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California Learning How to Succeed in Personal Finances

Medic's Risky Investments Could Use Doctoring


Mark McRiley is a dedicated poker player and a regular visitor to Las Vegas casinos. So it's not surprising that he's willing to gamble when dealing with his personal finances.

McRiley, a movie industry medic, dabbles in highly speculative stocks and other risky investments. He recently gave $10,000 to a man he had met while vacationing in Costa Rica who promised to deliver high returns by funding road and bridge building projects in that country.

"My dad and friends said I was crazy to do it but I had a good feeling about it," said McRiley, 32.

Good feeling or not, McRiley's penchant for chancy ventures is undermining his attempts to get his finances in order, said Preston Caves, a Manhattan Beach-based, fee-only financial planner who reviewed McRiley's finances for The Times.

Overly risky schemes, an unwillingness to research his investments and a lack of disability insurance could prevent McRiley from reaching his goals, Caves said.

"Building wealth is a long-run game that requires some discipline," Caves said. "You shouldn't make a lot of wild and crazy choices with your money."

McRiley confessed that for most of his adult life, he has lived beyond his means. He incurred $17,000 in credit card debt--which he recently paid off--by taking vacations and buying sporting goods and equipment.

His desire for more financial stability slightly predates a divorce that ended his eight-year marriage in May. In addition to paying off his credit cards, McRiley swapped his 1999 Honda CRV for an 8-year-old Honda Del Sol, eliminating the $410 monthly payments on the new CRV.

"I don't want a bunch of expenses anymore," McRiley said. "I want to live completely differently from how I was before. I'm even psyched about saving money."

He has about $4,000 split between checking and savings accounts and has started setting aside $1,000 per month for additional investments.

He has also started setting some financial goals. In the next three to five years, he would like to have enough money to buy a vacation home in Costa Rica. He estimates the home would cost $30,000 to $50,000.

Before thinking about investing for that goal, however, McRiley should build up his savings to $10,000, Caves said. This emergency fund is crucial because McRiley's work is unpredictable; a stretch of unemployment would make it difficult to meet his $1,000 monthly mortgage payments on his Altadena home.

As a movie industry medic, McRiley handles first aid on sets and locations. He also reviews working conditions to help other workers prevent accidents.

The presence of a medic is required on union movie shoots. McRiley is a member of the International Alliance of Theatrically Skilled Employees, but that doesn't guarantee employment. He must hunt for assignments and often goes several weeks or longer without work.

Fortunately the pay is good. He can earn $2,000 in a week if the movie shooting schedule includes a lot of overtime. And his growing list of contacts means that his down time is far less than when he started in this line of work four years ago. This year, for example, he is on schedule to work about 10 months and earn about $80,000.

McRiley also ought to consider buying disability insurance to provide an income in case he were to suffer an injury or illness that prevented him from working.

"Your biggest asset right now is your earning potential," Caves said. "Think of it as paycheck insurance."

This coverage is particularly important for McRiley now that he is divorced and cannot rely on a spouse's income for support.

In addition, McRiley needs to rethink his $10,000 Costa Rican investment and his stock selections, Caves said.

McRiley sent the money to Costa Rica after meeting an expatriate American there during his vacation. The expatriate guaranteed him a 2% per month return on his money, which would be used to fund infrastructure projects in that country.

The investment is unwise for several reasons, Caves said. Unlike mutual funds and publicly traded companies, this investment is very informally structured. It's not regulated or audited, creating a high potential for fraud. Even if the plan is legitimate, economic downturns in Central America, currency fluctuations or business failures could jeopardize the plan.

"When you assess the risk of an investment, this one is almost off the scale," Caves said. "Too many bad things could happen. I think you'd be wise to liquidate this investment immediately."

McRiley also should find another strategy for making investment choices rather than relying on stock tips that he gets from colleagues on the set.

Some of McRiley's stock picks have turned out well--communications equipment maker Sycamore Networks has climbed from $49 a share to $139. Others bombed. McRiley purchased medical equipment manufacturer Oxis International at $5 a share and watched it sink to less than $1.25. He also bought substitute-blood maker Synthetic Blood International at $2 per share. It now trades for 50 cents.

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