In her career covering the finance beat, Brooklyn-based editor Lauren Young has researched everything from salary negotiation tactics to the value of a prenup. Currently the Money editor at Reuters, and formerly a personal finance reporter for BusinessWeek and SmartMoney, she’s also had a front row seat to every major financial crisis in America over the past 20 years.
Lauren’s Money Tips
Set up auto payments to stash money into savings “pots of gold” every month.
Considering a grad degree? Try not to borrow more than your projected first-year salary.
Contributing the maximum amount for retirement isn’t just a good idea, it can save you taxes.
So how does having such insider access affect the way someone approaches her own finances?
“I’ve done some no-no-y things in my life, but I’m pretty good with my money,” Young says. “I’m not a millionaire. But I’m working my way.”
Young admits she (sometimes) keeps a credit card balance and never brings her lunch to work. She banks at McDonald’s (yes, that McDonald’s—her credit union allows her to use the ATMs there surcharge-free) and she’s not afraid to splurge occasionally. But her credit is—in her words—exemplary. She’s paid off her student loans and will soon fork over the money for her upcoming wedding.
Not surprisingly, Young’s the first person her friends turn to when they have money questions. We asked her how well she follows her own advice:
How has your job affected your own approach to money?
I think I’m more cautious [than other people]. I’ve always saved 15 percent of my salary since I started working. I bank with a credit union. I try to follow my own advice—mostly. One thing I don’t have is the recommended six-month emergency fund (but I do have money invested in the stock market that I would tap if I needed it).
Are there systems or routines that you stick to for saving?
I have money socked into a lot of different buckets every month—a taxable account, a cash account, a 529, retirement, charitable contributions, a health savings account, and a flexible spending account. The key is to have money consistently withdrawn at the same amounts and on the same dates so that you can stay on top of your cash flow. It’s all automatic and easy now that everything is online. It’s like I have these little pots of gold that I can tap into.
Do you have any debt?
Right now I have a credit card bill I have to pay. But that’s pretty much it. I rent; my car is paid off; I paid off my student debt a while ago.
[But] I recognize that debt is OK. It’s how you build a credit score. And so at this exact moment, I don’t have it, but in my life, I have, because you have to borrow money sometimes.
Congrats on paying off your student loans. How long did that take?
I didn’t borrow a lot for grad school (about $30,000), so paying it back over a decade wasn’t too onerous. Realistically, you should not be borrowing more, in total, than your first-year salary. Otherwise, the debt burden will be too much to bear.
It’s the summer after graduation. What should the class of 2015 be thinking about as they enter the job market?
Start saving as soon as you graduate. It might feel like it’s not possible to save for retirement, which seems so theoretical and far away. The power of compounding is such that if you start putting money away at age 21 versus age 31, we’re talking about a difference of tens of thousands of dollars. And save the max—not just the 3 percent that your company makes you. [Editor’s note: You can save up to $18,000 per year in a 401(k) plan for 2015, and an additional $5,500 in an IRA if you’re under 50].
People also don’t realize that there’s a whole tax play in terms of retirement saving, that you’re reducing your overall taxable income. People don’t always get that arbitrage. You have to play around with retirement calculators [to find out], but if you save the maximum amount for retirement, you may end up pocketing about the same amount of money because of the tax implications.
What’s your own approach to retirement savings?
Later in life, I have had the opportunity to invest in target-date funds, and I really like them for their low fees (the underlying investments are index funds). I have my own taxable account, and I have an IRA. But for the most part, the bulk of my money is in index funds. I feel like, why try to beat the market?
Do you find any popular rules of thumb for budgeting helpful—or all they all BS?
I think it’s OK to live a little bit beyond your means sometimes. I’m all about experiences, and I think to go on a really cool trip somewhere with people you love—and it might be a pinch, and you may be in debt for a little bit, I’m OK with that. It’s just not living so far beyond your means that you’re in a hole that you can’t get yourself out of. It doesn’t mean that you can go away every weekend. But maybe that one really awesome trip.
And when do you let yourself splurge?
I like clothes, but I don’t want to spend $800 on a pair of shoes. I spend money on travel, for sure (I always have a half-packed suitcase on my bedroom floor). And I definitely spend money on food. I live in a city with great restaurants, and I don’t have a problem—again, I’m not going to [expensive] meals every week, but going out and enjoying hanging out with friends. I rarely ever make my lunch.
You have a 10-year-old son. Are you grooming him to be a financial whiz?
He doesn’t have a retirement account—he’s 10!—but he was Warren Buffett for Halloween. He’s always looking to monetize everything. He’s even started a ‘black market’ for candy, gum and Cup O’ Soups at his summer camp. I don’t walk around the house talking about the power of compounding or beta or diversification, but he just knows about it. It’s really weird.