Daydiance

for Women

One way to erase credit card
debt is to obtain a personal loan
from a bank, says London, which
you repay over a fixed period of
time. Jodi Carris, a financial con-
sultant at Smith Barney who
graduated two years ago from
Eastern Michigan University,
saw the perils of unsafe spend-
ing first-hand.
Carris' roommate racked up
$10,000 in credit card charges
that she could not pay off. "It gets
really out of hand, doesn't teach
responsibility until after the fact,"
Carris says.
Her friend consolidated that
debt on a loan at Michigan Na-
tional Bank and continues to pay
it off monthly, in $150 incre-
ments.
If you own a home, you could
consolidate credit card debt on a
home equity loan, suggests Al
Sasson, financial consultant with
Merrill Lynch in Bloomfield Hills.
"The insurance rate that you're
going to pay is less — credit card
is 19 percent, home equity loan
10-11 percent — and the interest
you pay is tax-deductible."
OK, you've finally gotten rid of
that debt. Now, it's time to save.
First, make sure you have a rainy
day stash of two to six months'
worth of expenses, in an easily
accessible savings or money-mar-
ket account. London calls it "pay-
ing yourself."
Then, invest. You can turn to
a financial adviser for help, but
the easiest first step is to see if
your employer has a retirement
plan like a 401K, and if so, get in-
volved.
"If you can save anything, you
should," says Sasson, even on a
low salary. London suggests
squirreling away as little as $25
per paycheck — it's better than
not saving at all.
"I know it's really hard to set
aside money for the future ... but
there will not be social security
for people like us," says Craig
Felhandler, account executive
at Dean Witter in Detroit. "Peo-
ple who are 35-40 now are even
worried. So you have to find oth-
er means to prepare for retire-
ment."
Although Felhandler is a pro-
fessional financial adviser, he
says he learned about saving
from his dad.
"Sit down, make yourself out
a budget ... whatever you do dur-
ing the month, make [saving] a
priority as big as paying your rent
or your car payment. Set aside
$75-100 before spending money
on CDs," he says.
In developing a financial plan,

a consultant assesses your ob-
jectives, risk tolerance and age,
says Sasson. Many financial con-
sultants offer seminars, where
they give financial planning ad-
vice.
Young adults can afford to be
aggressive in investing, Felhan-
dler says. "Put as much as you
can into your 401K, buy technol-
ogy-related stocks ... If you're 25
and the market goes down a lit-
tle bit, as long as you're in a good,
quality position, you can feel com-
fortable that it's going to go high-
er. The market may go up and
down, but the long-term trend is
that it goes up."
If you have a low salary and
work for a company that allows
for direct deposit, London says,
"that's the best way to save,
where it comes right out of your
paycheck and goes into your sav-
ings account or 401K plan. Direct
deposit a portion of that paycheck
into a savings vehicle. Do not get
debit cards on that account, have
it so that it's hard to get that
money out."
Kent recommends investing in
a no-load mutual fund (no sales
commission) or an index fund
(based on S&P 500 index). "Any
of the magazines — Money,

Forbes, Fortune, Business Week

— have mutual-fund guides; go
to the library and get Morn-
ingstar, which many people con-
sider the bible of mutual fund
services." Morningstar and many
of these mags also "have Web
sites that can give information
about the cost of mutual funds,"
which help in making decisions
about which funds to invest in,
Kent says.
Or invest in an IRA (individ-
ual retirement account), like the
new Roth IRA, which was in the
tax bill signed Aug. 5 by Presi-
dent Bill Clinton. That allows the
option of either saving for a first
home, education, retirement or
medical needs, Kent says. "You
don't get a deduction for the mon-
ey put in but all earnings are tax-
deferred. And if you take money
out for an approved purpose,
there's no tax on the earnings
and no excise tax."
If an 18-year-old puts $2,000
per year into an IRA for only sev-
en years, that $14,000 will grow
to $1 million by age 65, Kent
says.
Why? "Ten percent interest
doubles every seven years, so if
you want to look at it on the back
end, at age 65 you have $1 mil-
lion, but at age 58, you have
$500,000, and $2 million at age
72."

"But if you started at 25-32,
that would only be worth
$500,000 by age 65; starting be-
tween 32-39, you'll have $250,000
by age 65."
Many of today's young adults
grew up in the comfort of the
1980s era of conspicuous con-
sumption. It's hard to shed that
level of comfort for a pared-down
just-getting-started lifestyle.
"The '80s was certainly a time
of running up the credit cards,
buying everything, never hav-
ing anything in the bank," Lon-
don says. "People need to get
used to [the fact] that you can't
buy it until you have the money
for it." ❑

How To Budget

LYNNE MEREDITH COHN

STAFF WRITER

First, make a list of month-
ly expenses. Don't forget
things like newspaper and
magazine subscriptions, birth-
day, holiday and anniversary
presents and car maintenance.
Put your goals in writing.
Determine your most impor-
tant goals, including vacation,
new car, marriage or house.
Make sure you have adequate
insurance — from health to
renter's.
If you don't know where
your money is going, buy a
small notebook and carry it
with you for a month. Write
down every amount you spend
-- including that $1.10 Snap-
ple and 70-cent pack of gum.
After you know where it
goes, minimize frivolous
spending. You can probably do
without $10 lunches every day
— set one or two days aside
each week for eating lunch
out, then brown bag it the rest
of the time. The same goes for
dinner — learn to cook. Car-
ryout is one quick way to lose
cash.
Depositing your entire pay-
check may not be the best way
to keep a handle on spending.
When you get your paycheck,
deposit the amount for bills
that you pay by check.
Withdraw enough to pay for
the cleaners, gas, toiletries,
groceries and entertainment.
If you keep that money in cash
at home, you'll be able to see
when you're running low and
cut back. Plus, when you pay
in cash, you're done — no bills
a month later to deal with. n

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