Single-mother sacrifices then savors prosperous course for herself and daughter.
By Christian Zappone, CNNMoney.com staff writer
January 24 2007: 4:44 PM EST
NEW YORK (CNNMoney.com) -- Sherelle Derico, 36, had a 3-week-old daughter and no job when she and her husband split in 1997. But the challenges of the separation and single-motherhood didn't deter her from seeking financial success.
"It was frightening. Most definitely," said Derico of the experience.
At the time of her divorce Derico, who held an accounting degree, was already considering earning a master's degree.
"As soon as the baby turned one I started on a Masters in Financial Management at the University of Maryland," she said.
The period brought changes not just in her educational and career goals but in her spending habits too. Derico, who enjoys interior design, says she used to spend a lot of money on clothes and furniture. She used to travel more.
Today, she prefers to pay off debt and to save money down to the penny. When this journalist contacted Derico on her cellphone, one of the first things she said is, "Can you call back on my landline? I want to save on my minutes."
Derico's personal history helps explain her habits. After becoming a mother and getting divorced she returned to a former employer who hired her back - for a lower paying job. Then 9/11 happened and she got laid off.
"I found myself in lots of debt. That's when I started to save a lot of money," said Derico, who now works as senior consultant in project management for Booz, Allen, Hamilton in the Washington, D.C.-area.
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Derico has paid off roughly $25,000 in student debt she racked up for her undergraduate degree in 10 years. She paid for her masters' degree mostly in cash along with matching plans from her employers.
Also, five years ago she started receiving a small amount of child support and is now receiving $700 a month.
As for her own money, Derico puts away 20 percent of her income into her 401(k) and IRA.
She says she's adamant about paying into her savings like she would any other bill.
She has $95,000 in an account with TIAA-CREF. Her Booz Allen 401(k) account has $36,000. She keeps about $8,000 in her regular savings.
"My friends say I'm pretty obsessive [about my savings]," Derico says, pointing out that she 'loses it' if her savings fall below a certain amount.
Buying a home
Although Derico faced lean times, she has managed to set and keep financial goals - like home ownership.
But Derico's 1999 purchase of the 4-bedroom 2-bath Fairfax, Virginia, 1,300 sq. foot town home didn't come without sacrifice.
She was enrolled in her master's program at the time and had to ask for a refund on that semester's tuition in order to come up with the down payment for the house.
To scrimp for the rest of the payment, she says she didn't go to the grocery store for 3 months and instead ate only the food she had stockpiled in her pantry.
"The majority was canned food," she said. "Spam. Ramen noodles soup."
But her daughter Sharmon didn't mind. Sharmon, who was 4 years old at the time, wanted to be able to jump; living in an apartment with neighbors in the unit below meant she couldn't.
Derico succeeded in making the down payment and took out a 30-year mortgage on the $114,000 home.
Not long after, she refinanced and brought the length of the mortgage down to 15 years.
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The value of the property has soared in Fairfax County's overheated real estate market. Similar homes in the area sell for $500,000-$600,000.
Derico has racked up $460,000 in equity in the town home.
She wants to pay off the mortgage in 10 years, which would mean she would own the home outright by 2009.
She points out that "any extra money goes towards her mortgage."
Although Derico still sacrifices today she no longer has to buy ramen.
Money handling
Today her one indulgence is a new 2007 LS460 Lexus. She bought it after trading in the 1996 ES300 Lexus which she had paid off. She financed the car through her credit union.
Derico has no credit credits, pays for everything in cash with the exception of her Lexus. If she can't use cash, she uses a debit card. She also uses coupons and savings cards when eating out, and for groceries and toiletries.
She eats turkey sandwiches every day at work and never eats out during the week. Her entertainment-dining out budget is $100. For the month.
One trick that has helped Derico, who still confesses to a weakness for impulse buys, is to save money in her ING Money Market account. Once you contribute money to it, you can't touch it for 2 or 3 days which she says prevents spur-of-the-moment purchases.
In terms of stretching dollars, "my friends try to figure out how I do so much on my little income. I've been called a penny-pincher, a thrift-saver, a cheapskate."
Derico says she learned little about financial management from her parents. Instead, her money education came from financial literacy lessons she took at her church.
She wants to pass those lessons on to her daughter.
Sharmon doesn't get a fixed allowance but Sherelle makes sure she always has some money on hand. Sherelle expects her daughter to save at least 10 percent of the money. As an incentive, at the end of each month, Sherelle matches whatever Sharmon takes to the bank. Including change.
Sherelle then shows Sharmon what's going into her account every month and how much her money has grown.
"My friends say [Sharmon] knows a lot more about finances than they do now," Sherelle says, who notes, "she understands credit cards aren't a good thing."
Sherelle does the same with the 529 education plan she opened up for her daughter last year which so far has more than $3,000 in it.
And finally, Sherelle has Sharmon tithe 10 percent to the church, as Sherelle does when not contributing to the renovation of her grandmother's 30-year-old house.
Future plans
Since Derico is on track to be debt-free in 5 years, including her mortgage, her prospects of a comfortable retirement are substantially raised.
She says she would like to retire from her current profession one day and move back to her home state of Georgia to teach financial literacy in the schools there. She'd also consider working part-time.
She also toys with the idea of starting an interior design business if it didn't mean going back to school. Sharmon, now 11, would one day like to be a graphic designer.
With the financial lessons applied to her own life, Sherelle Derico says she doesn't understand people who don't pay attention to their money. "It's nothing you can ignore," she said.
She marvels at people who can't make their finances work while they're employed, because if they can't succeed now that they're making an income how will they survive when they're not working?
"You can finance everything else," said Derico. "But retirement is the one thing that can't be financed."
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