the courage to change careers. But she is concerned that Bogar’s “spending habits are working against her. If she doesn’t change, even after earning a lawyer’s salary, she’ll still be struggling.”
Kirkland offers these recommendations for Bogar to get back on track:
Put on spending handcuffs. “If Jennifer chooses to purchase anything over $50, she should wait 24 hours before doing so. She needs time to weigh what the item means to her and distinguish between wants and needs,” says Kirkland. “She must forget short-term gratification and think long term.” Recreational spending will continue to be disastrous to her financial position. “You can’t fill an [emotional] void with ‘stuff’ and spa vacations,” says Kirkland, who suggests the paralegal explore free or low-cost activities she can enjoy with family and friends.
Fill the cash reserve gap. Bogar is currently short about $300 each month. She spends roughly $400 a month to lease a BMW 325i. Kirkland advises Bogar to cut her expenses, which include about $160 a month for gas, $150 for clothing, and $80 she puts aside for vacations.
Get real about debt. Bogar refinanced her mortgage in July and wiped out the onerous $11,000 in credit card debt. That’s good news, says Kirkland, but only if she doesn’t run up the debt again. “She should consider getting rid of two of her three credit cards, especially now that she is making $8,000 less,” advises Kirkland. She also recommends that Bogar adopt a new policy: pay off her credit card balance every month, or at least commit to paying off the balance within three months.
Build an emergency fund. “Jennifer doesn’t realize that with no cash reserves, she could be in serious trouble if she were to lose her job,” says Kirkland. She’s a long way from the six months of living expenses Kirkland says she should have set aside. In fact, the $2,000 in contest winnings should be put in a money-market account like the one offered by Emigrant Bank (www.emigrantdirect.com), which is currently paying 5% interest.
Increase income. Kirkland recommends that Bogar join her mother’s real estate business. She could go in one night a week and on weekends, suggests Kirkland, and gather listings. She could then partner with her mother to show and sell properties. The earnings from real estate would vastly improve her cash flow.
Prepare for the future. Bogar is off to a positive start in saving for retirement, but Kirkland would like to see her max out on her contributions to her 401(k). Estate planning is also critical since she’s a single parent, “She needs to prepare a will, a revocable living trust, a power of attorney, and guardianship documents for her son,” says Kirkland. As a divorcÃ©e, she should make sure that her ex-husband is no longer the beneficiary related to her retirement account, life insurance, or any other assets.
It would be advantageous to avoid more college loan debt, so Bogar should check with her employer about tuition reimbursement. She has hit some road bumps. But if she learns