Winner #31 Edwin Beale

Edwin Beale must decide whether to pursue an M.B.A., buy a second house, or both

up his cash reserve, which now barely amounts to $1,000. “I spend fairly heavily each month on clothing, other purchases, and dining out,” he says. “In fact, I rarely cook.”

Moreover, Beale wants to beef up his investment practices. He’s currently putting 15% of his pay ($650 a month) into his 401(k) plan, where he holds several Vanguard funds, mainly large-company stock vehicles. He hopes to put another $2,000 into a Roth IRA this year. He already has $4,800 in a brokerage account and invests aggressively in a small-company mutual fund and some biotech stocks.

Beale would like to have it all: an M.B.A., higher pay, lower taxes, cash on hand, and a comprehensive investment plan. To help make it happen, Walt L. Clark, president and CEO of Columbia, Maryland-based Clark Capital Financial L.L.C., offers these recommendations:

“His company has indicated it would pay a total of $10,500 toward an M.B.A. program, so I would recommend that Mr. Beale attend school part-time,” says Clark. “By maintaining employment with the company, he would keep his company car, eliminating expenses such as car insurance and car payments. If he decides to attend a school with higher tuition, he should use a home equity loan to finance the additional expenses rather than a student loan, because the interest from a home equity loan would be tax-deductible.”

For even more tax savings, Clark suggests that Beale buy a more expensive home with a larger mortgage to increase his interest deductions. “If possible,” says Clark, “he should rent the existing property. From what I understand, the current rent for such a home in that neighborhood will be around 40% higher than his existing mortgage payment. If he nets an additional $300 per month, this amount could be used for additional investing or to help pay for graduate school expenses.”

“Mr. Beale now spends $400 per month dining out and $300-$500 a month on clothes and discretionary spending,” says Clark. “To [accrue] additional capital for [his cash] reserves and to pay off his credit card debt, I would suggest reduce dining expenses to no more than $200 per month and [reduce] clothing expenses to no more than $200 per quarter. This approach will save an additional $600 — $700 per month, which could be used for cash reserves and debt reduction.”

Once his debts have been paid off and a sufficient cash reserve is accumulated, he could place $600 — $700 per month into an investment portfolio. “I would recommend a monthly, automatic investment program through a growth-stock mutual fund,” says Clark. “Each month, he would purchase shares in the fund, just as he now invests regularly through his company’s 401(k) plan.”

Beale’s current investments tend to be in large-cap funds, Clark points out. “Due to the recession and corporate downsizing, particularly among larger companies, I would recommend that he shift his investments toward small- and mid-cap funds. The companies held by such funds may perform better than large-cap funds because they might have fewer

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