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Shopaholic Finds Best Bargain in Exercising Control


A lot of things are going right for Brandan Wilburn.

At the age of 23, she's making almost $46,000 a year as a clinical assistant at biotechnology giant Amgen in Thousand Oaks. She's athletic enough to play on two company soccer teams and ambitious enough to want to pursue an MBA in her spare time--with her employer picking up the tab.

She loves to travel--Paris last year--and dreams of buying a condo and giving more money to her church.

But Wilburn has a nasty habit that is threatening her dreams and financial well-being: shopping.

"I can convince myself to go shopping in a heartbeat," said Wilburn, who spends $250 a month on clothes.

"I've tried to put myself on a budget, but I get tired of doing it and stop."

The result: Balances totaling $3,000 on three credit cards with interest rates as high as 22.8% and a consolidation loan of $3,000 (at 19.5%) in charges from two other credit cards. Coupled with a $1,900 loan for her computer, $12,300 in student loans from Spelman College in Atlanta and the $404 monthly payment on her 1999 Nissan Altima, Wilburn spends $950 a month on debt repayment--more than a third of her monthly $2,604 take-home pay.

"I've got to get my life together," she said, "but I need help."

Actually, Wilburn's financial situation isn't that bleak, said Tim Wallender, a Manhattan Beach certified financial planner.

If Wilburn can control her spending--a big "if"--she should be able to pay off most of her debts within two years and still have money available for an emergency fund, retirement savings and other goals.

"This 'shopaholic' behavior is really a common thing," he said. "She's got to eliminate all but one card, and keep it in her desk for emergencies. She should pay for everything by cash or check, and when she goes shopping she should have a list, and buy only what's on the list."

Wilburn should also realize that paying with plastic makes all her purchases much more expensive. For instance, Wallender said, Wilburn's $3,000 credit consolidation loan, at 19.5%, will cost her $1,417 in interest if she waits until August 2002 to pay it off.

And if Wilburn still gets the urge to shop? "She should go work out instead, or pick some other activity, because this is a kind of compulsive behavior," Wallender said. "She needs to break the cycle by channeling her energy into something else."

To get down to one credit card, Wallender suggested Wilburn transfer her balances to her lowest interest card, a USAA Visa at 13.8%, and direct as much money as she can into paying off that $3,000 debt.

"If you concentrate on just one card, you'll know you have that balance facing you every month and it's less temptation to charge," he said.

Wallender also recommends that Wilburn figure out all her mandatory expenses for the year and then divide that number by 52. Then she'll know how much money she has left over each week for nonessentials.

"She can just take a cash withdrawal from her ATM every week and say, 'Here's what I have to spend on dining out or clothes or anything extra,' " he said.

Wilburn's mandatory monthly expenses now total about $2,200, including $700 for half the rent on her Sherman Oaks townhouse (she has a roommate), about $750 on her car loan and insurance, $161 for her student loan, $155 for her consolidated credit card loan and $80 for her computer loan. She also spends about $150 a month on her remaining credit cards, paying a little more than the minimum required.

Wallender said she should funnel any spare cash toward paying off her highest-interest debt first--her 19.5% consolidation loan, which has an outstanding balance of $2,500.

For example, last February Wilburn received a company bonus of $2,500, which she used to pay for her trip to Paris. This year's bonus probably will be smaller, but Wallender said whatever the amount, Wilburn should skip the travel and use it to pay down that loan.

He also suggested she sell her tiny holdings of 10 shares of Amgen and five shares of PepsiCo stock and apply the $900 or so from the sale to paying off debt. Those two actions alone could wipe out her consolidation loan--freeing $155 a month to pay off her remaining $3,000 in credit card debt. If she can concentrate $300 a month on that debt, she'll have a zero balance in less than a year, assuming she doesn't add any new charges.

At the same time, Wallender said, Wilburn should start building an emergency fund and contributing to her 401(k). Once she stops her compulsive shopping, she'll save the $250 she usually spends on clothes every month. She can also give herself an extra $60 to $80 a month by stretching out the $161-a-month payments on her student loan from five to 10 years.

Wilburn should also try to extend the payments on her USAA car insurance, which costs her $353 a month, eight months a year. She'll pay the same amount annually, but by paying monthly, her payments would drop to about $238, freeing $115.

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