BE Financial Fitness Contest

Winner #7 Theodore & Darlene Mathis

account. He needs to terminate his plan of spending $100 a month to buy savings bonds, which take 18 years to mature, and instead add that money to their cash reserve.

  • Establish an education fund. The couple should take the remaining $500 and open up an education IRA. Teddy III has about $1,000 in cash gifts that is sitting in a regular bank savings account earning minuscule interest. The Mathises need to invest that money in a high-yielding growth mutual fund.
  • Boost their retirement income. At the rate they are going, the Mathises won’t have enough to retire at age 52. They need to push back retirement to age 60 in hopes of working more comfortably on having a seven-figure nest egg. They should start saving an additional $100 each in their 401(k) plans. (Darlene already contributes $200 per pay period; Theodore won’t be eligible again until January 2001, because of the hardship withdrawal.) Over time, they should increase their contributions until they max out their plans. (The current amount allowable is $10,500.)
  • Purchase more life insurance. He needs additional life insurance. If one spouse dies prematurely, Medearis says, you want to have enough coverage to wipe out all debt and replace the missing income. He needs to get a permanent life policy worth $250,000 for risk management purposes.
  • Adjust their W4′s to get an additional $400 in take-home pay. They get back about $5,000 a year in income taxes. The money that is sitting with the IRS for a year is not gaining any interest.
  • Theodore and Darlene Mathis Jr.
    Household Income $82,000
    ASSETS
    Checking $375
    Savings $1,000
    Bonds $750
    401(k) $20,500
    Home (equity) $135,000
    Other $72,000 (e.g., jewelry, cars, etc. )
    TOTAL $229,625

    LIABILITIES
    First mortgage $99,600
    Second mortgage $32,100
    Car loans $28,000
    Credit cards (combined) $5,050
    Personal loan $5,500
    Consolidation loan 2,500

    TOTAL $172,750

    NET WORTH $56,875

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