Sunday, Mar. 15, 2009

Mother seeks to break paycheck-to-paycheck cycle

Mary Beth Henry calls herself the family caretaker.

She’s raising two young children on her own and caring for her ailing father.

But the 26-year-old apartment complex manager from West Columbia know she needs to do a better job of taking care of her finances.

Henry has no emergency savings, no retirement plan, no will, no budget. “I haven’t done well.”

To get her finances in order, Henry agreed to work with financial planner Neil Brown of Burkett Financial Services this year and share the details so others can learn from her experiences.

Henry and Brown met for the first time last week where for more than an hour they reviewed her life - family, home, car, job, college, insurance, savings and spending.

It’s clear she’s living paycheck to paycheck.

Henry lives in a three-bedroom home she co-owns with her father. She pays the $686 monthly mortgage from her $29,000 annual salary. After taxes, that’s a little less than half her monthly take-home pay.

The rest goes for groceries, day-care bills, utilities and insurance.

Henry, with Brown’s help, must tackle her less-than-stellar credit history - a barrier to getting a loan for a home or car in the future. (She’s got both now.)

“When I turned 18, I went, ‘Woo-hoo, I could get a credit card,’” Henry told Brown. “I spent it on stupid stuff like jewelry.”

Not all is lost for Henry.

Brown praised her for having little credit card debt, having health and some life insurance, and paying off her father’s bright green VW Bug with 140,000 miles on it.

“Now you could put some money aside,” Brown suggested.

Henry knows her spending weak spot.

“I’m not a shopping person. When I shop, I like to bargain hunt,” she said. “I waste money on eating out. I think I can be doing better. It’s just a convenience.”

Brown asked Henry to make a radical shift in her life view: Kiss off some dinners with friends and embrace a retirement account for herself.

Brown then asked Henry to make a tough choice - fund her golden years over her kids’ college years.

“Your kids won’t miraculously give you $50,000 a year for retiring,” he said. The kids can get financial aid or scholarships to help them through school.

“No one will give you a scholarship for retiring,” Brown said. added.

Henry also will need the money in hand to pay off college loans of $5,500 and counting as she began taking classes at Columbia College this year to get her teaching certificate.

Brown suggested incremental spending changes to save $50 to $100 a month to invest in a retirement account or mutual fund. He promised to help her develop a budget.

“It’s a lifestyle change,” he told Henry, “so you can do what you really want to do and care for what you want to care for.”

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