What Matters Most?

Paraisia Winston prepares to tackle a mountain of bills

reduce her eyebrow- raising debt. Realistically, she knows there are only so many hours in a day, and despite her youth, only so much energy to draw from. However, she’s looking forward to the future. In five years, she hopes her credit card debt will be gone, her car will be paid off, and school loans will be under control. She is optimistic: “It’s just about getting from here to there. After law school I’ll be on my way.”

Gwendolyn V. Kirkland, a certified financial planner with Kirkland, Turnbo & Associates in Matteson, Illinois, reviewed Winston’s finances. While Winston’s situation is not dire, Kirkland says Winston will have to be “focused and purposeful” in adhering to a stringent budget to reach her goals.

Take control of finances. Winston’s basic expenses are in excess of her take-home pay. Based solely on those earnings, she faces at least a $1,656 deficit every month from the remaining items in her budget, which include a car note of $450 and the $600 she is paying on her credit cards. Winston pools together roughly $2,750 to pay her bills each month-between earnings from her part-time jobs and what she receives from student loans and takes from savings. Kirkland says it’s not enough.

On the plus side, Winston’s not extravagant with her spending. She doesn’t have cable TV and eats some meals with her parents to keep her grocery expenses low. To help make up for the income gap, Kirkland recommends that she seek another part-time job, or look for ways to earn extra cash.

Chip away at debt. Some of the funds in Winston’s money market account could be used to pay off her American Express card-which carries a balance of more than $7,500 and a 17.24% interest rate, the highest rate of her four cards. This will help reduce her monthly deficit by roughly $250. After graduation she should revisit her financial plan and develop a prudent budget to pay off her debts-systematically paying off her highest-interest credit card debt, then her car loan, while starting to pay down school loans. Law students who pursue public interest work may be able to participate in loan repayment assistance programs to help manage their debt.

Maximize existing savings. Winston is expecting a friend to repay a $1,500 debt before the year is up. Kirkland says that money should be put in her money market account, as should tax refunds and any unexpected sums of money, such as significant gifts. Furthermore, Winston must maximize what savings she has. For example, Winston should review the gift IRA from her grandparents to see if she can improve the returns, which Kirkland says are minimal at about 3%. Winston should also work toward building an emergency fund to cover six to nine months of expenses. And, when she is eligible with her new employer, she should enroll and contribute the maximum to the employer-sponsored retirement plan.

Kirkland says the outlook is promising: “What’s most critical will be discipline-to stay focused and not overspend. When

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