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California Learning How to Succeed in Personal Finances

Chemist Seeks Financial Elements of MBA


Two years out of college, Paolo Beltran is making the kind of money many newly minted graduates would die for.

But the 23-year-old nuclear chemist sees his $50,000 annual paycheck as simply a means to a more ambitious end. What he really wants to do is use the money he has already earned to pay for a master's degree in business administration, which would give him the education he needs to launch a new career. Instead of radiochemistry and spectroscopy, he's interested in e-commerce and information technology.

His goal: Expand the Internet economy in developing countries such as the Philippines. He wants to invest in start-up high-tech companies, and he dreams of launching a business to offer brokerage and banking services online.

"I've always enjoyed following the business and financial worlds, and an MBA will open up many doors for me to actually work in those fields," Beltran says.

First, however, Beltran has to figure out how to pay for that MBA, which he will begin pursuing full time beginning in September 2001. And he wants to do that without racking up more debt--a decision based on his experience as an undergrad at UCLA, when he piled up more than $12,000 in student loans.

It's a tall order, especially because he has to come up with at least $73,000 for school and living expenses during the two years it will take to complete the advanced degree.

Moreover, Beltran doesn't want to work full time while he's in school, tap his retirement savings or ask his parents for money. And he still wants to indulge his outdoor passions, which include camping, hiking, mountain biking, snowboarding and traveling. In fact, he and his girlfriend are planning a trip to Maui early next year.

But Beltran may be up to the challenge. He has already saved more than $20,000 and is paying off most of his student loans by using education vouchers he earns as a volunteer at Interval House Crisis Shelters in Seal Beach through AmeriCorps.

Beltran's goal is realistic and very doable, says Scott Leonard, a fee-only financial planner from El Segundo. In fact, if he attends a public university such as UC Irvine or UCLA and works full time during the summers, he should be able to earn his MBA, graduate debt-free and still save for retirement. The outlook is more problematic if he opts for a private school. That would jack up the price tag by 40% and would almost certainly require him to borrow money.

In either case, Beltran is off to a good start. He has about $20,700 in savings split among money market accounts, common stocks and mutual funds. He has an additional $13,000 in retirement savings--$10,633 in a 401(k) and $2,527 in a Roth individual retirement account.

Beltran works full time for Products Laboratories in Burbank. In addition to the $1,360 he invests every month, about 15% of his monthly income automatically is deducted as a contribution to his 401(k)--usually $1,150 to $1,200. His employer provides a 50% match of up to $1,375 a year.

Aside from a few hundred dollars on a credit card, debt is not an issue. Beltran has $11,231 in student loans, but his current income and education vouchers for $9,450 will cover that before he starts graduate school. To help cut costs, he recently moved from a $680-a-month apartment in West Toluca Lake to a Lakewood home owned by his parents. He splits rent with his sister, paying just $300 a month. The trade-off for the savings is that he has to get up at 5 a.m. to catch the Metrolink train to his office in Burbank.

Beltran figures that a two-year MBA, including his projected living expenses, will cost him $73,254 if he attends the public UC system, or $103,254 at a private school MBA program. Fortunately, he has several financing options.

He plans to work for his current employer until he starts school, then work full time during the summers, probably in an internship. He also could work part time for Products Labs--perhaps 10 hours a week--during the school year at $24 an hour. As a fallback, he could turn to his parents for help. But that's a last resort. "They have already helped me a lot," he says.

Reevaluate Expenses and Investments

As a first step, Leonard suggests Beltran review his budget for ways to cut his $23,700 in yearly living expenses. If Beltran continues saving at his current rate, when he's ready to start school he would have an additional $16,750 socked away in his money market account, based on a 5% return. Combined with his current savings, that should fund the first year of school, Leonard says.

Beltran also needs to take a more conservative approach to investing, Leonard says, to maximize savings and ensure the money will be there when he needs it. That means pulling his non-retirement savings out of the stock market now. Otherwise, if there is a big downturn, he could end up without the needed cash.

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