Waking up to financial realities in your 30s
Tess Vigeland: Sigh. We're getting older, as we continue Money Through the Ages, our special report in partnership with The New York Times. Your 30s are usually filled with enormous financial changes. You may be starting a family. Buying a house. Maybe moving from a starter job into something more like a career.
We're going to hear from two very different couples now. The first got married four years ago, just bought a house and welcomed their first child last month. Paul Sullivan is here to tell their story. He's the Wealth Matters columnist for The New York Times. Hi Paul.
Paul Sullivan: Hi Tess. How are you?
Vigeland: Very well, thank you. Welcome to the 30s!
Sullivan: I'm still in it myself.
Vigeland: You are! OK, well, you'll be able to relate more than I am, because it's behind me. Give us a quick thumbnail of the couple that you talked to.
Sullivan: Yeah, interesting couple. Bernardo Mainou and Natalie Thornburg. They both have Ph.Ds in microbiology and are researchers at Vanderbilt University in Nashville. They think they've been making good financial decisions along the way with a few hiccups here and there. But it turns out they're in a bit more of a pickle than they thought. Over years of college and graduate school, they used their credit cards perhaps a bit too often. And they're now saddled with about $35,000 in high interest credit card debt.
Vigeland: Ouch. Alright, here's what Natalie and Bernardo said about their relationship with money.
Natalie Thornburg: I hate thinking about money. I really just want to have enough so we have enough food on our table, that we have a safe home.
Bernardo Mainou: We don't live by money, and even now, I don't feel like money is the main thing for me. I'd like Tyler to grow up so that he doesn't have to help us out.
Vigeland: Now, how typical do you think Natalie and Bernardo are financially?
Sullivan: I think they're very typical and I think there are a lot of positive things to be taken away from their situation. They have this month-old son named Tyler and he's been a wake-up call in some ways. They really want to get their financial house in order. As part of my conversation with them, I paired them with a financial advisor in Portland, Ore. And they need to be on a strict budget, they need to know exactly how much they're spending every month. They need to have a more robust emergency fund. And then they need to make sure they have some life insurance for this young child.
Vigeland: This debt obviously is what is really holding them down at this point. Let's hear what they said about paying that off:
Natalie: We're trying to put as much as we can, paying the credit card down than saving. We put things towards savings with kind of the thoughts in our brains of not long term yet, it's kinda rainy day fund.
Bernardo: You know, it's sort of a catch-22. I feel like you want to pay off the high-interest debt that you have as fast as you can, but at the same time, it feels good to have a little bit behind there.
Natalie: We have to have something. We have to have something.
Vigeland: Paul, what are they doing in terms of thinking about the future? Are they even at that point yet?
Sullivan: They're not. And one of the shocks to them is just how large their rainy day fund would have to be to qualify as a legitimate rainy day fund. The advisor pointed out that a rainy day fund should be at least six months of expenses after taxes. That bumped their rainy day fund up to about $24,000-25,000. So it's a daunting amount of money to have to put aside.
Vigeland: Maybe they weren't so happy hear from a financial planner.
Sullivan: Well, the interesting thing that they said is, you know, I talked to them the day after the financial planner spoke with them. They were very animated, and in an earlier clip, when Natalie says she hates hates hates to think about money, she said it's changed a bit and she wants to think about it more. And Bernardo was a bit wistful. He said he really wished that somewhere along the way, he had been forced to take or at least known about some sort of financial planning course. Something that would have taught him how to manage his money better. But the upside of this, they're 31 and 34 and they're happy to have heard about what they have to do at this point in their life. As Bernardo says, they won't be a burden to Tyler down the road.
Vigeland: Paul Sullivan is the Wealth Matters columnist for the New York Times. Thanks so much Paul.
Sullivan: Thanks Tess.