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Separate Styles Put Finances Out of Joint

April 22, 1997|HELAINE OLEN

Jean Mills and John Orcutt believe they've discovered the secret to maintaining a happy marriage: separate finances.

The couple, married 12 years, jointly gross $107,000 annually. But they maintain individual checking accounts and try to split expenses equally.

Mills, 40, buys the groceries and pays the child-care bills for their children, Justin, 7, and Katie, 3. Orcutt, also 40, picks up other household costs and the rent. The couple's only joint holding is a condominium in Mar Vista that they purchased in 1988 and now rent out.

"I don't question Jean about her purchases, and she doesn't question me about mine," explains Orcutt, an assistant grocery store manager. "I know it sounds strange, but we've grown comfortable with it--and it prevents arguments."

It also prevents joint financial decisions.

"We are doing separate retirement savings, and we're not looking at it jointly," Orcutt admits. "We have no unified plan."

But the couple's lack of financial coordination could lead to financial catastrophe, warns Brent Kessel, a fee-only certified financial planner based in Santa Monica. At the heart of Kessel's concern are Mills' and Orcutt's wildly differing investment strategies.

Mills, an assistant vice president and loan officer for a bank, considers herself a cautious investor. She's accumulated $62,000 in her individual retirement accounts, divided among three U.S. large-company stock mutual funds: Fidelity Equity-Income II (five-year average annual return: 15.8%), Berger 100 (five-year average annual return: 11.3%) and Dreyfus Third Century (five-year average annual return: 12.8%), a vehicle for socially conscious investors.

She also has $12,500 in a bank certificate of deposit.

Orcutt has pursued a more ambitious and unconventional strategy.

An avid reader of financial magazines and newsletters, he has over the years been attempting to earn average returns of 20% per year by "timing" the market and moving his assets in and out of individual stocks, mutual funds and gold.

Right now, taking his cue from James Stack, publisher of the InvesTech Market newsletter in Whitefish, Mont., Orcutt is bearish about the stock market's prospects. The $43,000 in Orcutt's IRA and his cash savings of $11,000 are currently parked in money market accounts, earning low rates of interest.

Their cars are paid for, and they have no credit card debt.

Kessel doesn't approve of Orcutt's investment strategy, but he lauded the couple's savings habits.

"You deserve congratulations on your financial discipline," he says. "It's rare to see a couple your age, living on the Westside, with two children, with absolutely no credit card or car loan debts."

In addition, Kessel made a special point of complimenting Orcutt on placing the security deposit the couple received from their condo tenant into a separate account.

"Most people would spend the money and deal with paying it back when the tenant moved," Kessel noted.

The planner also agreed with the couple's decision not to sell their Mar Vista property for now, because they believe it will one day increase significantly in value. Even though Orcutt and Mills are taking an after-tax loss of $173 a month on the unit, selling it now for its estimated worth of $115,000--almost $40,000 less than the purchase price--would cost $14,561, taking into account closing costs of 6% and paying off the mortgage.

Still, the planner maintains that separate finances have allowed Orcutt and Mills to sweep some difficult money matters under the rug. Like their children's college education, for instance. Mills wants to start saving now to send the kids to a four-year state university. Orcutt doesn't think that's necessary, believing that the family can handle those bills as they come in.

The couple also disagree about where they should live.

They are renting a Culver City house for $1,400 a month. They were surprised when Kessel informed them that their monthly housing tab could decrease significantly if they purchased a home costing $259,000 or less. After their mortgage and property tax deductions, he said, a $259,000 home would cost them $1,200 a month--leaving a comfortable $200-a-month cushion for home repairs or improvements.

Mills, motivated by what she believes are Culver City's better schools, pushed for the move to that community in 1995. She would like to see them start saving to buy a home in their current neighborhood. Orcutt, however, wants to move back to the condo.

"John seems to think we're spending too much on housing and that we should make do with the condo and save money. But it's too small for two children and has no backyard," Mills said.

Aside from hindering their ability to make major financial decisions, the couple's separate-but-equal approach to finances also makes for confusion. For instance, Orcutt had been under the impression that the family was not saving enough money. But the planner pointed out that that was not the case, that Mills had saved more than $10,000 last year from her salary alone.

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