Reassessing Risk

Virna Dolmo is learning to invest more aggressively to reach her financial goals

Virna Dolmo can recall attending New York’s Lehman College in the mid-1990s and being bombarded with credit card offers. She ended up with 14 cards — mostly from department stores. It wasn’t long before she ran into trouble. “I had collection agencies calling me up constantly. I was just working part time, so I couldn’t pay them off,” says Dolmo, who contacted a debt consolidation company to get on a payment plan that proved unsuccessful. “I had to pay them $50 every month and then they would pay the credit card companies for me,” she recalls. “When I calculated how much I would pay in fees, it made more sense to pay the credit card companies directly myself.”

By the time Dolmo graduated college and entered the workforce full time in 2000, she had accumulated $8,000 in credit card debt and $10,000 in student loans. She was learning a valuable lesson about managing debt. “Instead of participating in my company’s 401(k) right away, I used my [discretionary income] to pay back my student loans and pay off my credit card debts,” explains the 34-year-old professional, who works in the collection division of telecommunications giant Verizon. “Every month, I would pay more than the minimum due.”

Dolmo was debt free by 2002. “That’s when I started becoming conservative and started saving my money. I started contributing 10% of my salary to my 401(k),” says the New York native, who earns a gross annual salary of around $56,000. She also began investing in I Bonds through a salary deduction plan at work. Moreover, she changed her spending habits. Now she buys only what she really needs and what is on sale. Every month she pays off the balances on the three credit cards she holds.

In the last four years, Dolmo has managed to amass $47,050 in a money market account earning nearly 1% interest and $13,400 worth of I Bonds earning 4% interest. Her 401(k) is valued at $33,050 with an average return of 4%. With so much cash on hand, Dolmo wants to do a better job of investing her money in the stock market.

She also wants to team up with her older sister, Dina, a schoolteacher, to buy a brownstone in another two years. The siblings have rented and shared an apartment since Dolmo started working at Verizon. By splitting monthly costs with her sibling, Dolmo keeps her living expenses to just $1,250 a month, while her take-home pay is a little more than $2,100. “Why not buy a house together,” she asks. “That way, the mortgage payments won’t be as high [as paying them individually,] and we can write [off the interest] in terms of our taxes. Whenever we go our separate ways, we can sell the house and make a profit.”

Another of Dolmo’s intermediate goals involves another family member. “My youngest brother’s son is 6. I want to set up a college savings plan for him. Once my nephew turns 18 … he will have an easier time paying for

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