This millennial makes $50,000 a year writing about food in NYC—here's how she spends her money

In 2015, Alicia Kennedy, then 29, quit her steady job as a copy editor at New York Magazine, cashed out her 401(k) and became a freelance writer and editor, specializing in cocktails, vegan food and the intersection of food and politics.

It was a risky move financially but Kennedy, now 32, says it was right for her. "I've definitely learned that I care more about my quality of life than the quality of my bank account," she tells CNBC Make It.

Three years later, Kennedy still makes her living as a freelancer, earning around $50,000 a year. Additionally, she's working on a book proposal on the history of veganism, which she hopes to sell. In June, she started "Meatless: A Podcast About Eating," in which she interviews chefs and writers about their relationships to animal products. It only costs $12 to produce and distribute, and it brings in $80 a month via the project's Patreon page.

There have been some setbacks: One of Kennedy's biggest shocks came after her first year as a freelancer, when she saw the amount she owed in taxes. Despite budgeting $3,000 for the expense, she owed more than $5,000. Her dad ended up paying that bill for her.

Still, despite those challenges and despite New York's notoriously high cost of living, Kennedy says she's able to live comfortably in Brooklyn on her salary. Ideally, she'd like to earn more, develop a financial cushion, feel more stable and spend more time traveling.

"Working for yourself is really hard mostly because you're not actually just dependent on your own ideas — you have to sell them to someone else and make sure everyone likes them," she says. "So the instability of finances and never knowing when the next check is coming is a huge challenge."

Here's Kennedy's breakdown of everything she spends, saves and splurges on in a typical month.

Kennedy rents a two-bedroom apartment in Brooklyn with her partner, Sareen, and a friend who only lives there part-time. The total monthly rent for the place is $2,350. The $1,000 Kennedy gives her partner covers both rent and utilities, including internet.

Food is Kennedy's biggest splurge. Between groceries for her and her partner and going out to eat, she spends around $1,000 per month. For her, food is part of the job: It enables her to test recipes and keep up with food trends. It's also a source of pleasure. Though the cost is high, "it's really worth it to me," she says. "I enjoy making stuff and I enjoy going out to eat."

Because she studies and writes about food, she has no problem paying premium prices for groceries and holding back in other areas, such as clothing and apartment furnishings.

"I'll go to the farmer's market and I can spend $30 on mushrooms," she says. "Food is really the biggest part of my budget and it has been for years because that's just my life."

She's learned to cut back on the number of "extravagant" restaurant meals she indulges in per month, but she still allows herself to spend on groceries without adhering to a strict budget.

Kennedy has been making monthly student loan payments since she graduated from Fordham University in 2007, where she majored in English. She consolidated them after finishing school, which she calls a mistake. For now, she makes her monthly payments and looks forward to finally eliminating them.

She spends $150 every month on her iPhone, which goes toward both her phone plan and the hardware. While there are certainly cheaper options, she says having the latest technology is useful for work: "I have a phone bill that is exorbitant because I always get the newest iPhone so that I can always have the best camera because it's kind of a business necessity for me."

Kennedy pays only $15 per month for membership at a nearby Blink Fitness gym.

Kennedy automatically transfers about $150 into savings each month and, in total, she has $1,500, or one month's worth of living expenses, in an account. She doesn't have any long-term savings, though. After cashing out her 401(k), which held around $7,000, to jump-start her freelance career, she hasn't made any moves to rebuild her retirement accounts.

Kennedy says she knows saving for retirement is the responsible thing to do but, for now, "I've given myself a few years to do this creative life and we'll see how it works out."

As a freelancer, Kennedy's insurance options are limited and expensive, so she chooses to go without. For the time being, she doesn't regret the decision: The deductibles and premiums on her previous plans were so high that she never felt as though she was getting much in exchange for what she was paying.

When she broke her foot after giving up her insurance, she had to pull almost $2,000 out of savings to cover the cost. However, that amount "wouldn't have even made a dent in a deductible for any of the health care plans that were available to me," she says.

Kennedy has other irregular expenses, too, including:

• Donations: She donates what she can to non-profit organizations, such as RAICES Texas.
• Transportation: She chooses not to buy a monthly subway pass because she primarily bikes around the city, so she pays for the train as she goes.
• Credit card: She carries a relatively small amount of debt, about $1,000, on her credit card, which she pays down when she can, like after she gets paid for large project.
• Fun: In addition to spending at bars and restaurants, Kennedy also regularly splurges on books, many of which she uses for research for her articles. Kennedy says she's spent up to $100 a month on books but recently got a library card after realizing how amounts were adding up.

CNBC Make It asked Pamela Capalad, a certified financial planner and founder of Brunch & Budget, to provide commentary on where Kennedy is doing well and how she could improve. Here are her thoughts.

Kennedy clearly knows what her priorities are

Capalad applauds Kennedy for prioritizing and spending accordingly. "I like that she's very clear on the fact that food is something that is of value to her," Capalad says. Although groceries could be an easy place for Kennedy to cut back, at least she's choosing to spend on something that makes her happy: "It's the biggest splurge because it's something she's passionate about."

She makes savings automatic

"It's much easier to save money proactively than to try and hope that there's something leftover," Capalad says. "A lot of people make the mistake of saying, 'I'll save whatever's left over in the end,' and what ends up happening is the next paycheck comes and you don't think about moving that money into savings."

She could be more prepared

Capalad suggests Kennedy work up to keeping three months' worth of living expenses in an emergency fund.

She could switch to making quarterly tax payments

Capalad says it may be helpful for Kennedy to put 25 to 30 percent of every paycheck into a separate account just for taxes. She may also want to consider paying her taxes quarterly instead of annually. While it might feel hard to part with the money in the moment, it means not having to worry about having enough come April. Plus, that way, "you know that whatever is leftover is yours," Capalad says.

She could set up a retirement account

Capalad recommends freelancers look into a SEP IRA, or simplified employee pension, which allows self-employed individuals to make tax-deductible contributions and not have to pay taxes until they retire. Plus, these accounts offer higher contribution limits: up to 25 percent of your income after deductions, or as much as $54,000 as of 2017.

"Saving for retirement as a freelancer has a double benefit because you don't have to pay taxes now and all of the money grows tax-deferred," Capalad says.

And while many experts caution against taking money out of a retirement account before you're of retirement age, Capalad understands why Kennedy made that choice.

"Based on the reason why she did it, I feel like she was able to step into a new chapter in her life and a new part of her career by doing this," Capalad says. "It's not necessarily a good or a bad thing. It's taken her on a different path and it's given her the ability to do what she's doing now."

She could take a closer look at her spending

While it's great that Kennedy has a sense of how much she's spending per month, Capalad recommends she take a more granular look at her expenses. "It may be helpful for her to use something like Mint or Personal Capital to actually find out where her money is going," Capalad says.

Kennedy is able to give a relatively clear picture of where she spends most of her money but taking a closer look at smaller expenses, such as Amazon purchases or drugstore runs, could be insightful in helping her prioritize and budget even further.

"Figuring that out is going to be really critical for her to live on an inconsistent income, because her knowing what her baseline is like, 'Okay, this is how much money I need to have and I need to make on a bare minimum to live,' and for her to also know how much she can put away in savings and actually keep in savings," Capalad explains.

At the end of the day, despite the strain it can put on her finances, Kennedy feels good about her decision to choose her freelance lifestyle over a traditional 9-to-5. "When I talk to people who might be miserable in their full-time job," Kennedy says, "I do feel a little bit better about my choices to be so unstable and have such an unpredictable life."

What's your budget breakdown? Share your story with us at makeitcasting@nbcuni.com for a chance to be featured in a future episode.

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