NerdWallet’s How Do You Do Money? series asks people from various walks of life to share their attitudes and approach to personal finance, with the goal of bringing transparency to discussions surrounding money. In this installment we speak with Yaffa Fredrick, a 24-year-old managing editor living in Brooklyn, N.Y. This is how she does money.
What do you do for your main source of income and how did you get into that line of work?
I am managing editor for World Policy Journal, a foreign affairs magazine that covers underreported issues across the globe. I’ve always been fascinated with the political sphere, while simultaneously in love with the written word. This position is ideal because it allows me to combine my passion for effective policymaking with the art of long form reportage. In college, I studied political science and media, and during my junior year, I interned for World Policy Journal. Though I spent the next few years working in a TV news space, I was excited to return to WPJ when the position opened last August.
Would you like to be doing something else instead?
Right now I’m fairly content in my day job. I get to work with young writers across the globe, curate a magazine from start to finish, and even dabble in my own short form reportage from time to time. In the future, though, I’d like to transition to a larger journalism space with a stronger digital platform. It’s wonderful to have top-notch content, but it’s even better when that content can reach millions.
About how much do you earn before taxes per year?
Do you feel secure with that amount? If not, how much would make you feel secure?
Not entirely. I still tutor and freelance quite a bit because New York City is so incredibly expensive. The rent on my two-bedroom in “brownstone Brooklyn” is just slightly more than one-third of my income after tax—and that figure excludes utilities and Internet. I haven’t determined the best figure, but I’ve been told rent should be no more than one-fourth of your take home (pay). If I operate under that assumption, then I’d need to make closer to $100k.
Do you have any debt?
I’ve paid off all my college loans so the only debt I carry month-to-month is on my Bank of America Cash Rewards card. I think, at this very moment, I have about $300 to pay on that card. Oh, and I recently pulled out my Lord & Taylors card so I owe about $70 for my makeup splurge at the Laura Mercier counter.
Do you think incurring that debt was worth it?
I certainly believe my college education was worth the small debt I incurred, but I’ve also been fortunate to be steadily employed since graduation so I’m of the belief that the degree was worth the cost. In terms of the credit cards, my debt is very manageable. Even if I don’t pay the entire card(s) off each month, I have the capacity to do so. And meanwhile, I’m earning cash back and air miles!
Do you have any savings goals?
I do! I’d love to save enough for a down payment on a one-bedroom in Brooklyn. My mom raised me to believe in the importance of having equity, and property in New York seems like an ideal form of equity (I, of course, say this with a very primitive understanding of what equity actually means in terms of long-term financial security.) I should note that my mother also encouraged me to open a 401k at my first job, and over the last three years I have made consistent contributions to it. Though retirement seems like a very distant goal, I would like to live as comfortably as possible when I do close up shop.
What is a question that you’ve had related to your personal finances, either in the past or recently?
Should I be paying off my entire credit card bill each month, or is it “acceptable” to carry a small balance from month to month?
NerdWallet has previously addressed this question here.
Are there any resources or tools you’ve used to learn about and manage your personal finances?
I had a free trial with LearnVest a year ago that helped put my spending habits into perspective. I’ve tried Mint, but I’m kind of old school with my budgeting. I have a running Excel spreadsheet, where I chart my expenses each month—rent, food, entertainment, etc. And I check it every so often to make sure my projections and my actual costs aren’t too far apart.
How was the topic of money approached in the home you grew up in? What factors do you think influenced that approach?
My mom was a single mom for most of life so she was an expert at budgeting—perhaps less by choice than by necessity. She taught me the importance of building personal savings, a retirement account, and as I mentioned above, equity. Though I never knew exactly how much my mom made, she was very transparent about the costs of paying her mortgage, sending me to private school, paying for summer camp, etc. But I think the most important lesson I took from my mom was the art of the hustle. She taught me that if my day job wasn’t paying me enough to support some of the activities I really wanted to engage in, I could take on side jobs to supplement my income.
Has your approach toward personal finance changed from the time you left home and how so?
I think the biggest reality check I had was when I graduated college and moved into a glorified closet in downtown Manhattan. I’d been raised upper middle class, and suddenly I couldn’t afford the lifestyle I’d grown accustomed to. It made me bitter—like I’d been set up for disappointment—because working for city government (my first was at the Manhattan DA) was never going to afford me the same lifestyle. And so I took on four or five side jobs to try and earn a better income. As a result, I was working 70-80 hours a week, but having zero time to enjoy being a 20-something in New York. Several years later, and I’ve found more of a balance. Yes, I still tutor or babysit, but I’ve figured how much I need to earn to cover basic expenses and enjoy the city that never sleeps. I take on fewer gigs; I prioritize; and I’ve mastered the art of Excel budgeting.
What is the best monetary investment you’ve made?
My Amazon Prime yearly subscription—for less than $100 a year, I get everything I could possibly need to order delivered to my door in less than 48 hours. Did I mention I’m slightly impatient?
What monetary investment do you regret the most and why?
Does rent count as an investment? For two years, I paid close to $1,500 a month to live in a 10×6 room—notably the size of a solitary confinement cell— in the bougiest neighborhood in New York. Now I pay less than that for a room triple the size. I wish someone had told me the rent was too damn high, and I should’ve moved to Brooklyn at 22.
What does financial stability mean to you?
I think this definition has evolved with time. At 22, it meant covering my rent and transportation costs without having to ask my mother for a monthly donation to the Bank of Yaffa. Now it means earning enough to cover the basic expenses, while also building out a personal savings account and a retirement fund—and affording the occasional international trip.
What financial accomplishment are you most proud of?
I actually read in a NerdWallet column that young people should ideally be putting 15 percent of their earnings into retirement accounts (feel free to correct me here), and I’ve structured my finances as such that I am now doing that. It’s given me that warm, fuzzy financially responsible adult sensation.
Are there any questions you’ve ever wanted to ask a financial advisor?
Is there value in a personal savings account with a negligible interest rate, or should I be moving my money into mutual funds?
The determiner here should be the eventual use of the funds. If the funds are meant to be used as “emergency” or “reserve” funds, then leaving it in savings, even with today’s meager returns, is going to be the best choice. If the funds are meant for the longer term, like retirement, then moving them into investments that shoulder more risk is probably appropriate. What’s good for the goose may not be good for the gander, however. Be sure to consider your own tolerance for risk with every investment that you make, keeping your time horizon, goals and need for liquidity in mind.