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Financial Planning: A Midyear Guide 1987 : part one: Planning Ahead : Three Investor Profiles : Budget-Minded Manager on Track

June 21, 1987|Nancy Rivera Brooks | Times Staff Writer

"Money is a terrible master but an excellent servant."--P. T.Barnum

Beyond the charts and general principles of investing, personal financial planning is really as individual as the people involved. Age, financial situation and acceptable risk will vary greatly from investor to investor. But the following are three investing situations that can serve as a guide. The financial planning was done for The Times by Harvey S. Gettleson, a partner with the Ernst & Whinney accounting firm in Los Angeles.

She admits it almost sheepishly, but a few weeks ago Steffne Miller dropped a very tidy sum in the petite clothing departments at South Coast Plaza.

But don't get the idea that Miller, a single, 35-year-old public relations manager for a nonprofit organization in Orange County, is a wild spender. Quite the contrary.

Miller carefully works out a budget at the beginning of the year that takes into account clothing purchases, insurance payments and other basic expenditures. And she sticks to it.

"Years ago, when I really felt I had come of age as a professional person, I sat down and developed a budget," Miller said. "I'm a highly organized person." Clothing expenditures, she added, are really a kind of business expense because she must constantly present a professional image.

Miller, who earns "more than $32,000" a year, said she has reached a point in her career where she has some money to invest. But beyond a few stocks, her individual retirement account and a pension from an earlier job, Miller said she is unsure of what to do with her money.

Miller said her next financial goal may be to buy a house. But she is torn between tying her money up in a home or spending some of her savings now on such things as home furnishings and travel.

Gettleson told Miller she is on the right track with her budget.

"I've got to commend you on your detail," he said. "It's the best I've seen in a long time."

Given Miller's relatively low tax bracket, Gettleson advised her to invest for income rather than tax savings.

He suggested a "relatively conservative portfolio" that includes growth stock funds and fixed-income securities. "Don't go out and play options or anything like that," he said.

The decision to buy a house is a difficult one, he said.

Gettleson said he generally thinks "you're always better off buying than renting," but added that it's not true for everyone.

"The tax benefits of owning a home are not that great" under the lower tax brackets created by last year's tax reform law, Gettleson said. Housing remains a good long-term investment because homes historically have appreciated, he said.

But home ownership also would mean considerable new costs, Gettleson said. So unless Miller intends to live in the house more than a few years, Gettleson advised that she postpone buying a house.

Gettleson also recommended reducing or paying off credit cards. The interest cost of using credit cards is high, and such interest deductions are being phased out. Miller could take out a lower-rate loan from her credit union to pay off the debt, he said.

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