Play Money
They Work Hard, Then Party Hard. But They Don't Realize the Cost.

By Nancy Trejos
Washington Post Staff Writer
Sunday, February 3, 2008

When Paxton Styles goes clubbing with friends, his drink of choice is Crown Royal whiskey. That, he says, is not good for his finances. In two weeks, he spent $680.43 on his social life. Much of that -- $296.16 -- went towards bar and nightclub tabs. Happy hours cost him $133. Dinners and late-night munching were another $94.92.

Styles can easily go out four or five times a week. He is 31, unmarried, and childless. He also lives in the 11th-most expensive urban area in the country, according to the Arlington-based Council for Community and Economic Research, which means that a good chunk of the $47,000 a year he earns as a meetings planner goes towards having fun.

"I spend too much money on the partying," he acknowledged after tallying his expenses.

It's a familiar refrain among young residents in the Washington region: In such a career-obsessed town, what's wrong with partying hard after working so hard? But financial planners say it's the main way young professionals in their 20s and 30s get into financial trouble in urban areas like Washington. Many have good incomes but not as good as they will be someday. Retirement seems far off, so they don't save enough. They put everything on credit or debit cards and don't keep track of their spending. All that makes it easy for them to give into the many temptations of a place like Washington and its affluent suburbs.

"We work so hard in building our careers," said Keva Sturdevant, a financial adviser for Merrill Lynch in the District. "The younger generation wants to see that immediate reward for their hard work, so they spend and hang out with friends and shop. I'm not saying you shouldn't do that, but there should be limits based on your particular financial situation."

How much you should spend on your social life depends on how much you make, how much debt you have and how high the fixed costs are that you have each month, financial advisers say. If you don't have many expenses, you can spend more on fun. If you are living paycheck to paycheck, it's the first thing you should cut out. It's that simple -- or not, said William Murray, a 31-year-old graphic designer who lives in the West End. "On any given night, someone's out," he said.

What are you to do if you're young, want to pay your bills on time and save for retirement but still have a social life?

The first thing is to keep track of how much your social life is costing you, advisers said. Save your receipts, and tally your expenses with an online program such as Quicken. Pay attention to your ATM receipts. Advisers said they have many clients who frequently take out cash and don't pay attention to what happens to it. "They don't know what they spend," said Rolf M. Winch, a financial planner with Lifetime Financial Partners in Rockville. "If you don't know, how do you get your arms around it if you're in financial trouble?"

Young people in the District are vulnerable to overspending on activities such as dinners, drinks and movies, advisers said.

For one thing, entertainment options have expanded with the region's economic revitalization over the past decade. For another, the District is a pricey town -- the sixth-most expensive U.S. city for dining out, according to Zagat's customer-ranked 2008 restaurant guide. The average cost of a meal for one person in the District is $34.69, above the national average of $33.42, according to Zagat. One adult ticket for a Friday night movie at AMC Loews Georgetown 14 is $10.50. An orchestra seat for a Saturday night play at the Studio Theatre in Logan Circle is $53. A glass of Pouilly-Fuisse at Ozio Restaurant and Lounge in Dupont Circle is $12.

D.C. is also a town where networking is part necessity, part hobby. It's a town of lawyers, lobbyists and consultants, a town of power lunches, happy hours and party-hopping. There are people who make tons of money and people who make so-so money, and you don't want to be shut out of the social scene even if your salary is not up to par.

"It's a town where people want to fit in, so I think sometimes people will spend in order to fit in, and that might mean dining out a little too much or buying clothes that are a little too expensive," said Kim Reed, a financial planner with Garrett Planning Network in Chevy Chase. "It's a very prestigious town. . . . If you live here, you kind of get sucked into that."

At the request of The Washington Post, four Washington area residents in their 20s or 30s agreed to keep a spending tally over two to four weeks in October and November.

"What surprised me was how much I spend on food I don't eat," said Styles, who kept tabs on his spending for two weeks. Late-night eats alone cost $49.08.

Alcohol was his other big expense. Styles is 6 feet 4 and weighs 250 pounds, so by his own admission, it takes a lot for him to feel the effects of drinking. Even trips to the liquor store to stock up for a night of watching football at a friend's house set him back $71.06.

Murray was surprised by how much he spends on friends. It's the price he is willing to pay for being a self-proclaimed "cruise director."

"I float freely between social circles, and that definitely adds to my social costs," he said while sipping beer at an Arlington bar during a Festivus celebration in December.

Murray makes about $90,000 a year, puts the maximum he can in his 401(k) and has about $20,000 in savings. He has a $400 car payment and pays about $1,000 in rent.

During his first week tracking expenses, he spent $201.30 on dinners and drinks with friends. There was the $14 pitcher of beer for friends at a bar on U Street NW, $29.56 on a birthday dinner and $16.14 for snacks to watch a football game at a friend's house. He spent quite a bit on himself, too, buying a $659.34 Xbox 360 Elite bundle with Guitar Hero II and Halo 3. He spent $154.38 on fun during the second week.

He also travels frequently. He recently paid about $4,600 for a cruise on the Queen Victoria for himself and his brother. Yes, he acknowledged, if he cut back on trips he would probably own a house by now. But he'd rather see the world than own a home.

Craig Smith, 23, also considers himself a social butterfly.

From Oct. 26 to Nov. 26, he spent $144 on alcohol and $20 on cover charges. Another $100 went toward Saturday night dinners with friends, $40 at the shopping mall food court and $60 on lunches after basketball games with his buddies. Another $325 paid for dates with his girlfriend.

His most shocking discovery? "Why in the world did I spend $112 on Baskin-Robbins?" he asked while sipping bottled water at Caribou Coffee. "On sundaes?"

Smith is a legal analyst making $36,000 a year. He has about $2,000 in credit card debt and $7,000 in student loan debt. He has no car payment and lives rent-free with his mother in Springfield. He has been able to tuck away $13,000, which means he doesn't feel so bad about going out five or six nights a week.

But he has found a hidden cost to socializing: gasoline. Because he lives in Springfield, he has to drive to meet friends. He sees people in Tenleytown, Bowie and Alexandria. They play basketball in Georgetown and Tysons Corner. The monthly tally: $280.

"Living at home gives me a lot of financial freedom," he said, "but there are trade-offs."

Trade-offs -- a word many people don't like to hear, especially Linda Dickerhoof, 31. That's what her life has been about since she decided to buy a two-bedroom duplex in South Arlington in November.

She makes about $70,000 a year as a public relations director for a company in Alexandria. Her monthly mortgage payment is $1,600. She has about $10,000 in credit card debt and pays $300 in student loans, $400 for her car and $150 for insurance.

"It's very easy for me to get $100 out of the ATM machine. The next thing you know, I'm buying a coffee, I'm buying this and that, and it's gone."

Buying a home and a late fall cold kept her from spending lavishly from Oct. 26 to Nov. 17, when she kept her tally. But she splurged some nights.

There was the $89.04 Halloween costume. She was a vampire. The cover charge for the party she went to at RFD in downtown D.C. was $10. Beer cost her $20. When she ran out of cash, she put $11 on her credit card.

One Friday night, she went to a hockey game at the Verizon Center. The ticket was $35. She arrived at the game with $60 in cash. After paying for parking for her designated driver, having pre-game beers, beers at the Verizon Center, then post-game beers, "I went home empty-walleted," she said.

Lesson learned: "I own a house now. I have a dog who requires dog food and stuff. . . . I have so many different responsibilities, and I can't go out and spend a couple of hundred dollars on a lunch tab."

Financial advisers said these four people are not necessarily being financially irresponsible. But they said that too often, young people ignore the most important rule: "The key is to fund all the obligations and the goals first and then spend the rest, but oftentimes people do the reverse," Reed said. "They have fun, they go shopping and whatever is left, they use that to pay bills and save."

Don't shun fun, but scale back, the advisers said.

At happy hour, buy two drinks instead of four. Go to a matinee instead of an evening showing of a movie, or wait for it to come out on DVD. Don't go to expensive concerts. Watch them on DVD.

Eat at expensive restaurants only on special occasions, not on nights you simply don't feel like cooking. Entertain at home, and ask your friends to bring dishes or drinks. If you're having dinner with a friend at a restaurant, try sharing two appetizers and an entree instead of ordering separate appetizers and entrees.

"You've got to pick your spots as far as the social life goes," said Frank Boucher, a financial planner in Reston with the Garrett Planning Network. "No one can live like a monk, and you shouldn't, but if you're spending $100 a week on drinks and going out with your friends, you can knock that down to $50 and have your friends over your house for a potluck."

And whatever you do, don't use credit to have fun. "You never use credit for things that are going to lose value," said Paul Richard, executive director of the Institute of Consumer Financial Education in San Diego.

After realizing how much his social life is affecting his finances, Styles has decided to make some changes. Although he has no car payment, student loans or credit card debt, he does worry about his future financial stability. Now is the time to do something about it, he said.

"I've decided for the month of February, I'm going to not drink to see how much I save and how much weight I lose," Styles said.