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Californians Learning How to Succeed in Personal Finances

Decisions, Decisions

Couple Must Determine Which Goals Come First


Fred and Connie Burkholder may be newlyweds, but they're not going to be living on love.

It's a second marriage for both, and the couple are sorting out desires and previous obligations. They want to buy a home, but they have a lot of debt. Connie wants a child, but Fred, who already has four children, isn't so sure. They like to enjoy themselves but know they need to save for retirement too.

They have some choices to make.

Connie, 41, was divorced 10 years ago. The former probation officer knew she liked counseling people, and she returned to school with the idea of earning the credentials to become a therapist. She earned two master's degrees and a couple of years ago began a private practice as a marriage and family counselor. Now she's completing a doctorate in sociology at USC.

She's convinced that therapy is her calling, but it's one that's taken a lot of money to pursue.

In eight years of study at USC, she has racked up more than $68,000 in student loans. Payment on those has been deferred, but Connie will have to start meeting that obligation six months after she completes the requirements for the advanced degree, probably in two years. Because she's been in school so long, Connie's been unable to save as much as she would like to buy a home, afford a baby or plan for retirement.

Fred, 52, a Vietnam veteran who has a background in electrical engineering, works as a regional marketing specialist for a European conglomerate. He's earned a comfortable living for decades, but he's also been supporting four children, now ages 17 through 25, from his previous marriage, so he's never had much extra cash. He also has a $16,000 balance on a student loan he took out this year for his eldest daughter. However, Fred has accumulated about $50,000 in his company's pension plan and more than $36,000 in his tax-deferred 401(k) retirement plan.

The old saw has it that money is one of the two leading causes of marital discord (sex being the other). That's something Fred and Connie were determined to avoid. Before they took their vows, they had a frank talk about finances.

"We both knew where we were with our debts and obligations," Fred explained. They agreed that each would maintain individual responsibility for the bills and obligations incurred before the marriage. Now they are trying to establish a plan to reach their common goals and build a foundation for a more prosperous future.

Theirs is a particularly challenging situation because they must grapple with financial concerns typical of the middle-aged as well as some usually faced by younger couples.


The matters of whether to have a child and whether they will be able to afford to buy a home soon concern them most. In their case, a baby would be an especially costly proposition--Mother Nature will have to be assisted with medical procedures their insurance won't cover. The fact that they have such a large debt load is making every choice that much more difficult.

But first things first, said fee-only financial planner Jane V. King of Wellesley, Mass., who specializes in the financial complexities of second marriages.

Priority No. 1 for any blended family is to establish wills and trusts, she told the couple. That way, if Fred were to die tomorrow, there would be no confusion as to the beneficiaries of his life insurance and retirement packages.

Connie has written a will, but Fred has not. "I haven't even thought it through," he admitted.

"When you have competing priorities [in estate planning], it's important to lay things out in writing," King said. Once the couple have decided how they want their assets distributed, she said, they may want to consult with an estate-planning lawyer, which should cost them between $600 and $1,000.

Once the estate-planning issues have been addressed, King said, Fred should realign his 401(k) investments, now all in low-risk income funds, so his savings will work harder for him.

"I would urge Fred not to be so conservative," King said, since he has 15 to 20 years before he will retire. "He's too young and there's too much time for him to give up growth on those assets. With that amount of time [before he retires], the risk of losing that money is slim."

She recommended that he put the $36,587 now in his 401(k), plus the $7,200 he puts into it annually, into a more aggressive and diversified mix of mutual funds offering the likelihood of higher returns.

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