This story is part of CNBC Make It's Millennial Money series, which profiles people across the U.S. and details how they earn, spend and give away their money.
Alex Pardoe works hard for his money — and he isn't afraid to splurge on Hermes Birkin bags, Louboutin loafers or a custom Mercedes.
As a hairstylist and salon owner in the Detroit area, the 25-year-old earns $280,000 a year. While he makes sure to save for the future, he also believes in enjoying the present.
"I've really always functioned under the mentality of you need to enjoy your life while you have it," he says. "I knew I never really wanted to die with a bunch of money in the bank, so I think it's important to live and be happy."
What he earns
Pardoe moved to Detroit from Virginia after high school to attend cosmetology school and ended up starting his career there in 2012.
He first worked at a major salon chain, where he earned around $30,000 a year. But Pardoe was determined to grow his client list as well as his earning potential. He started sharing his work on Instagram and used the social media platform as a way to garner interest in his services. He even offered free services to certain influencers in exchange for word-of-mouth publicity.
The strategy worked. As Pardoe began to build a solid repertoire of loyal clients, his income grew. By the next year, his take-home pay had doubled, he says, and it has only continued to increase.
In 2017, he decided to open his own salon, Aesthetic Hair Co., with two business partners in order to offer other stylists the same opportunity he had to expand his career. "I grew so quickly that I wanted to be able to provide a platform for other hairstylists to grow really quickly," he says. He's also developed and marketed his own line of hair products.
"When I first started, the national average for what a hairdresser would take home was about $26,000 a year. We've strived so hard our whole career to not make that the standard and to give hairdressers a platform to make an amazing living for themselves," he says.
As a salon owner, Pardoe liaises with distributors, takes care of education for the nearly 30-person staff and is on the floor three to four days per week. "I'm there to help all of my stylists with any questions," he says. "I'm always there to have their back when an issue arises in the salon."
On any given day, Pardoe sees between eight and 22 clients, with the help of two assistants. He charges around $275 for highlights and anywhere from $800 to $2,000 for extensions, depending on length and thickness.
"Being a salon owner kind of changed my life in a sense that I don't really work 9-to-5 anymore," he says. "I feel like I work 24/7."
Overall, Pardoe earns around $190,000 a year from client work, $50,000 in tips, $30,000 from teaching classes and holding private sessions with other stylists, and $10,000 from his product line, for a total of $280,000.
In the city of Detroit, the median annual salary is just over $27,000 a year, according to the U.S. Census Bureau. Pardoe's salon sits just outside of the Detroit city limits in Ferndale, an area in Oakland County that's home to both blue collar workers and a growing artist community. He's tapped into an affluent consumer base there.
"I think the biggest misconception about living in metro Detroit is that because the city was bankrupt years ago that people here can't be successful and people here can't run businesses and people here don't have money," he says. "But Oakland County is actually one of the richest counties in the United States."
Still, for Pardoe, work isn't just about money: "I got into hair because I really loved the instant transformation that you could give people and the confidence boost that you can give people."
What he spends
Here's a breakdown of everything Pardoe spends in a typical month.
Click to enlarge
Pardoe's largest monthly expense is his two cars. Currently, he's leasing a Mercedes Benz G-550 for $2,200 a month, which he plans to buy outright when the lease is up. He's also financing a BMW i8, which runs him $1,300 a month. He spends $380 on insurance and about $300 on premium gas.
Although Pardoe admits that having two cars "isn't necessary and is definitely excessive," they're a worthwhile expense because they bring him joy. "Driving them makes me happy, so the more the merrier!" he says.
Pardoe never cooks. In fact, he says, he's never even turned on the oven in his condo. Instead, he goes out or orders his meals in from delivery services such as DoorDash or UberEats, which he says is his biggest regular monthly splurge.
He often brings in food for others, too. "I buy lunch for the salon all the time and l get things delivered for them all the time, so there's not just me," he says. "I'm buying food for everybody."
Rent, utilities and Wi-Fi: $1,970
Pardoe shares a two-bedroom, two-bathroom condo, which costs $2,500 a month, with his boyfriend Josh. Pardoe's share comes to $1,900, and he pays $70 to cover Wi-Fi for the place. Even living just north of Detroit, the couple can afford much more space than they would in a pricier area, such as San Francisco or New York.
His rent includes two parking spaces and access to a gym.
Entertainment is Pardoe's largest miscellaneous expense, coming to around $1,200 per month. When he goes out with friends, he's quick to cover the tab, he says.
His share of the expenses for his rescue dog, Biscuit, is around $100 a month. That covers food, treats, toys and vet costs. "I haven't gotten him into Gucci ready-to-wear," he jokes, "so as soon as we get him into Gucci ready-to-wear, the sky's the limit."
He gives about $25 a month to the Humane Society and another $100 to Planned Parenthood.
Pardoe spends around $5,000 on travel annually, which averages out to around $420 per month. He says it can be easy to get wrapped up in work, and so it's worth it to him to spend money on vacations and seeing the world: "I think it's really important to be as cultured as humanly possible and keep yourself grounded."
And although Pardoe says he drives almost everywhere, he pays for cabs occasionally during a night out. That runs him around $30 a month.
Saving for the future is a key goal for Pardoe. In addition to the money he pays into his life insurance policy, he also puts $500 a month into his Roth IRA and $1,300 in a brokerage account.
He also keeps a sizable amount of cash in his checking account. Currently, it holds around $77,000. Once he reaches $100,000 and qualifies for the next level of rewards at his bank, Pardoe says he'll start diverting money away from that account into one that earns a higher interest rate.
To make sure he's on track to meet his retirement goals, Pardoe works with a professional financial advisor.
Clothes, shoes and accessories: $1,500
Pardoe loves to splurge on brand-name clothes, shoes and accessories and can spend anywhere from $300 to $3,000 a month. The designer section of his closet includes garments from Gucci, Balenciaga, Christian Louboutin and others. He also collects Hermes Birkin bags, which start at around $7,000 each, and has a case dedicated to displaying them.
"With the amount that I work and how hard that I work on my feet all day, it's rewarding to come home and have the things that I want to have," he says. "It's rewarding to be able to put on a pair of shoes that I worked really, really hard for."
As a creative person, he has a lot of respect for designers, so if "a designer comes out with a new sweater and I really like this sweater, it's worth it for me to buy it."
Pardoe is also a fan of tattoos and has spent around $10,000 total on his collection over the past six years. He sees tattoos as a fun way to express himself. "A lot of my tattoos are jokes," he says, pointing out one of Britney Spears shaving her head and another of Kim Kardashian crying.
"It literally says, 'Kim, there's people that are dying,' just to remind me that I'm human, you know," Pardoe says.
Pardoe puts $700 toward his joint disability and life insurance policy each month, as well as $30 towards renters insurance. He plans to stay on his parents' health insurance plan until he turns 26, so he doesn't pay anything toward health care yet.
His life insurance policy is worth $3 million and he chooses to put a lot into the plan because the money earns a higher interest rate than a traditional savings account at a bank.
Pardoe's $230 monthly phone bill covers the hardware and service for two iPhones: one for work and one for personal use.
Credit card repayment: $100
Pardoe puts around $100 a month toward the $2,000 balance on his credit card. Although Pardoe has enough in his checking account to pay his card off entirely, he chooses to carry a balance on the assumption that it will help him build credit and raise his credit score.
Pardoe doesn't have any other debt, in part because his parents paid for his education: "I decided not to go to a four-year year school and I went to a trade school, so they paid a lot less for my school. I am very fortunate to not have student loans."
In place of cable, Pardoe pays for a number of subscription streaming services: $7 for Hulu, $13 for Netflix, $15 for HBO Go and $15 for Amazon Prime video.
What the experts say
CNBC Make It asked Andrew Westlin, a certified financial planner at Betterment, to comment on what Pardoe is doing well and how he could improve. Here are his thoughts.
He should consider a high-yield savings account
Pardoe currently has around $77,000 in his checking account, which Westlin says is probably too much, since checking accounts typically only offer around 0.09% in interest.
One way to earn a greater return while still keeping his funds accessible is to open a high-yield savings account, such as those offered by online banks such as Ally or Marcus by Goldman Sachs that earn 2% or more.
"By moving over his current cash to a high-yield savings account that pays 2%, the money that he has will earn anywhere from $1,200 to $1,500 in the first year alone," Westlin says. "That's one of the easiest wins."
Pardoe can use this money as an emergency fund, which experts say should hold enough to cover between three to six months' worth of living expenses.
"He probably still wants to keep some money in his everyday checking account, just so he still has some more liquid funds," Westlin says. "We usually say keep about one month of your expenses in your everyday checking account. Everything else can be moved over to a high-yield savings account."
He can pay off his credit card balance
Another "quick win" for Pardoe, Westlin says, would be paying off his $2,000 in credit card debt. Right now, Pardoe is choosing to keep a balance because he thinks it helps his credit score, and he wants a good credit score in case he decides to buy a home.
However, Westlin says, that's a myth: Carrying a balance doesn't help your credit score. In fact, carrying a balance could be costing Pardoe money. "Most credit cards, the interest rate is anywhere from 15% to 20%, so if he's keeping a $2,000 balance, that's about $300 to $400 of interest that he's paying every year," Westlin explains.
Pardoe can build his credit by using his credit card regularly and then paying off the balance every month, Westlin says.
He is smart to keep his usage below 30% of his credit limit, however, Westlin says: "Once you start getting your balance over 30% and your usage rate goes up, that will damage your credit score in the eyes of the lender because they're only lending you so much, and if you're maxing out your credit or using a really high percentage of what's available to you, that doesn't show that you're the most credit-worthy individual."
It's great that he has numerous streams of income
"In today's world, you can make money doing anything from anywhere," Westlin says. "A very common catchphrase is that the most important investment you can make is in yourself."
He applauds Pardoe for diversifying his sources of income: In addition to earning money from doing hair, Pardoe is also a salon owner and an educator, and he has his own product line.
"That's the best thing he's done," Westlin says. "He's really capitalized on his industry, what he's knowledgeable about and what he's passionate about. At the end of the day, he's doing something that he loves and making a lot of money doing it. I think that that's phenomenal."
He should make sure he's eligible to contribute to a Roth IRA
Although Pardoe is smart to make saving for retirement a priority, he should ensure that he's using the most effective savings vehicle. Because of how much he earns, he might not qualify to contribute to a Roth IRA, which has a $135,000 limit for single individuals.
If he's not eligible to contribute to a Roth, he could face a penalty. To avoid that, "he can do what's called a recharacterization," Westlin says. "As long as that's done before the end of the tax year, he can move that money over to a traditional IRA, and there's no taxes or penalties."
Additionally, it could be a good idea for Pardoe to outline what he wants retirement to look like. Does he want to live the same lifestyle? If so, he might need to be putting away more of his earnings each month. Currently, he's saving roughly 7% to 8% of his take-home pay, Westlin calculates, but, to keep up with his current lifestyle in retirement, he'll want to be saving at least 15% of his income.
"It's about setting clear goals and determining how much he needs to save to meet each of them," Westlin says.
He's smart to have disability and life insurance
Because Pardoe has an active job and is on his feet all day, it's smart for him to have disability insurance, Westlin says. If he's ever unable to work, he'll still be covered.
As for his life insurance policy, he might need to evaluate how he's using it. Because he doesn't have any dependents, it might not be necessary, Westlin says. If that's the case, he might be able to divert those funds elsewhere.
However, having life insurance could be a wise move if he's using it as part of a business succession plan. "With life insurance, you can structure something that's called a buy-sell agreement with his partners," Westlin says. If Pardoe were to pass away, the proceeds from his death benefits would go to his partners, who could use the money to buy Pardoe's heirs out of his share in the business, he explains.
Contributing so much to his policy each month might not be the best use of his funds, though, Westlin says.
Overall, Pardoe has a strong handle on his finances, Westlin says. For now, "it's more about maximizing that money and making sure that he's saving enough and in the right places."
As long as Pardoe is putting enough away for the future, "how the rest is spent doesn't really matter," Westlin says.
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