Robert Jones, a 34-year-old tax auditor for the Cook County Department of Revenue in Chicago, is not unlike most young people who in their early work life spend money for immediate gratification—focusing more on wants than needs. He spent most of his 20s traveling extensively. “If someone called and said let’s go somewhere, I would pick up and go,” says the Chicago native. “I was carefree.” While everyone deserves an occasional vacation, Jones never planned financially for those trips or any miscellaneous expenses, he simply financed his travels with a combination of cash and credit cards. He racked up a hefty debt in the process—more than $12,000.
Poor spending habits are not so much an issue today for Jones, who has since changed his behavior. “Once I turned 30, I started looking around at [my] finances,” says Jones. He didn’t like what he saw: too little savings and too much debt. So a year and a half ago, he started spending within his means, keeping a realistic budget, and tracking his level of debt. He embarked on an accelerated debt repayment plan by doubling up on payments. He also started paying cash for his purchases.
“I wasn’t producing any savings or money for retirement. So, I decided to be a producer instead of a consumer,” explains Jones. “I had about $7,000 worth of student loans. That is down to $900. I now have a budget that I follow religiously.”
Jones has about $15,400 in debt, most of it a $13,000 car note on his 2001 Chrysler Jeep. He has roughly $20,000 in savings and investments, including his company pension, Series EE bonds, and individual stocks [Wal-Mart (NYSE: WMT) and United Parcel Service Inc. (NYSE: UPS)]. An immediate goal, Jones says, is to purchase a two-unit brownstone so he can live in one unit and rent the other—and then use the rental income to cover his living expenses. The homes he has his eyes on are priced between $182,000 and $260,000.
Jones has also found ways to supplement his income. In addition to the annual $36,000 salary he earns from his full-time job, he has a part-time gig with ESPN Zone earning $640 biweekly. Jones hopes to increase his salary by 15% to 20% in the future. He has taken time off from pursuing an M.B.A. at Loyola College to study for the exam to become a certified fraud examiner, which will enable him to create informational seminars around identity theft and credit repair. He plans to return to the M.B.A. program this summer, taking one of the five remaining courses he needs to graduate.
While he may have gotten off to a slow start, Jones is on the right track. He says his primary goals now are “to build my business and to build my assets.”
In the last two years, Jones has gone from being a spender to being a saver. He is contributing $161 per paycheck to his pension, $75 to a 457 retirement plan, and $36 toward bonds. By adopting a