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WALL STREET, CALIFORNIA | MONEY MAKE-OVER / LUCILLE
RENWICK

The Road to Independence : For Single Parent and Children, Time to Face a Few Financial Facts

March 11, 1997|LUCILLE RENWICK | Staff writer Lucille Renwick covers education for The Times' Valley edition

Phyllis Alles learned an important lesson when she and her husband ended their 22-year marriage: Don't depend on someone else for financial support.

"I just thought he'd always be there and that I'd have his income," said Alles, who was a full-time mom for most of the marriage. "Never did I think that I'd have to support myself. That's been a real rude awakening for me."

Now, a year after the divorce became final, Alles, 42, is trying to prepare herself for the day when the financial ties are severed. Her alimony and child support payments will begin to taper off in June and terminate completely in six years.

"It concerns me because I wonder how I'm going to make it," Alles said. "I'm stressing about the $275 I'm going to lose in June. I feel like it's definitely going to hurt."

Since their separation in 1993, Alles has been receiving monthly payments of $1,320 from her ex-husband. That's provided a financial cushion to bolster her $24,000 annual income as an entry-level manager at a West Covina Lucky supermarket. Knowing that these payments are temporary, she wants to get her feet on the ground financially and to build a nest egg for retirement. But saving money hasn't been easy.

All three of her children--ages 23, 18 and 15--live at home, and currently none helps pay bills or buy groceries, Alles says. As a result, saving has been a piecemeal process, and Alles has occasionally been forced to dip into that money for emergency repairs to her 1986 Oldsmobile Cutlass or to pay off credit card bills.

From her weekly paychecks, Alles puts aside $105 a month into a regular savings account, $135 a month into the Janus Worldwide Mutual Fund, $10 a week into stock in American Stores (the parent company of Lucky) and $10 a week into a "certificate builder" with her company's credit union. To date, she has accumulated about $500 in the savings account, $1,300 in the Janus fund, $960 in company stock and $550 in the certificate builder program, which will be rolled over into a CD when it reaches $1,000. Her checking account balance normally hovers around $200.

But Alles' bills continually seem to drain her savings.

She has a $1,061 monthly mortgage payment on the Chino home where she and her family have lived for the last 11 years. She owes about $2,500 on credit cards--on which she pays only $87 a month--and $1,000 in lawyer's fees. She also pays about $385 a month in utility and telephone bills. In addition, she pays $250 a semester to study at Chaffey Community College in Rancho Cucamonga, where she is pursuing a bachelor's degree in business administration. And because she orders take-out dinners a few nights a week, she spends about $240 a month on "entertainment."

On the whole, it's a somewhat unsatisfying way to live--and not one that's helping her accomplish her long-term goals.

"I just feel like I'm spinning my wheels and I'm not getting anywhere," Alles said, voicing a sense of despair.

*

What she's really doing is investing in too many places and not increasing her savings enough, said Judith Martindale, a fee-only certified financial planner based in San Luis Obispo.

Martindale, who specializes in advising middle-income families, said Alles is doing a good job of trying to save, given her salary and her expenses. She is putting away a little more than 10% of her salary. The problem is she's not retaining that 10%--she keeps dipping into her savings. She needs to make a few changes to ensure her own security and to end the sense of resignation she feels about her finances, the planner said.

First and most important, Alles needs to get her elder son, Jim, to start paying rent or to contribute to the household bills in some way. Her 18-year-old, Tony, should also start contributing once he graduates from high school in June and begins full-time work. Tony now works part time to pay for his car and auto insurance.

"If Jim gave you $300 a month for living in the house, then you could put that in an IRA," Martindale told Alles.

Admittedly, it's difficult to tell your kids they need to start pitching in. But Martindale says Alles should realize that by doing this, she will be teaching her children something early in their lives that she had to learn later and the hard way: financial self-reliance. It is particularly important to address these issues with Jim, Martindale noted, because he serves as a role model for his younger siblings.

Still, Alles said it will be hard to ask her elder son for money because he's financially strapped. Although he works full time, he never seems to get ahead.

"Their dad has even told me that I have to tighten up" on the kids, Alles acknowledged. "Deep down, I think that's what has to be done, but I don't know what to do. [Jim] just can't seem to get on his feet financially."

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