Reaching the Next Level

This year has been tough for almost everyone. Belts are tighter and wallets are opening less often. Finances are strained as paychecks have been cut and jobs eliminated. Black Enterprise reached out  to all 11 of last year’s Financial Fitness contest winners to see how they fared. Despite the rocky economy, many of last year’s winners have done fairly well. One winner managed to double his emergency savings and is preparing to purchase his first home. Another paid down high-interest credit card debt. The third has learned to say no to loans to family members.


“Law school was a big financial gamble,” says Paraisia Winston. She’s not sure yet whether she’s won or lost. With graduation now behind her, she’s left with the fallout–some $203,000 in student loans.

She was counting on a $145,000 salaried job at a law firm to be her get-out-of-debt-free card, but the offer was rescinded because of cutbacks. So she cobbled together part-time jobs and student loans to get by. Fortunately, last year she got a summer job paying $45,000 working as an associate in a law firm. That post saved her. Winston got serious about paying down her credit card debt and reduced it from $20,000 to $4,000. She called her creditors and told them the minimum payments of $600 a month she was paying on her three cards was too high. She got breathing room with a reduction to $222.  By simply asking, she was also able to get her interest rate lowered from 24% to 9%. Winston, who is on a payment plan, closed two of the accounts; she now has only one active credit card, and that has a zero balance. She also paid off her car loan. “I’m now living a cash-only lifestyle,” says Winston, who graduated in May.

The 26-year-old made other big decisions. She left Chicago in the fall to take a job in Denver as a law clerk for a federal district judge. She now earns a base federal salary of $70,000.

Winston has second thoughts about the condo she purchased before starting law school. “I wasn’t quite ready for everything that comes with homeownership, such as taxes and repairs. It was too much of my budget.” Now that she lives in Denver, she rents out the condo, which is in Chicago. Unfortunately  the tenant’s $1,000 rent covers only part of the mortgage; Winston is responsible for the remaining $600.

Winston says she is starting to feel more optimistic. She passed the bar in October, and her new job will make her more marketable to higher-paying government or large law firm jobs. She’s not sure where she’ll eventually settle professionally, but she’s attracted to the flexibility that government offers.

The Advice: Take control of finances. Winston’s basic expenses exceed her take-home pay by at least $1,656 every month. They included a $450 car note and a $600 monthly credit card bill. Winston should seek a part-time job or look for other ways to earn extra cash.

The Action: Winston got a part-time job paying $14 an hour (working 15 hours a week), and later got a better part-time job paying $18 an hour (working 30 hours a week). She then landed a summer job paying $45,000, which she used to pay her tuition and pay down her credit cards.

The Advice: Chip away at debt. Some of the funds in Winston’s money market account could be used to pay off her American Express card. After graduation, she should revisit her financial plan and develop a budget to pay off credit card debt, her car loan, and then her school loans.

The Action: Winston created a budget and now sticks to it. She renegotiated her credit cards and reduced her balance from $20,000 to $4,000 by using much of her summer job earnings. In addition, she paid off her car loan and applied the $2,000 contest winnings toward debt. She is considering seeking a position in public interest work, which offers school loan repayment assistance.

The Advice: Maximize existing savings. Winston should place the $1,500 she lent to a friend and any other unexpected sums of money in her money market account. She should review the gift IRA her grandparents gave her to see if she can improve the returns. She should also work toward building an emergency fund that would cover six to nine months of expenses.

The Action: Winston used the loan repayment to pay down debt. She reviewed the gift IRA and improved her returns by about three-quarters of a percent. She didn’t increase her savings much because she relocated, but now that she has a tenant she’ll be able to save since she’s living rent free with relatives in Denver.