and Income Fund. The current value of her fund holdings thus far: $ 1,800.
“I promised myself that when I had kids of my own, I was going to get a head start on their college funds.” It seems that Greer is up to meeting her life’s mission.
Financial Snapshot: LaWanda Greer
Take home salary $ 24,000
Alimony support $ 6,000
Expenses $ 30,000
Savings $ 600
Debt/labilities, $ 2,000
Investment portfolio $ 12,000
(includes 401(k), IRA,
FINANCIAL EXPERT: Vanessa Donaville, principal of In Touch Investments (www.lpl.com/vanessa.donaville) in Vallejo, California.
HER STRATEGY: Significantly reduce Greer’s debt; find savings and investment vehicles that will maximize the return on her money. Donaville’s first step was to evaluate Greer’s income, expenses and debt, and structure a monthly budget. By doing so, she laid the foundation for a comprehensive savings and investment program. “First, you start with your cash situation — savings, checking and money market accounts,” says the financial planner. “Next develop an investment portfolio starting with equity and mutual funds. As your account builds up, add individual stocks to the mix and then bonds.”
What follows are Donaville’s recommendations:
Greer should pay off her $ 2,000 credit card debt.
Until her financial situation changes, she advises Greer to continue to dollar-cost average — setting aside $ 25 a month in her son’s account and launching another account for her daughter’s education.
Steadily increase the amount of money that she places in current and other investments.
Instead of placing money in a CUTMA, Donaville advises her to open up an education individual retirement account (IRA) or a Roth IRA so that her dollars will grow tax-free.
Greer should stick with the Oppenheimer Main Street Growth and Income Fund, which has a five-year annualized return of 21.5%. “Based on its long-term history and performance, the fund continues to generate consistent returns and perform at average with its peers,” Donaville says. (Aggressive growth funds, which offer high returns but great risks, are recommended to investors who have five years or more to reach their financial goals.)
Increase contributions in 401(k) to 10% in order to prepare for post-career life.
THE RESULTS: Donaville concedes that $ 25 a month will not enable Greer to meet the total amount required to send Martin II to a four-year private institution. While she will not meet her goal of amassing $ 180,000, Greer would save up $ 15,000 over the next 13 years (at an average rate of 12%).
Once she reduces her debt and reorganizes her post-divorce finances, Greer plans to increase her monthly contributions to $ 2,160 a year. Over a 13-year horizon, Martin II would have $ 82,500 toward his college education.
FINANCIAL GOALS: To create education funds for Greer’s son and daughter, which would be valued at $ 120,000 each over the next 13 and 15 years.
* To build a growth portfolio that would generate about $ 1 million in retirement income.