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How “Jen” Is Planning for an Epic Trip to France

By Ellevest Team

We sometimes get questions about how people may be using Ellevest to reach their goals — so we’re sharing some stories to help bring its power to life. Meet “Jen.”*

“Jen” is 31 years old, and she’s crushing it. She just got promoted to marketing director at her company (slay). She’s making $75,000 a year. And she’s living her best life just outside of DC with her long-term girlfriend.

How “Jen” Is Planning for an Epic Trip to France

Basically, things are looking pretty darn great today. So now she has her eye on some things she wants to get to tomorrow (and beyond).

Jen’s goals: Dream vacation, dream house, dream retirement

Jen has three big money goals on her list. First, she’s determined to retire with enough money to make her retired lifestyle as fantastic (or, actually, more fantastic) as her pre-retired lifestyle. So she’s looking to be on track for a comfortable nest egg.

Second, she’s preeeeetty sure she wants to buy a house someday. Not yet, because she’s still enjoying the flexibility renting gives her (plus she likes not having to pay for broken water heaters), but eventually.

And third, she’s got her heart set on an epic 35th birthday trip for herself and her friends to the south of France. Because le wine. And le beach. And le fromage.

Jen’s financial picture: Good so far, but ready to rock

At work, Jen’s contributing 6% of her gross salary to her 401(k) — and getting a 3% company match (whoop whoop). After taxes, that translates to about 8% of her take-home pay.

She’s also been putting extra money in a savings account each month. Between that and her 401(k) contribution, she’s been socking away a total of about 15% of her take-home pay a month. She has about $34,000 in her savings account (brushes invisible dirt off shoulder).

Jen’s playbook: Prioritize, then pop le champagne

Jen decides to keep three months’ worth of her take-home pay — about $14,000 — in her savings account for emergencies. Then she creates an Ellevest account and picks three goals for herself: Retire on My Terms, A Place to Call Home, and Once-in-a-Lifetime Splurge.

  • For her “retirement” goal, Ellevest uses Jen’s real-life info to estimate what her salary will be just before she retires. The goal amount it recommends should be enough to let her pay herself 90% of that salary in retirement. Based on what she has in her 401(k) so far and the percentage she and her employer add to it each month, Ellevest estimates that Jen’s almost on track. She’ll bump it up a little bit after she’s done saving for the trip to France.

  • The “home” goal is meant to help Jen build up enough for a down payment on the house of her dreams someday. Jen decides to give that goal a timeline of about eight years, since she still feels pretty far off from ready to buy.

  • Ellevest uses her salary to calculate how the mortgage she might be able to get, and then recommends aiming for 20% of that number. It comes to about $69,000. To get there, she puts the rest of her savings she doesn’t need for her emergency fund — about $20,000 — into that goal and plans to add about $380 each month.

  • Because eight years falls in between short- and long-term, Ellevest constructs an investment portfolio for her that starts at 46% stocks and 54% bonds. Ellevest will reduce the risk as she gets closer to the end of her eight years.

  • Jen thinks her epic birthday trip will cost $10,000, and her birthday is four years away. So she puts those numbers into her “splurge” goal. Ellevest recommends investing about $190 a month to get there. She’ll start at 41% stocks and 59% bonds for this goal.

  • All three of those deposits added together — 401(k), home goal, and splurge goal — comes out to about 20% of her take-home pay. That’s more than she’d been saving before, but it’s worth it — because trimming her budget a little bit to get to that once-in-a-lifetime birthday dinner in Nice … is niiiiice.

Disclosures

Jen’s not real. We made her up so we can show you the kind of decisions people can make toward their goals. In other words, this is a hypothetical client scenario that doesn’t represent any Ellevest client, though many of them happen to be coincidentally named Jen, and it’s by no means individually tailored investment advice. See the Disclosures section below for how we calculated how much the hypothetical Jen would hypothetically need to hit her hypothetical goals. Go, hypothetical Jen, go, and drink some hypothetical Champagne when you get to France! (Also note: France is real.)

© 2019 Ellevest, Inc. All Rights Reserved.

We assume Jen’s tax rate is approximately 25%.

We assume her 401(k) is invested in a low-cost diversified investment portfolio that begins at 95% equity and becomes more conservative as she reaches retirement. We used a Monte Carlo simulation — a forward-looking, computer-based calculation in which we run portfolios and savings rates through hundreds of different economic scenarios to determine a range of possible outcomes. The results shown reflect a 70% likelihood of achieving a retirement income amount of $112,659 per year, or better, and include the impact of taxes and inflation.

We assume Jen’s “A Place to Call Home” goal starts with a balance of $20,300, and she makes monthly contributions of $381, or about 6% of her salary, which grows in accordance to a women-specific salary curve provided by Morningstar Investment Management LLC, a registered investment adviser and subsidiary of Morningstar, Inc. The account is invested in a low-cost diversified investment portfolio that begins at 46% equity and becomes more conservative as she approaches her goal date. We use Monte Carlo simulation — a forward-looking, computer-based calculation in which we run portfolios and savings rates through hundreds of different economic scenarios to determine a range of possible outcomes, and the results shown reflect a 70% likelihood of achieving $68,726 or better, and include the impact of an Ellevest advisory fee of 0.25%, taxes, and inflation.

We assume Jen’s “Once-in-a-Lifetime Splurge” goal starts with a balance of $0, and she makes monthly contributions of $192, or about 3% of her salary, which grows in accordance to a women-specific salary curve provided by Morningstar Investment Management LLC, a registered investment adviser and subsidiary of Morningstar, Inc. The account is invested in a low-cost diversified investment portfolio that begins at 41% equity and becomes more conservative as she approaches her goal date. We use Monte Carlo simulation — a forward-looking, computer-based calculation in which we run portfolios and savings rates through hundreds of different economic scenarios to determine a range of possible outcomes, and the results shown reflect a 70% likelihood of achieving $10,011 or better, and include the impact of an Ellevest advisory fee of 0.25%, taxes, and inflation.

The projections of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.

The information provided should not be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice.

The information provided does not take into account the specific objectives, financial situation or particular needs of any specific person.

Diversification does not ensure a profit or protect against a loss in a declining market. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.

Investing entails risk including the possible loss of principal and there is no assurance that the investment will provide positive performance over any period of time.

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Ellevest Team

The Ellevest team is working to help women reach their financial and professional goals.