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Taylor Remade : How Boomers Can Avoid Going Bust

November 05, 1996|Debora Vrana

Like many Southern Californians, Warren Taylor doesn't understand why he never has any money.

The 41-year-old post-production supervisor says his paychecks are spent before he gets them. He can't imagine taking his family on a Hawaiian vacation, much less begin to put money away for retirement or start a college fund for his two children, Brandon, 10, and Lauren, 5.

Although Taylor and his wife Lorie, 34, a self-employed hairdresser, together make about $60,000 a year, they have virtually nothing left over at the end of every month. Even worse, Taylor, who helps do post-production for many of the "Peanuts" animation ventures, said his job security in the entertainment industry is always uncertain.

"I always worry that tomorrow will be the last day I have a particular job," Taylor said. "I live paycheck to paycheck, so if the paycheck stops, I'm already in the hole."

As a result, Taylor keeps his Tujunga family on a tight budget. They cut coupons, eat out only once a week and see movies just twice a month, sticking to cut-rate matinees. The last trip they took was a visit to Oregon to see relatives last Christmas. The family drove there to save money.

They have managed to save $13,500 in a low-yielding bank savings account. Taylor's employer has put aside $10,400 for him in a motion picture industry pension retirement fund. The family has only $500 in debt.

Still, what they are doing is not enough. If they don't begin saving more, they will be penniless when it comes time to retire. But the Taylors' estimated $3,000 in monthly take-home pay gets eaten up so quickly that they can hardly put aside anything for the future. Here's where it goes:

* $900 each month in mortgage payments on a $150,000 two-bedroom house on which they still owe $110,000.

* $700 a month on private school for their two children.

* $300 a month on gas for long commutes and trips with the children to soccer practices or gymnastics classes on the weekends.

* $800 a month on groceries--"My son eats like a horse," Taylor said.

* $165 a month on insurance for two cars. They have no auto loan payments, however.

* Along with expected expenses, it's the unexpected things that hurt the Taylors. New soccer pads for Brandon, a gymnastics outfit for Lauren, costly car repairs or office birthday gifts siphon their remaining earnings.

The Taylors want to have more savings and learn how to control their spending. They may want a new home, as the two children are getting too old to share a room in the family's two-bedroom house. Also, Warren has no will or life insurance and his wife has no retirement savings account.

Taylor is trying to do his best. But he needs to do more, said certified financial planner Judith Martindale of San Luis Obispo.

She estimates that most Southern Californians are just like the Taylors, irresponsibly living paycheck to paycheck. She said the Taylors' situation, albeit frightening, is similar to that of many of her clients in their 40s who still haven't learned how to take responsibility for their money.

"Living within your means is living with integrity," said Martindale, the author of "52 Simple Ways to Manage Your Money." "Living beyond our means is not living as an adult."

That's all well and good, Taylor said, but managing finances for a Southern California family these days is especially tough.

"It's very scary. So many people are falling off the treadmill--people smarter than I am. I didn't realize this would be so hard," he said.

It's not as hard as Taylor thinks, Martindale said.


First and foremost, Taylor needs to be more disciplined about money--begin to monitor more closely his and his wife's spending patterns. Most of all, he needs to learn to pay himself and his family first--by saving money for the future.

Taylor should start by religiously putting aside $500 a month, or 10% of the couple's income, toward retirement and college for the children. Martindale also wants to see him boost the $13,500 reserve he keeps in a savings account to about $17,000, or almost 30% of the couple's combined salary, because his job is so unstable and his wife is self-employed.

Even with that, the Taylors will be way behind where they need to be.

Ideally, they should be putting aside $11,000 a year just for retirement, an unrealistic amount for this family, Martindale said. That number is calculated on their current situation and assumes 3% inflation, Social Security benefits, a 10% return on investments and Warren living until 85 and Lorie until 87.

Also ideally, the family should start saving an additional $450 a month now for college. Those are low figures based on the children's going to a junior college for two years and a state school for two years, Martindale said.

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