Theresa's 29, on $90,000 and likes to shout her friends drinks. She has a money makeover to save $25,000.

Theresa: 29.

Works: Public Relations.

Income: $90,000.

Approach to money: Frivolous. 

“I don’t deny myself. If I want something, I’ll get it,” she said. While Theresa earns very respectable money as a marketing manager, she has none left at the end of the month. Make-up, jewellery and big nights out are her major weaknesses.

To her credit, Theresa has an emergency stash.

“Enough for a flight home and a bit extra”. Tick the “F*&k Off Fund” box. But otherwise, she has a bit of a spending problem.

When I sat down with Theresa, I found it’s not as simple as seeing something she likes and buying it. It’s a web of social pressure, personality and habit.

The daughter of a farmer and teacher mother, Theresa inherited her dad’s approach to money: if he has it, he spends it. Her mum, however, is thrifty and keeps the family finances in check. 

One of Theresa’s challenges is that she sees money as a way to show her love.

“I feel guilty for being away from my family, so I spend a lot on presents for them.” Paying for weekends away for her parents, for example. She has eased off a bit now, but still errs on the side of far-too-fancy gifts.

The same generous streak makes her fast and loose with cash on a night out.

“When I’m out, I’m like the Wolf of Wall Street. I’ll buy all my friends drinks, shots, whatever, no questions asked.” She never chases people for money they owe her either.

I nearly fell off my chair when I asked how much Theresa spends on a weekend. “On average, about $400”. That’s drinks, dinners, taxis and I am guessing some serious hangover food too. It’s definitely time to change things up.

Getting ready for serious ‘adulting’

Theresa’s closest financial goal is straightforward: to buy a house in her hometown. She thinks AU$20-30K will be enough for a deposit.

Theresa had hoped she’d have a property by the time she was 30, but with the big 3-0 looming in December, she’s revised that to 32.

When I start digging, this milestone is part of a bigger shift in Theresa’s life. She recently moved in with her boyfriend – who is much better with money.

She’s going from a single life of partying with the girls, to a quieter life. 

“I had a lot of expenses setting up a home together, plus I don’t want to be out getting smashed every weekend. It’s hard explaining that to my friends though – they are used to me being a party girl. But I definitely feel like it’s time to rein in the spending and get serious about saving.”

When I ask her about the longer-term goals, Theresa hasn’t thought much about them. She knows she wants kids – two or three – and plans to be a working mum. But paying for a wedding, childcare or time off for maternity leave hasn’t come into her calculations yet.

The Makeover

Step 1: Set SMART goals (Specific, Measurable, Achievable, Realistic, Time-based)

Save $25,000 by December 2019 for a home deposit (that’s $1000 per month)

Step 2: Set a Budget - then make it realistic

Theresa has mapped out her fixed and essential costs in the MoneySmart Budget Planner, and they are manageable. Her take-home pay works out at $5,600 per month, so her savings goal is about 18% of that.

Her budget sets out essentials - i.e. ‘the cost of being Theresa’ - and includes rent, groceries, insurance and transport. With no car and sharing a 1-bedroom unit, her fixed costs aren’t too high, at at touch under $2000.

Theresa is paying off a small credit card debt and a bigger student loan. She also had no health insurance budgeted, but knows she needs to get it to avoid extra tax before she turns 30 in December. So I added that in too, and these things total $420.

Personal care includes a fairly pricey gym membership, contact lenses, getting her hair done, buying ‘maintenance’ make-up (she has sensitive skin so buys the fancy stuff).  That clocks in at $465. There is probably room to trim this if she wanted to get more thrifty down the track.

Add in lifestyle costs. In her version of the budget, Theresa had no allocation for holidays, which is unrealistic (she went to Fiji last week). I added $250 per month for this. There was no budget for buying shoes and clothes, so I added $100, and with no budget for taxis or Ubers, I added $100 there as well. The restaurants and bars budget is a big cut for her - down to $170 per week. While this might sound high to some (i.e. me), it’s all relative.

This is an ideal budget. In real life it will need some flexibility - there’s currently a buffer of around $270. But it’s important to have a framework.

Step 3: Make a mindful spending manifesto

This is a short personal statement where you set out what you value, where you want to focus your energy and money, and where you’re not going to spend it. This gives you a sense of intention and a touchstone to return to when you’re wavering.

Ideally, it will help Theresa get her mindset right for sticking to a budget.

Step 4: Set up your Spending Buckets

Theresa needs a bank account for each of these purposes:

• Pay & bills: Her pay goes in and all the boring stuff comes out of here (rent, groceries and bills)
• Short-term savings: For money Theresa knows she will need to spend, just not right now. Flights home, holidays, presents for the family, etc.
• Long-term savings: This is the place for the house deposit. It’s going to be with a different bank, so there are no temptations to move it around on the spur of the moment.
• Spend & Splurge: This is where the nights out come from, as well as any splurges like clothes and jewellery. That vintage Chanel ring she has her eye on? Yep, only if it comes from here.

The rule is, everything needs to be allocated to each account before she gets her hands on the Spend & Splurge money. Theresa can either set up scheduled transfers or do it manually on payday.

Planning for disaster

The hard part is going to be what happens when the Spend & Splurge account is empty too early. Say it’s one week before payday, the account is low, and there’s a birthday night out. What will Theresa do?

She could either:

• Spend the rest of the money and suck it up until payday.
• Go and not drink at all/very much. When people ask why, she says ‘It’s not in my budget’. This is a controversial and difficult choice. People will question her, make her feel bad or try and talk her out of it. She will need to tough it out.
• Go and not drink.
• Take money out of her savings account and spend that.
• Let her boyfriend pay.

All of these are valid options, but none are ideal. But that’s what adulting means.

Probably the best option is to avoid the situation altogether. She’d do this by planning her spending.

• Look at the month’s social events. The big ones like birthdays will be known in advance. Allocate funds to each one. Maybe even take cash out and put it aside at home.
• For the other nights out, give herself a cash budget. Take that out and when it’s gone, it’s either time to stop drinking or to go home.

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Theresa is currently paying compulsory super, but that won’t happen if she goes home to Ireland. So she needs to make sure retirement saving remains on her radar, even when she is in her thirties, having kids and working part-time.

Once she hits her current goal of buying a home, it will be time to re-do all the goals and priorities. That’s ok - it’s part of life.

In reality, Theresa and her partner will probably pool their resources at some point to buy a house. That will take some pressure off her savings target, but as Fierce Girls know, A Man is not a Financial Plan. She needs to proceed on the basis of doing it on her own, and if her man steps up and pitches in, even better!

A final word

This kind of makeover is easy to do on paper, harder to do in real life. The key is to have your goals nice and clear, so that when you’re wavering, you have something to help make decisions. With her SMART goal, a mindful spending manifesto and a boyfriend who is a good influence, Theresa has everything she needs to make a positive change.

Belinda White is a PR specialist and finance guru. You can find out more about her here on The Fierce Girls Guide to Finance.

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