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MONEY MAKE-OVER / Southern Californians Learing How
to Succeed in Personal Finances

Savers on Right Path but American Dream Is Still Far Off

Couple have maintained discipline even as their income has increased. With improvements in their plan, they can indulge their nesting instinct as well as build a nest egg.

November 03, 1998|DIANE SEO | SPECIAL TO THE TIMES

Mark Stephenson and Cherie St. Jean have known the strains of unemployment and debt. At this point in their lives, they'd like to stay on friendly terms with security.

Fortunately, Stephenson, 34, and St. Jean, 29, have discipline on their side, and they have a comfortable combined annual income of $78,000. Neither has extravagant tastes--their idea of fun runs to outdoor activities such as camping and hiking rather than nightclubs and resorts. And their goals are not out of reach. They simply want to pay off Stephenson's student loan by next summer, save enough to start a family in a few years and buy a nice home in the Ventura area before 2000.

Stephenson, a guard at the federal prison in Lompoc, traces his thriftiness to growing up "dirt poor" and seeing his parents try to scrape by in retirement on Social Security.

"I don't want to wind up like that," he said.

For her part, St. Jean, 29, a paralegal at Amgen, the biotech giant in Thousand Oaks, credits some choice dollar-stretching lessons from Dad (which helped her pay off her student loans in a few years).

Those money-saving skills really got a workout from 1994 through early '97, when Stephenson, a Marine veteran now in the Reserves, had a hard time finding a job after graduating from Cal State Northridge with a degree in physical education.

During that time, the couple lived on St. Jean's then-$30,000 salary plus the small sum Stephenson got as a member of the Reserves. The couple not only got by, they managed to save $6,000 for Stephenson to attend a four-month police academy training program, make payments on St. Jean's student loans (Stephenson had a deferment on his) and even for St. Jean to contribute to her 401(k) plan.

"It was tough," she said. "There were times we couldn't even go out and rent a movie because we knew we needed to save the money."

Diversifying the Investment Plan

Though those days are long over, the couple have stayed focused on their goals and faithful to the live-on-one-income habit. St. Jean has since landed a better-paying job--her position at Amgen pays $48,000 a year--and Mark is now earning $30,000. However, the couple still rent an $875-a-month one-bedroom apartment in Ventura and drive older cars, both paid for. They rarely eat out and still practice such economies as going to movie matinees to save on tickets and shopping where they can get a discount.

The only thing they do now that they didn't during the toughest years is subscribe to cable TV and splurge on the occasional big treat, such as a long-awaited ski trip to Whistler, Canada, this winter.

So far, the couple have accumulated $15,500 in their workplace tax-deferred retirement plans, to which they contribute the maximum each year--$13,000 in St. Jean's 401(k) and $2,500 in Stephenson's plan with the government.

St. Jean also has $15,500 in a traditional IRA, and the couple have $18,000 in money market and savings accounts.

"We're at a point in our lives where we need to know if we're going about all of this the correct way or if we can do things differently," Stephenson said.

The answer to that is yes they are, for the most part, and yes they can, said Robert Wacker, a fee-only certified financial planner in San Luis Obispo.

"I think you guys have done a great job working toward your goals," he told the couple.

"Your level of savings," at 30%, "is just phenomenal and really unusual," he noted. Wacker was also impressed that the couple whittled $24,000 in student loans to $4,600 in four years, and he foresees no problem in their meeting their target date of next summer for paying off the rest of Stephenson's loan.

The couple say they're eager to get some well-considered advice about investing, admitting that their current portfolio is more the result of offhand recommendations than research. Their approach, admits Stephenson, feels like "throwing at a dartboard."

If so, then many of the darts are on target, because the couple have made some respectable choices, Wacker said. His suggestions were intended more as fine-tuning than an overhaul, to better diversify their fund choices and steer some of their money into funds that have been better performers and appear likely to remain so.

Being diversified is always important, but Wacker said it is especially urgent in times such as this with markets in turmoil all over the world. In fashioning a stock-heavy plan for the couple, Wacker noted that they are decades away from retirement age and say they are comfortable with risk.

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