The Shot-Caller with Plans

A recent New York Times  article revealed that to be considered “middle class” in New York City, one has to make about $160,000 per year.  In other areas of the country, that salary can get you farther–maybe a nice home with a pool, a car or two and a comfortable lifestyle–but in NYC, you’re lucky to be living in a doorman building in a decent part of town and possibly have a parking space.  If people making six-figures are still struggling to afford certain essentials, what if you make a five-figure salary?  How can you possibly maintain a decent lifestyle, have your needs met and maybe even afford a splurge or two?  And more important, how can you save money while living in NYC on a not-so-hefty salary?

Jennifer Cole, a freelance graphic designer (www.jenncoledesign.com), learned the hard way that to save money as a small business owner, it takes organization, prioritization and thriftiness. Yet over the past 4-5 years, she managed to save $35,000 on a $50,000 a year salary–and can still afford to pursue her hobbies, travel and shop!

The Tough Early Days

Up until recently, Jennifer’s experience with money had seemed like a crazy a rollercoaster ride. Growing up, she witnessed her family wrestling with money problems and debt, and she had always had a tenuous relationship with money. In college, she trained herself to be thrifty, living on $50 a week, and became adept at using coupons at the grocery store, prioritizing splurges and being creative with her existing wardrobe.   That frugality extended even down to her shampoo!  Later, as a business owner, Jen struggled to abide by this philosophy, but eventually she found herself in a hole.

She started her graphic design business in San Francisco, then moved to New York City several years ago and struggled to balance the responsibility of her business with the financial demands of living in a big city.  As an entrepreneur she knew that the key to success was managing her finances so that her business could sustain her lifestyle.

Her “aha” moment came one day when she was balancing her checkbook and realized she had spent $2000 in the past 2 weeks.  She was mortified and disappointed with herself–because the bulk of that money was spent on frivolous things and not on necessary expenses.  Soon after, she received a tax bill in the mail and didn’t have the money to pay it.  She quickly realized that if she was to continue her freelance business, she would have to be more organized, and allocate portions of her paychecks to taxes and other expenses.

Making Changes

After some soul-searching and thanks to a loan from a family member to help her pay the tax bill, Jen got herself in gear.  She dove into what she calls “spreadsheet land,” and set up a system that tracks her paychecks.  So now when she gets a $6000 check, she knows it doesn’t all go directly into her checking account; rather, she allows herself to keep half for monthly living expenses, then portions the rest into tax payments, retirement account, savings and business equipment/expenses.

Once she set up her spreadsheet and started using it, saving was a cinch!  By allocating her paychecks to savings and taxes, she didn’t have any lingering worries about missing payments or outstanding debt.  She knew how much she had to spend each month on necessary and variable expenses, and was automatically putting money into savings because of the way the spreadsheet was set up.  The more she saved the more peace of mind she had–and the easier it was for her to set priorities.  With her spending money, she learned how to live on a budget and make the right decisions, and the most important concern for Jen was to be unencumbered with money problems.

Rules To Live By

Five years later, Jen has a thriving business and a healthy savings account, yet continues to live below her means. She says, “Whenever I make money, I don’t up my lifestyle.  I have a hefty savings account but still live in a 300 square foot studio apartment.”  What rules does she live by?  “Set financial goals, live by your rules but don’t change your lifestyle if you get a raise or come into money.”  She says the most important lesson she’s learned is to “align your values with your money; that helps you prioritize how you save  and on what splurges.”

So even as she continues to grow and take her business to the next level, Jen also allows herself the occasional splurge, especially on her favorite hobby–traveling.  She is a fan of airbnb.com and arifarewatchdog.com, sites that offer low-cost travel options for budget-minded consumers.  Jen also does much of her wardrobe shopping online, and snags deals on sweaters, coats and boots all year-round by using coupons and specials advertised on the sites.  In that way, she is always shopping and never “needs” anything.

And this year, she has been pursuing another goal.  With her business and finances in order, Jen has been hitting open-houses and meeting with real estate brokers with the hopes of taking advantage of the low-moderate income housing opportunities available in New York City.  These governent subsidies may help Jen buy her first home–a benefit for people at her income level–but, alas, not available to the six-figure ‘middle class.’