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MONEY MAKEOVER

Newly single and rethinking his future

At 41, Paul Schnebelen of Oxnard is dealing with the breakup of a long-term relationship, but his frugal spending and dutiful saving habits have him on solid financial footing for his new single life.

August 22, 2010|By Ann Marsh

For 10 years, Paul Schnebelen shared a three-bedroom apartment in Oxnard with his fiancee. Members of the Disneyana Fan Club, the couple shared a passion for all things Mickey.

They envisioned owning a home together in Florida where real estate is affordable and Disney World is close by.

Then, in January, the relationship ended. Schnebelen took on about $3,000 in credit card debt to ship his ex's belongings to her new home in Oregon. He kept their parakeets Suzette and Joe, named after singing animatronic birds in the Enchanted Tiki Room at Disneyland.

"We were married in everything but name," said Schnebelen, 41. Sometimes the breakup feels liberating, he said, "sometimes it's painful, sometimes it's just strange."

In his new single life, the technical expert for the U.S. Social Security Administration in Ventura is trying things he's never done before such as taking classes in improv comedy and dancing. Next up: singing lessons.

He also finds himself asking new questions about his future: Can he afford to buy a house on his own in Southern California? Should he seek a promotion with his employer of 15 years? Should he strike out on his own as a specialty tour guide at Disneyland?

"At this point," he said, "I see my life as kind of open."

And how, said Delia Fernandez, a fee-only financial planner in Los Alamitos who agreed to review his post-relationship finances. "Ten years is a long time, and that can be a very difficult transition," she said. "It's a whole new life."

People underestimate all that is involved in becoming single, the planner said.

Generally speaking, "single people don't live as well as couples," she said. "They don't have as much money. They don't get to live in the nicer, more expensive house. They don't get to go out as much."

The good news, she said, is that Schnebelen developed solid financial habits back when he was single.

As a result, he has a steady income of $87,000 a year. He also has about $40,000 in non-retirement savings, $12,000 in non-retirement bonds and $108,000 in retirement savings.

In addition to his credit card debt, he owes $4,500 for his car. If he stays in his current job through age 62, he can expect a federal pension of $1,500 a month and an equivalent amount of Social Security income.

Schnebelen's dutiful savings habits began early.

Today he stashes $780 a month into several retirement and non-retirement accounts. He saves 4% automatically through work and his employer kicks in an additional 4.5%.

Given that he has three life insurance policies with death benefits that total $300,000, he is over-insured for a single person with no dependents, Fernandez said. His only relative, his mother, is self-supporting, in good health and lives nearby in Southern California. The largest policy is through his work. He owns the other two on his own.

Given the high fees on these so-called whole-life insurance policies, they were poor choices compared with more-affordable universal or term-life policies, Fernandez said.

However, paying into them did help Schnebelen develop good financial practices early. "How many people at age 23 think to have life insurance policies?" she asked.

The planner suggested Schnebelen hold on to the policies until he decides whether to leave his job, in which case he would lose the largest policy. As for buying a house, the advisor also counseled Schnebelen to wait until he is sure that he is committed to an area.

She expects housing prices to remain depressed for two to five years. If Schnebelen has any plans to move in that time frame, Fernandez said, he should not incur the expense of buying.

In the meantime, she urged him to consider finding a smaller apartment than his current one, which costs him $1,415 a month in rent, or about 30% of his take-home pay.

Downsizing should help him save for three purposes, she said: paying down his credit cards, which he is already doing; building up a three- to six-month emergency reserve; and buying a home when he is ready.

She praised him for regularly buying savings bonds but said this is not the best emergency reserve.

"You can't write a check on that in a pinch," she said. Schnebelen gets an A, the planner said, for his overall frugal habits. She pointed out he bought a used rental car that he plans to "drive until the wheels fall off." He uses a credit card with a low average interest rate and converted a regular retirement account to a Roth account. This will enable him to withdraw tax-free income in retirement.

Fernandez urged him to take his retirement savings out of several accounts he purchased through a broker whose firm is charging him a 1.9% annual fee. That same firm already took a whopping 50% in commissions in the first year he opened them back in his 20s, a practice that has since been discontinued.

He can avoid further charges altogether with a no-load mutual fund account in a discount brokerage such as Charles Schwab or TD Ameritrade, she said.

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