a credit card to make sure I could eat and live normally. Then when I started making $40,000, I still wasn’t even making enough to pay off my debt, so I was making just enough to finally start breaking even. It wasn't until I got this recent job that I was finally making enough money to pay off my debt.

Did the amount increase significantly?

It stayed the same because I was always putting some money towards it. I had 0 percent interest rate the first year, and then when the interest went up, it was probably an interest of like $15 or $20 per month, so it wasn’t enough that I was really scared. I know people are very scared of interest rates, but in that situation I was like, look, if it’s $20 a month and there’s 12 months in a year, that’s, like, $200. I didn’t really prioritize moving it to another card because I didn’t think that it would take me that long to pay it off. If it was more money, I would’ve thought about it.

How long did it take you to pay it off?

I would say it took me about six months. Once I was at my new job, I started putting money toward it.

Where do you think you got this attitude toward money from?

I was probably a senior in high school when the recession really hit (maybe a junior or a sophomore). That was a time when I was thinking a lot. I feel that I’ve always thought about money a lot. I’ve had jobs from the day I turned 15, and I’ve always worked. I’ve always been very cognizant of money.

My parents were upper-middle class living in a nice Atlanta suburb. I actually always felt like they weren’t super frugal, and I always felt like they could have been more frugal. My parents always tell me that they worry that I’m too cheap and that I should not worry about spending more money on shoes or clothes or that sort of thing, but they’re always trying to bring me back to that kind of more suburban view of shopping, which is, like, if you want it, you should get it. I think it was really making so little the first few years in New York that shifted things for me in a big way.

My parents are financially in a place where they could’ve helped me if I got in a really big pickle in New York, but they weren't making enough to where they could support me financially while I was interning. That’s a space where I’m like, oh, I have to figure this out, but if I have a problem, I’m safe, but I also need to just learn how to figure this out.

I worked seven days a week for eight months and it was very exhausting, but it put me in a better standing with my company. When I got hired, I was just in a better place professionally. I was much more ready to take on the job.

Also, the budgeting that I learned during that time has really helped me now, and it’s really changed the way that I view money. I’m grateful for that, and I would do it again. I actually recommend other people do it as well when I talk to people who call me post-grad.