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Wall Street, California | MONEY MAKE-OVER: Southern
Californians Learning How to Succeed in Personal Finances

Serious Young Saver Is Ahead of the Game


There was a time when Anthony Anico could be called a spendthrift. He was in his early 20s, had just landed a very good job and felt entitled to indulge himself a little. Three-hundred-dollar Calvin Klein sunglasses, $55 dinners at Santa Monica's Border Grill, a weekend trip to New York--why not?

Some new-job celebrating is one thing, but Anico soon realized he'd taken it a bit far. And live-for-the-moment was never really his style anyway. A secure financial future means more to him than whatever fleeting pleasure extravagance might buy.

And so, lesson learned, Anico, 25, who's been living with his parents in Oxnard for the last few years, has been preparing to be truly on his own.

"I'm tired of living at home and . . . want my independence," said Anico, who earns $51,000 a year as a clinical laboratory scientist at Columbia Los Robles Hospital in Thousand Oaks. "I know that if I start saving now, I will enjoy the finer things in life when I reach retirement age." Along the way, he'd also like to become a homeowner.

Since deciding to get his financial situation in hand nearly two years ago, Anico has paid off the $10,000 he owed on credit cards and student loans. He also has started saving, amassing more than $18,000, with a significant portion of that in mutual funds and retirement accounts. Now his only debt is the $9,000 he owes on his 1996 Mazda 626 sports sedan.

"Anthony is doing a fabulous job," said fee-only financial planner Howard Rothwell of Overland Park, Kan. "If you have the ability to save when you are young, it is the most powerful thing you can do for your future financial well-being."

How powerful? If Anico saves $5,000 a year for the next 40 years, and if that money earns an average annual return of 8%, he could retire at age 65 with about $1.3 million. (Even eroded by inflation and taxes, such a nest egg would be respectable.) If he waits until age 35 before he starts saving, he will have to more than double his annual savings to $11,500 a year to get the same results.

More aggressive saving while he is young takes greater advantage of the power of compounding and could mean much more flexibility when he is older. In fact, saving $10,000 a year for only the next 10 years--and then stopping--would, under the above assumptions, still give Anico almost $1.5 million at age 65.

"I'm not saying Anthony should save $20,000 a year and keep living with his parents," Rockwell added. "There is a fine balance throughout life between spending and saving. But if he keeps saving a reasonable amount of money, he will be home free. That is what I try and get all my clients to do."

Living with his parents and not having to pay rent, utilities, food and other expenses has certainly helped, Anico acknowledges. But family support, however wonderful and freely offered, is no guarantee of financial success, as Anico has observed.

He knows a few people "who look like they are never going to move out of their parents' house, either because they haven't landed a career yet or because they are in a big financial mess," Anico said.

Thinking ahead is something Anico has always done. Even when he was an undergraduate at UC Santa Barbara, he says, he was weighing his career options and their costs (Medical school? Didn't like the idea of graduating with a six-figure debt) and rewards (Laboratory science? Good career and good pay--$20-plus an hour).

And although Anico did veer off the track for a while, he never forgot that undisciplined spending would affect his future financial well-being. Yes, he'd buy the occasional $80 Dolce & Gabbana T-shirt, but he'd still make sure he was saving some money and not racking up an unmanageable credit-card debt.

There came a time when Anico became just plain tired of being beholden to creditors, of living with the idea that he could be owing money years into the future. He first went after the nearly $7,000 he owed in student loans. For 18 months, he shaved at least $300 and sometimes as much as $1,000 off the balance, until it was zero.

His career, besides providing him with work he enjoys, put him in contact with a financially savvy acquaintance who urged him to start investing in mutual funds.

Once he paid off his student loans, Anico did some research and decided to open his first account with Janus.

"I chose Janus not only because of word-of-mouth persuasion but because they sent an easy-to-follow packet for the novice investor," Anico said.

Since then, he has set aside about $1,000 a month, accumulating about $2,500 in tax-deferred accounts and $5,400 in a regular account with Janus.

Specifically, he has $2,800 in Janus Overseas (recently closed to new investors) and $2,600 in Janus Olympus. Both funds are relatively new, each returning about 23% annually over the last two years.

In tax-deferred IRAs and Roth IRAs, he has $1,550 in Janus Growth & Income, $500 in Janus Twenty and $500 in Janus Worldwide. All three have produced average annual returns of about 23% over the last five years.

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