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Her Next Challenge: Getting Financial House in Order


Courtney Chapman, a single, 32-year-old Georgia native, enjoys a challenge as much as the next person. Move across the country when a job transfer is offered? No problem. Find a new job when she is laid off six months later? Piece of cake.

But ask Chapman about her long-range financial goals--or even her budgeting plans for next month--and an anxious look crosses her face. She admits that for years she has been financially paralyzed by her lack of knowledge.

"I grew up in a small town, and my parents were middle-class people who never really talked about money," she said. "There were never any discussions about retirement, the best way to save your money, interest rates--none of that. And I never really learned about those things on my own."

But as the first day of 2001 dawned, Chapman was thinking long and hard about her finances. She wanted to devote more of her paycheck to both short-term and long-term goals, possibly save for a small condominium and set up a solid retirement plan.

"I decided that I just needed a push in the right direction," she said.

That attitude, coupled with Chapman's positive financial situation, bodes well for her future, said Margaret Gault, a San Francisco-based certified financial planner.

"She is a financial planner's ideal client," Gault said. "She is young, not encumbered by debt and is eager to contribute to a retirement savings plan."

Unlike many who have put off planning for their future, Chapman already has a lot going for her. Her job as an account manager for KCBS-FM Marketing, a TV and radio advertising and promotions company, pays her a base salary of $45,000 annually, and in her first year there she racked up $21,000 in commissions.

She also keeps her living expenses modest. Chapman shares a house in Santa Monica with two other people, paying $700 a month for her share of the rent.

"I'd really like to move out and get a place of my own, but I don't think I can afford it right now," she said. "I do like the area where I'm living, though, and I think I'd rather live there and have to share a place than buy something in Timbuktu and have to drive a long way to work."

Chapman's only other major monthly obligation is a $341 car payment for her 1998 Honda Accord.

Best of all, Chapman, despite her confessed lack of financial acumen, has already managed to assemble a modest portfolio--starting with an emergency fund of about $5,000 in a low-interest passbook savings account.

She has accumulated about $10,000 in her 401(k) plan, most of it contributed in the last year after picking up some coffee-break advice from co-workers as well as suggestions from her boyfriend.

The account is fully invested in stocks--50% allotted to shares of Viacom Inc., a media giant that owns the CBS television network; 20% to MFS Emerging Growth Fund; and 30% to Barclay's S&P 500 Index fund.

Chapman is trying to commit 10% of her income to the 401(k) account, but worries about maintaining that level if the commissions she earns for setting up marketing campaigns or selling naming rights to events fall short of her first-year level.

"I was very lucky with some of my first projects," she said. "But it's not going to be that way all the time."

As a safeguard against a lower income, she tries to keep her spending in check. She still winces at the memory of the $3,000 balance she ran up on her very first credit card while a student at the University of Georgia.

"I had no business even having a credit card," she said, laughing about it now. "I had no money! I was only able to pay enough each month to keep the balance at $3,000, but it stayed there for about five years.

"One day, I looked at some of the papers from the credit card company and saw that I was paying 28% interest. I didn't know if that was good or bad, so I asked my boyfriend at the time, and he told me I could get a card at 8% or so. I was amazed."

Chapman ended up calling the company and threatening to take her $3,000 balance elsewhere. The company blinked, offering a 12% rate that helped her eventually pay off the balance.

"Now I just have a good old American Express card, and I pay off that balance every month," she said.

But the spending urges are still there.

"Out here, you get so caught up in having to have a name-brand pocketbook or dress or something," said Chapman, who had never ventured outside Georgia until the job transfer brought her to L.A. in December 1998. "I had my hair colored out here and it cost me $175. I never would have done that back home."

Gault, the financial planner, said Chapman doesn't have to live like a pauper to realize her financial goals.

"She is young and enjoying being footloose and fancy-free, so it's OK that she is paying rent right now, especially if she wants to continue living in a very expensive area," Gault said. "But if she utilizes discipline, intelligence, patience and perseverance, she should establish a substantial retirement savings account by the time she reaches her 60s."

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