Jewelry industry magnate Kendra Scott may be best known for her classic designs and dazzling baubles, but she is truly loved for her philanthropic and educational efforts. Over the last decade, her company has donated $30 million to local, national, and international causes, and just last year, Kendra built the Women’s Entrepreneurial Leadership Wing at the University of Texas in Austin, where young women are learning how to rock the C-suite, and form their own amazing companies. (And who better for them to learn from than Kendra herself — her company now has a billion-dollar valuation and 2,000 employees, 90% of whom are women. YES, she also teaches!)
We’re so honored that Kendra chose to join us for this very special Mother’s Day episode, where she opens up about what it was like to start her company with just $500, and a newborn baby boy (literally) strapped to her chest. That was back in 2002, when the country was still reeling from 9/11, and Kendra shares some candid insight into some parallels between what companies are facing now in the wake of coronavirus, and what we went through then.
Kendra says that she was inspired to start her business for several reasons — she wanted to create products that she wanted to wear, but either couldn’t find, or couldn’t afford. She also wanted to be able to be present as a mother, but stay involved in the fashion and design worlds that she loved. She also talks about how philanthropy drove her from the very beginning — even when she had no money to give, she would donate a pair of earrings or a necklace, whatever she had, to a worthy cause.
She also offers up some hard truths about her first failed business venture — a hat company — that she was forced to close after five years. She says that an entrepreneur’s journey will bring many gifts, but that some of them will be painful. She discusses the importance of not giving up after your first failures. “Those real life-lessons were the greatest gift, even though in the moment, ouch! They hurt,” she says. “Sometimes what we think is going to happen doesn’t always happen, but that might be because there’s something better — a bigger opportunity, waiting for us.”
When Kendra first started her jewelry business, she was working out of a spare bedroom in her home, and she had to sell all her samples just to have the money to buy materials to fulfill her first “real” orders, which brought her $1,265. When she got that check, she says, “I came walking in the door like we had just won the lottery. I said, ‘Baby, we’ve got ourselves a business!’”
Kendra also opens up about how she’s coping with coronavirus — on March 16, she closed all 108 of her stores, and is now able to do curbside pickup in some stores. She shares her advice on how fellow entrepreneurs (and all of us) can make it through this time. “This is not going to last forever. We are going to get through it together. As a country and as a world, we are going to come out of this so much stronger, so much kinder and more empathetic than ever before,” she says.
After coronavirus, Kendra predicts there will be an incredible need for the human touch — people will need gathering places, to see their friends, and to be together in community places. She predicts that although things will be different at first, retail will continue to thrive… And some of us (especially us Southern girls!) may need to adjust our behavior for a few months. “I’m a Texas girl. I’m a hugger!” she says.
In Mailbag, Jean and Kathryn talk about shopping and confidence-building experiences, and some of the retailers we love most (We’re looking at you, Von Maur, and of course, Kendra Scott!) We advise a listener who is expecting a baby, but who has also suffered financial losses during coronavirus — specifically she’s wondering about 529 contributions and life insurance. We also hear from a high-risk listener who is worried about returning to work after coronavirus given that her job does not offer work-from-home flexibility. She’s wondering if she should find a new job or quit her old one in order to protect herself. Lastly, we connect with a listener in New Zealand who is curious about prioritizing starting her business in the middle of the pandemic vs. building up her emergency fund. Also, in Thrive, Jean dishes on how you can get your credit reports free every week from now through April 2021.
This podcast is proudly supported by Edelman Financial Engines. Let our modern wealth management advice raise your financial potential. Get the full story at EdelmanFinancialEngines.com. Sponsored by Edelman Financial Engines – Modern wealth planning. All advisory services offered through Financial Engines Advisors L.L.C. (FEA), a federally registered investment advisor. Results are not guaranteed. AM1969416
Kendra Scott: (00:02)
I wasn’t having big dreams. I wasn’t thinking I’m going to build a billion dollar brand and open stores all over. I was just thinking, how could I contribute to our family unit, do what I love, be a good mom and give back. That was really it.
Jean Chatzky: (00:21)
HerMoney is brought to you by Fidelity Investments. Fidelity is committed to helping clients through any market conditions with financial planning and advice when you need it most. Learn more at Fidelity.com. HerMoney comes to you through PRX.
Jean Chatzky: (00:35)
Hey everybody, I’m Jean Chatzky. Thank you so much for being here with us today on HerMoney. I want to take just a sec and wish all the moms out there listening, including the dog moms, the cat moms, the plant moms, and my mom a very, very happy Mother’s Day this weekend. I hope that you are all able to do something to celebrate yourselves even in light of these current restrictions because we all deserve it. Our guest today – we are so excited about this – also happens to be a mom and when her son was just three months old, she started her business in the spare bedroom of her house with just $500 in cash. That was back in 2002. In 2010, she opened her first retail location and today our business has a billion dollar valuation, 108 locations and employs more than 2000 people, 90% of whom are women. Some of you may already know who I’m talking about. If you could see me and my dangly beautiful earrings, you would know that I am joined today by jewelry industry titan, Kendra Scott. Her colorful designs may be on your ear lobes or your fingers as I speak. And I got to say Kendra, it has been a long time since we had the whole team as excited. Not everybody shows up for every show. Kendra signed on. We’re recording this through zoom, because we’re all at home and Kathryn is here of course, but our social media manager, Christine Burke, is here sporting her earrings. We are all quite excited about this.
Kendra Scott: (02:24)
You’re very zoom chic, is all I can say. Well, you guys like all fabulous in your jewels. I love it.
Jean Chatzky: (02:31)
If we were in our studio in New York, Charles our engineer would be telling us to take off our earrings and bracelets cause he’d be afraid they would jangle against the mic. But I’m just going to go with it.
Kendra Scott: (02:42)
Hey. This is a new day.
Jean Chatzky: (02:44)
Yeah. Kendra is also, I mean you are so admired for your incredible products, but we also have to mention that you really know what it means to give back and that since 2010 you have donated $30 million to local, national and international causes. And just last year you built the Women’s Entrepreneurial Leadership Wing at UT in Austin. So, so incredible. Thank you for all you do and for being here.
Kendra Scott: (03:16)
Thank you so much for having me. I’m so excited. I absolutely love your podcast. Many of those women that you spoke about that work with me, listen to it and love it as well. So thank you for having me on.
Jean Chatzky: (03:28)
For sure. For sure. So let’s dive in and start talking about your company. I mean, starting with $500 that’s really something. A lot of businesses, Spanx was started with $5,000 and I’ve talked to a lot of entrepreneurs who started with $5,000 but not 500.
Kendra Scott: (03:50)
Well, it wasn’t exactly like I sat there and said, I’m starting a business today with $500. We didn’t have a lot of money in the bank and it was right 9/11. So here it was. I was had a newborn son. It was early 2002 and it was a scary time and I was trying to figure out how could I be a present mom for this new amazing little baby that I just brought home, but also do what I love, which was fashion and design. I’ve loved it since I was a little girl, but more importantly for me, I wanted to do something good for my community. I had recently lost my stepfather to cancer and realized that we have a really short time on this earth. And he taught me that lesson of, use the gifts you’ve been given to do something good. And that really just stuck with me. So when I had my little boy, I really wanted to create a business that allowed me to be a present mom and create that for other women. Create products that I wanted, that I couldn’t find, and products that I couldn’t afford. I mean, I loved semi-precious stones. I loved color. But everything out there I couldn’t afford as a new young mother. So I wanted to create something that was attainable for women. And then the third part was I wanted to do good. I wanted to help my community, but I was broke. So I would just, anytime anybody would call me and they’d say, Kendra, can you donate to this charity with a silent auction item or a raffle? I decided early on that I would never say no. That I could always make a pair of earrings or a necklace and that I could do that at that moment. And that just grew from there.
Jean Chatzky: (05:27)
What is so striking about when you got your start is how similar I think things are to today. I mean people are at a place where they are so frightened. Resources are more scarce than they’ve been and for awhile. And I think we’ve got a lot of our listeners who are thinking, you know, maybe I don’t want to go back into that office. Maybe it’s time for me to try to do my own thing, to try to put foot in front of the other. What do you say to them?
Kendra Scott: (06:00)
You know, I think sometimes it is the struggles in life and these challenges that come across that make us stronger. That give us a new and fresh perspective on what’s important. On the things that we may want to do. And sometimes you have to have these big moments of impact. These things that just stop you in your tracks and you say, whoa, what’s going on? To really open your eyes to maybe something new and different. And you know, I think for my life, I look back on a lot of those moments. The ones that were the most challenging really in a lot of ways were the gifts. At the time it didn’t feel like it. A lot of them were painful and, you know, my first business failed. I had a retail hat company and I had it for five years and I worked in that little store open to close seven days a week. I could barely hire anybody. And after five years of trying to make it work, I had to close it. And I think for a lot of people it’s like, oh gosh, well that’s it. You know, it’s scary to think about going into business again. And so after that closed, I had to go get a job. You know, I had to go work. I worked for a magazine, I got a job. I missed though being control of my own destiny and I missed fashion and design. I missed that customer interaction. And when I had my first son, that was a whoa, stop you in your tracks moment. As many of us moms know, you your first born, when they hand you that baby in the hospital and they look up at you with their little eyes, it’s like everything in your life that you thought was important is suddenly so not important.
Jean Chatzky: (07:37)
Kendra Scott: (07:37)
Right? I mean, it’s a feeling that you can’t describe until you’ve got that little little baby in your arms. And so that was a moment for me that I realized I want to be there for him, but I love being in business. So if I could do something that would help provide for my family, I wasn’t having big dreams Jean. I wasn’t thinking I’m going to build a billion dollar brand and open stores all over. I was just thinking, how could I contribute to our family unit, do what I love, be a good mom and give back. That was really it. It wasn’t a big business plan. My first business that failed, I thought I was going to open stores all over the country. That didn’t happen. So sometimes what we think is going to happen doesn’t always happen, but that might be because there’s something better, a bigger opportunity waiting for us. And that was what happened with me, that the store that I had was my education. It was, I masters in the school of hard knocks, of retail. Of business. If I hadn’t gone through this five years of learning what it felt like to have to pay rent and make payroll, understanding margins, profitability, I wouldn’t be able to have started Kendra Scott and have the successful company I have today. Those real life lessons were the greatest gift. In the moment they were, ouch. They hurt. So when I started, $500 is what I had. I could buy materials, created a little collection. Cade was three months old. I threw him in one of those little Baby Bjorns, which I think are still out there. And we went store to store here in Austin, Texas. I showed my collection to local boutiques. I’d write orders on a word document that I had created and I went home. I had a little bulletin board. We had a spare bedroom. It was about a 10 by 12 little room. And I set up some card tables that my mom brought over. Bead board. I had some wire and tools and I started making my orders out of that bedroom. Again, not with ever thinking in a million years that this $500 start was going to turn into this. But as soon as I delivered those orders, I actually had to sell all my samples that day. So, I’d have enough money to buy the materials to fulfill those orders. So I ended up selling that sample set for $1,200. It was $1265. I will remember it exactly. And she wrote me a check for $1,265 and I came walking in the door like I had won the lottery. I was like, baby, we’ve got ourselves a business. And I had just taken $500 and I made $1,200. And I took that money, invested it in the supplies I needed and it just kind of started going from there. And one day led to the next. I remember trying to figure out how am I going to fund this? They’re like, well, go find an angel. And I’m like, well yeah, where do these angels hang out? Because I would love to find an angel. It’s exactly what I need. It was really tough and a lot of people didn’t take me serious. I was a woman in Texas trying to start a fashion brand. I remember editors in New York and LA thinking that I was clearly probably just selling Southwestern jewelry, being very critical that if I wasn’t on the coasts that I couldn’t be a legitimate brand, a legitimate brand in fashion. And I remember thinking, oh, you have no idea who we are or what I am and what we can do. And I think those conversations for me was that drive. And I think for a lot of women, we get told no a lot or we don’t get taken seriously or we have the first five to 10 minutes to prove ourselves when we walk into a room. And I think the more I’ve been told no, the more I’ve been told you can’t do this or you aren’t doing this, it’s like for me, oh, I’m like, yes.
Jean Chatzky: (11:22)
Yeah. Don’t tell me no. Don’t tell me no.
Kendra Scott: (11:24)
Well now it’s like, I almost, when they say oh, that’s not possible, or you can’t do that or nobody does that, I get excited now. I actually am like, oh gosh, can you just say that again? I want to hear what you’re saying. You’re saying I can’t do it. I’m like, oh baby, here we go. Game on. For me it’s that fire that just starts and I think for a lot of women, you have to have that resilience. And you have to have that ability to not let those things internally affect you, but use them as ammunition to go and conquer the world or your dreams.
Jean Chatzky: (12:06)
Yeah, no question. Can I go back for a second though, to those hard lessons that you’ve learned in retail? Because I think right now, boy, there are so many people who are just wondering if they’re going to make it. And trying to figure out how they can make it. How are you coping with coronavirus? How are you coping with this new world that we’re living in? And what do you suggest to people who are trying to get through it?
Kendra Scott: (12:35)
You know, this is something that I don’t think any of us could have ever even put our heads around happening. If in January, you told me what the world would look like today, I would have been like, are you crazy? That’s not real. That couldn’t happen. Right? On March 16th, we made the decision to close all of my stores, 108 of them. And we’ve been closed since then. In Texas, Friday, April 24th, they’re allowing us to do curbside. So we’re just starting to do some to go and new models. But just like after the recession, just like after 9/11 when I started my business, 9/12, it was a new day. It was a different day, but there was a unity of people. You would go into a coffee shop and people all had a shared experience that united us as a country. It united us as people. But it was a new world. We’ve never traveled the same sinse. We had to learn new things like taking our shoes off and not having bottles of hairspray and things we loved in our bags. But we acclimated to it, right? We evolved to understand this new world and I think post-Covid is going to be similar. As a retailer who is invested in a lot of brick and mortar, hearing people say, well brick and mortar will be over, this is the end of brick and mortar, people are only going to be shopping online, I don’t believe that. I think that there’s still going to be an incredible need for the human touch. I think people need gathering places and places to see their friends and to be together, community places. And I think businesses today really need to think about what that looks like. They need to create a safe place where people can have great experiences and share special moments with the people that they love. And in the beginning it’s going to be different and it’s going to be an adjustment. I’m, you know, Texas girl, I’m a hugger, you know, very few people I would meet, I would hug you. You know, I mean, some of my friends in New York always like Kendra, you know, people don’t hug here. But I love that I’m a hugger and it’s good. It’s hard because now I can’t even, I have to be six feet away from everybody. And it’s like this virtual hug thing that I’m doing and it’s a tough new reality. And I don’t know how long that will last. And I think the thing right now is we have to be willing to be flexible. I think if we get in our minds that it has to be like this or is it going to be like this and we build up all this fear, it’s going to just really prohibit us from being able to move forward. So each day I wake up and I take that day. It’s new information. We don’t know how long lockdowns are going to continue, how long retail’s going to be just to go or if it will have to revert back. But I know one thing is for certain, this is not going to last forever. That this is a moment in time. We are going to get through it. We’re going to get through it together. The unbelievable amount of community love and kindness I’ve witnessed during this pandemic has blown me away. And I feel like as a country, as a world, we are going to come out of this so much stronger and kinder and more empathetic than ever before. I feel like if anything came out of this more than anything is supporting local businesses. I’ve thought so much about that. You know, how the communities that you’re in, the restaurants that have been open 30 years or 25 years, that they’re family owned, that I may not have visited in a long time, I can’t wait to go and see them when this is over. The local shop owners, the florists, the folks that you sometimes just, you don’t think about them. I think we’re thinking about all of those people today and wanting to make sure we’re supporting the people in our community.
Jean Chatzky: (16:21)
I think you’re so right. And I also think that in a strange way, you know, we’ve been talking for years now about how we’re happier when we spend our money on experiences. And so I think in a strange way it has prepared us to take this on. That we have been gearing up to be more experiential.
Kendra Scott: (16:44)
Absolutely. I mean, when I opened my first store, I started my company in 2002 and I was just selling wholesale because after my first business in retail failed, I said, I will never go back into retail again. That business is scary. Forget that I’m out. But then in 2008, when the recession hit, I realized that I didn’t have a personal connection with my customer. I was allowing other stores to sell my products and nobody knew my products better than I did. And I wanted to be the one to have that connection with her. So that recession changed the course of my business. And in 2010, we opened e-commerce, we opened color bar, which was an experience of creating your own jewelry. We opened our first retail store. It hadn’t been, we were kind of just going along from 2002 to 2008. We were, you know, growing a little, but nothing. We weren’t going crazy. And then in 2010 to today is when we had this lightning in a bottle of growth because of the, what are the worst financial crisis in our history that propelled this unbelievable growth. And I wanted to create something that I wanted as a customer. I hated the jewelry shopping experience. I would go in and there’d be everything behind cases and all the girls would kind of look at you. If I walked into my workout clothes, they’d be kind of judgy looking at me and if I’d asked for something to see, I felt like I had to buy it and if I didn’t they were going to be, you know, it was very high pressure and I just hated it and I thought if I can create an experience where people can touch and feel the jewelry, where they’re welcomed, where we’re so happy to have them, that we’re creating community events within our store, that they can be part of the design process and sit at the color bar and drink champagne and eat a cupcake and design a piece of jewelry and watch it magically get made in front of them. That would be so fun for me. And I think more and more today we have to put ourselves in our customer’s shoes. We have to think about what do they want? How are we going to surprise and delight them today? How are we going to wow them? Because the minute we become complacent, we will lose. And today we are changing so fast every day, especially with Covid, that we have got to be able to pivot to shift and to think, how today can I surprise and delight my customers?
Jean Chatzky: (19:04)
I think you are so right. I want to come back in a second and I want to talk about the world of good that you are doing in Austin but also all over the country and the world. But before we do that, let me just remind everybody, HerMoney is supported by Fidelity Investments. For more than 70 years, investors have relied on Fidelity Investments to help plan for their financial futures and as always when the unexpected happens, Fidelity’s there to help you work through it with financial planning, with advice for what you need today and tomorrow. Helping to make it all clear. To see how Fidelity can help you and your family on your path forward visit Fidelity.com.
Jean Chatzky: (19:47)
We are back with Kendra Scott, founder of the Kendra Scott jewelry line, which is available and her boutiques as well as so many different department stores. Well, let’s talk about the entrepreneurship center that you started at the University of Texas. What was that about?
Kendra Scott: (20:08)
You know, it was such an exciting opportunity. You know, we’re based in Austin, Texas is where our corporate headquarters are. And we have had so many phenomenal interns throughout the years, over these last 18 years coming from the University of Texas. And so our involvement with the University has always been so special. But this was a way that we could really even impact it more. And one of the things that I realized being a designer, is I remember as an artist, I was told that you are either left brain or right brain and if you are one or the other, you can’t be in business. If you’re a creative that you can’t be a CEO. And business courses weren’t available to people in fine arts in other areas. And I started to look at what it meant to be a leader and an entrepreneur and that should be open to all schools, all studies. And that women can learn entrepreneurship skills. Doesn’t mean you have to run a business. You can live your life with an entrepreneurial mindset. And so what I wanted to do was really give these young women at the University of Texas the opportunity to learn how they goal set, how they achieve the things that they want to achieve, how they live their life with confidence. And we wanted to provide that for every female student and male. It’s inclusive to everyone but with a female focus. And that was important to us. Many of these business classes or entrepreneurship classes, 99 to 95% of them men, male students are in the class. And a lot of women were intimidated to even sign up for some of these courses. So I think it’s really amazing that we can have a kind of female-focused women led. And again, we love the guys in there and get their input, but this will be where they are actually the majority instead of the minority. And giving them those skills to go lead their absolutely best, most happy lives.
Jean Chatzky: (21:57)
Well, I get to Austin every once in a while. You’re going to have to let me come and talk to your students about their money.
Kendra Scott: (22:03)
I would love it. And we actually have a really great community gathering space where we’re doing our workshops. We bring in guest speakers. We’re doing a women’s summit in November, so we would love to have you come for that. But we actually put it in the college of fine arts. I wanted it to be in a place unexpected. And so I think the brains of tomorrow are the artists, the ones that aren’t afraid to color outside the lines, the ones that think out of the box in really unbelievable ways. And so getting students, even from the school of education, why can’t one of these female students be superintendents of schools someday? Why can’t we help give her the tools to walk into boardrooms confident? And so this is really exciting. It’s been so exciting to put together. I’m actually teaching a course in the fall, so you can now refer to me as Professor Scott. I am an official part of the faculty, so I’m so excited. It’s an amazing thing.
Jean Chatzky: (23:02)
That’s fabulous. So it’s Mother’s Day. We’re teeing up for Mother’s Day. What are you going to do?
Kendra Scott: (23:09)
Well, first of all, this has been, you know, it’s a crazy blessing in a way to get all this time with my family. My oldest Cade that we just talked about is graduating from high school. So the little one that was in the Baby Bjorn is now 18 and graduating from high school. And so that’s been a challenge because bless his heart, he can’t walk with his friends, we can’t do prom. But I secretly between us have loved it because I’m getting all of this amazing time with him before he goes off to college next year. So, you know, I’m the most happy when I’m with my family and that usually of us grilling outside, maybe swimming in the pool, going for a family bike ride, snuggled up and watching a movie. If I get breakfast in bed, I’ll be happy, but I don’t need it. I just love being with my kiddos and I’m looking forward to that day where I get their full attention.
Jean Chatzky: (24:02)
Kendra Scott, you are so the perfect guest for this episode. I’m thrilled to meet you and to have you here. Thank you so much for doing this and Happy Mother’s Day to you and your wonderful family.
Kendra Scott: (24:15)
Thank you. And Happy Mother’s Day to all the amazing moms out there and all of the moms who’ve been on the front line. We appreciate you. We love you and we hope you have the best Mother’s Day.
Jean Chatzky: (24:25)
And we’ll be right back with Kathryn and your mailbag.
Jean Chatzky: (24:34)
And Kathryn Tuggle from HerMoney, our producer, is with me. So that was so much fun.
Kathryn Tuggle: (24:41)
I love her. I loved her before and I love her more now.
Jean Chatzky: (24:45)
I did not know her as well as you and Christine knew her, and maybe that’s being from the Northeast so much and not from the South, but boy, oh boy is she smart.
Kathryn Tuggle: (24:56)
Just so dynamic. Amazing.
Jean Chatzky: (24:59)
Amazing. And I love that idea of thinking about what people really need right now. Like she thought about what people really needed coming out of 2008 and giving it to them. That’s going to be the key to success.
Kathryn Tuggle: (25:13)
100 percent. And I just loved her beautiful insight into how you are treated in a store, because I think every single woman listening to this podcast has had the experience of walking in to a boutique or a store of some sort and being treated like crap and it is the most demoralizing, un.. what’s the word? What’s the word that makes you not want to spend?
Jean Chatzky: (25:41)
Uninspiring? And I mean it’s not even so much that they treat you like crap, it’s that shopping is not a confidence building experience. You know what I mean? I mean just think about bra shopping, right? Like how awful is that? That you have to go and figure out what fits. I don’t like shopping for jeans. You always feel like you’re judging yourself even if nobody else is judging you.
Kathryn Tuggle: (26:11)
Absolutely. Absolutely. But smart retailers, have you ever shopped at a Von Maur? I think they do a really good job with customer service as well.
Jean Chatzky: (26:20)
No. What’s it called?
Kathryn Tuggle: (26:21)
Jean Chatzky: (26:23)
Kathryn Tuggle: (26:24)
Von Maur is a department store. They’re in a few states. They’re in Alabama and I think they started in Iowa, but I always feel like a million bucks when I walk into one of their locations.
Jean Chatzky: (26:34)
Wow. It makes all the difference and I also think, look, we have words judgment-free all over our site for a reason. Right? But I mean women feel judged all the time and it sucks and if we can do a little part to stop that, I think hopefully we convince some other people to believe that it’s necessary to and just come along for the ride.
Kathryn Tuggle: (27:00)
Absolutely. She’s got it locked down. She knows how to treat her fellow woman and I love that.
Jean Chatzky: (27:06)
Kathryn Tuggle: (27:07)
Jean Chatzky: (27:08)
Alright, we got questions. Let’s treat our fellow women by answering them.
Kathryn Tuggle: (27:13)
Our first question is from an anonymous listener. She writes hi Jean and Kathryn. Thanks for the consistent steady voice amidst a financial whirlwind. It’s been a pleasure listening to and learning with the show. Right now I’m in a bit of a loss. I’m 37 years old and my partner and I are expecting our first child in October. It’s a girl.
Jean Chatzky: (27:32)
Kathryn Tuggle: (27:35)
My question is about estate planning. I would normally bulldoze my way through my regular checklist of 529 and life insurance research, but our financial situation has drastically changed over the last month and I’m not sure how to proceed. My longterm partner and I are both in the wine industry and it was hit hard by Covid. He was laid off and I received a 50% pay cut indefinitely. On top of that, we’re facing down a $6,500 health insurance deductible, which makes this pregnancy very expensive and stressful. Finding work that does not put my partner at risk of exposure is limited at the moment and we’re unsure of when real recovery will happen this year. On top of that, my maternity leave starting in October is dismal at two full paid weeks and four weeks of 60% pay after which I need to take unpaid leave. All of this means I can walk away making half of what I would normally earn in a year. On the bright side, we’ve been living very conservatively. My partner has about $5,000 in retirement and 10,000 in savings. I have over 350,000 in two 401ks, 30,000 in a Roth and less than a thousand dollars in my HSA. I also have 2000 in checking and about 63,000 in a high yield savings account. I was hoping that lump of savings would be a cushion for the very expensive daycare rates in our area or maybe a down payment on a future home. My partner and I don’t plan to get married, so I know we’re not protected by the usual family law assumptions. I would seek out an estate planner, but any added costs right now seem prohibitive. I know we’re not destitute, but it feels impossible to put down roots for our daughter’s future when the present is so fraught with the unknown. How can we save for a 529 when I can’t even safely afford to contribute to retirement this year? Is life insurance even an option we should look at and should we be covered with a newborn? Should my partner be the beneficiary of my savings and retirement plans or should I put these in my daughter’s name. Help and thanks for listening?
Jean Chatzky: (29:34)
Well, first of all, you are about to, as you’ve just heard, embark on the adventure of a lifetime having this baby, and so I don’t want to lose sight of the fact that this is a really happy, blessed event. So focus on that as much as you possibly can. There are a couple of things in your letter that give me just a little bit of pause and I’ll get to them in one second, but before I do, let me just say, give yourself a break on the 529 contributions. If you don’t start making them this year, you don’t start making them this year. If you don’t start next year, you’ll start the year after. Looking at your personal financial situation, what I see is somebody who is a really, really good saver. You’ve accumulated a lot of money and you’re only 37 years old so you will get there. Just take that worry off your plate for right now and don’t worry if you have to scale back on the 401k contributions for this year. That’s okay too. You will get back in gear when you’re able to get back in gear. A couple of things that you asked about, let’s address specifically. Life insurance with a baby is a must. It’s an absolute must. You and your partner should both have term life insurance policies, so go online. If you go to HerMoney, we’ve got some articles about this. There are places like Policy Genius where you can just shop around online, find a policy that works for you. But yeah, you absolutely need that. The good news is it’s not going to be very, very expensive. Here’s where I get a little bit stuck. As far as your partner being the beneficiary of your savings and retirement plans versus your daughter. That really depends on what this money is for and I’m a little concerned about the inequity in your financial life. You’ve got a lot of money, you’re clearly a really fantastic and responsible saver and investor. I can’t tell why he has so much less and it’s troubling to me. And so I would say, take enough out of that high yield savings account and use it to cover the pregnancy so you can stop worrying about that and take another thousand dollars or two and talk to a lawyer, talk to an estate planning lawyer about the best way to protect your daughter without sabotaging the ability of your partner to take care of your daughter if something were to happen to you. I’d also say eventually I’d like to see you sit down with a financial advisor who can make a plan that will show you that you are indeed checking off all the boxes for your future. Because you’re checking them all off. But not spending the money on a lawyer right now is not the right move. Does that make sense, Kathryn?
Kathryn Tuggle: (32:48)
Yeah, it does. I mean she is doing so well in terms of savings and if she has the bandwidth for a 529, then some of that money needs to go to a lawyer now.
Jean Chatzky: (32:59)
I think so. And with your partner at home, even if you’re back at work, after whatever time you feel you are able to take off, you don’t have to pay for daycare. You got it built in. So that’s a cost that you don’t have to worry about.
Kathryn Tuggle: (33:14)
Jean Chatzky: (33:15)
Congratulations though. And I hope everything goes really, really smoothly with the rest of the pregnancy.
Kathryn Tuggle: (33:22)
Yeah. Congrats. Our next note is from Janell. She writes, I’m 62 and I live in the San Francisco Bay area. I’ll have to return to work after the coronavirus shelter in place is lifted. I’ve been on my job for 32 years. The concern I have is that I’m one of the people in the high risk group because of a number of health issues. So I must be especially careful during this pandemic not to be around large groups of people. My job involves dealing with the public all day. I’m a receptionist and telephone operator. The type of job I have does not permit me to work from home and because of medical issues I’m limited as to the type of positions I can do. I’m thinking that now maybe the time to take an early retirement so I can protect my health. I just don’t know that I have enough to live on, but I also don’t know what else to do. I live paycheck to paycheck and so I’ve only been able to save a small amount. My annual salary is $41,500. I have 3,200 in cash savings and I have a 403b retirement account in the amount of $133,000. For a quick look at my other expenses. My rent is 1100 and that increases annually by about $35. Other expenses including food, utilities and transportation to and from work are around $600 a month and I have two credit cards with balances totaling 21,000. Can you please offer suggestions? I just don’t know what to do.
Jean Chatzky: (34:44)
Sure. So a couple of things stand out. One is, of course we all have to do what we have to do to protect our health these days and if you’re in a high risk group you have to take that incredibly seriously. When I read that you are both a receptionist and a telephone operator, it strikes me that all I’m seeing lately are notices from companies that are hiring people who can work from home because they have customer service skills that are applicable on the phone and online. And I’m wondering if you should be looking for one of those jobs. In fact, I’m suggesting that you should be looking for one of those jobs. There are so many different places out there where, you are exactly what they want right now. And so I’d say while you are at home sheltering in place, get that resume together, build back up that LinkedIn profile and get out there and start looking. The big cost that you didn’t mention is healthcare. And I believe that you didn’t mention it because your healthcare is paid for by your company and that is a big gap that you would have to fill because you’re not old enough to qualify for Medicare. So I’d like to see you stay in the workforce, find a way to stay in the workforce until you get to Medicare because that’s not an expense that we look like your budget can handle. The other thing that is concerning here is the $21,000 in credit card debt. I’m wondering if that number is going up on a monthly basis or going down on a monthly basis. If it’s going up, I want you to take a real hard look at where your money is going and if you can find any wiggle room at all to throw against those debts, it may be worth giving the credit card companies a call, seeing if there’s any flexibility in interest rates that would allow you to pay down the debt faster. But we certainly don’t want to see that scaling up. And I also wonder, I don’t know what these jobs from home are paying, but I do know as Kendra was saying, we are in a whole new world right now and I suspect you may be able to find pretty competitive work simply because you have the skill set that so many people are looking for. So good luck with that and let us know what happens.
Kathryn Tuggle: (37:23)
I totally agree. 32 years at this company, you’ve clearly proven your worth. You know what you’re doing and companies that didn’t have work from home positions like this five weeks ago, may be about to have a lot of positions just like this. Remote work from home.
Jean Chatzky: (37:41)
You know, I didn’t even think about that. I mean that’s another really, really good suggestion. Go back and talk to your employer about the fact that you can’t come back in, but that you would like to continue to work and see what happens.
Kathryn Tuggle: (37:55)
Absolutely. Our last note is from Megan in, drum roll please, New Zealand.
Jean Chatzky: (38:01)
Kathryn Tuggle: (38:02)
Yes, she writes hi Jean. I just love your podcast and your blogs. Thanks for keeping on doing what you’re doing during this crazy time. In New Zealand, we don’t have the level of illness that many other countries have endured, but our economy has taken a big hit and both my and my husband’s job are potentially at risk. Just before the lockdown I launched my side hustle, an online BD retailer. Not the best time to launch any business, but on the bright side, this is really the time for online retailers. I’m at a point where I need to invest more into the business for marketing, but with job concerns and the shrinking economy, I’m not sure whether to hunker down and put my money into paying off our home loan, so that I am in a stronger position if I do lose my job, or invest in the business, which has great potential. I have a little bit of a buffer in my personal finances and the banks are offering repayment holidays, so those things would help. One alternative is to keep the business ticking over without investing more capital until things settle down a bit. I appreciate that this decision really comes down to my combination of personal and business circumstances, but any general advice you have would be so appreciated. Thank you.
Jean Chatzky: (39:10)
So Megan, I think and I hope that listening to Kendra Scott got you totally jazzed up because it got me totally jazzed up about your situation, that this really could potentially be an incredible opportunity if you play it right. So my inclination is to say don’t stop investing in the business, but I do want you to put pencil to paper or pen to paper or fingers to computer, whatever your pleasure happens to be, and figure out the payoff for the money that you are investing. It’s something that we are dealing with at hermoney.com as we try to get more content up on the site. I want to know what the payoff on putting that content up is going to be in terms of page views, in terms of likely advertising dollars. And I think you need that filter. Because otherwise it’s a little too much of a gut decision when this is a time when relying on the numbers can be something that makes us considerably stronger. I think, take advantage of the repayment holidays. Definitely take advantage of the buffer that you have in your personal finances. In the United States, mortgage rates are so low and I think things are largely the same in your part of the world. But if you’ve got a very, very low rate of interest on that home loan, I wouldn’t stress trying to supercharge your repayment. I would invest the money in the business instead as long as your mortgage payment is not uncomfortable for you on a regular basis. And I would try to, while you’re doing all of these things and while we’re all living at a time where we’re not going out to restaurants as much and we’re not spending as much on transportation or work clothes or things like that, I would conserve as much cash as you possibly can. So my answer was a little all over the place. Clearly I want you to be able to do everything, but I do think if you feel like you’re onto something, you have to go with it.
Kathryn Tuggle: (41:22)
Absolutely. And we have situations like this so often, right? Where you have to just kind of straddle that fence and do a little bit of both, whether it’s saving for retirement and saving for college at the same, or investing in a new business and saving in your emergency fund. It’s always that balance that you have to strike.
Jean Chatzky: (41:40)
Yeah. It’s not an either or. It’s a how much to which one.
Kathryn Tuggle: (41:44)
Jean Chatzky: (41:45)
Yeah. Perfect. Thank you, Kathryn. This was a fun show for me. I appreciate you having Kendra on.
Kathryn Tuggle: (41:52)
Of course. She was amazing. More amazing than I thought she would be, so thanks so much.
Jean Chatzky: (41:57)
Yeah, absolutely. And in today’s Thrive, a little bit of news. For roughly the next year from now through April of 2021 the three major credit bureaus, Experian, Equifax, and TransUnion are offering customers free access to our credit reports every single week. And you can access those reports at annualcreditreport.com. In pre-pandemic times, this free credit file access was limited to one per year from each of the three major bureaus. Pulling a report every three months was what we suggested. Pulling a report every four months was what we suggested to provide an ongoing window into what lenders and other entities were saying about us. But now it’s just a free for all. So do you actually have to pull your report every week? Well, I think that’s probably overkill, but this is just a reminder that now is a good time to keep your eye on things, that this is a time when scam artists come out of the water using coronavirus to cover themselves in schemes to gain access to your credit card and other personal information that puts you at risk for fraud or identity theft. We’ve got lots of information about that up at hermoney.com so if you need more, go there. There are no hidden gotchas here. Just be careful not to inadvertently sign up for a credit monitoring product that is going to cost you money. Offers will be made on the page. Just close them out if you’re not interested.
Jean Chatzky: (43:33)
Thank you so much for joining me today on HerMoney. Thanks to Kendra Scott for her incredibly inspiring conversation. I love her designs and next time I am in Austin, I am definitely, definitely going to check out that flagship store. If you like what you hear, I hope that you’ll subscribe to our show at Apple Podcasts. Leave us a review. We love hearing what you think. We want to thank our sponsor Fidelity. Ordinarily we’re at CDM Sound Studios recording this show, but for now we are using zoom and a Yeti mic from the comfort of our homes. Our music is provided by Video Helper and our show comes to you through PRX. Thanks for joining us. Have a happy Mother’s Day and we’ll talk soon.