March 1, 2004
Increasing Earning Power Through Education
Rafael and Janice Richardson of Montgomery, Alabama, have dedicated their lives to education. The young couple—he’s 32 and she’s 34—are both teachers. Up until last September, the Richardsons had a household income of $82,000. But since Rafael left his job as a high school science teacher to pursue a doctorate in educational leadership fulltime, the two now rely on Janice’s $35,000 salary as a primary grade school teacher.
“Once I complete my Ed. D. in another three years, I’ll be able to teach at the college level,” says Rafael, who anticipates a $15,000 increase in his salary, raising him to almost $65,000. Janice has a master’s degree and is considering pursuing her educational specialist certification in the hopes of bumping up her salary as well. If she decides to get that certification, it would mean an additional $1,400 per year in tuition that they would have to pay out. A $15,000 annual fellowship is helping offset the costs of Rafael’s education. (His tuition, fees, and books run about $2,500 per semester.)
Meanwhile, the couple must find a way to pursue higher learning while building up their retirement savings. Right now, they have about $14,800 in retirement savings from their IRAs and 403(b) accounts. They’re also concerned about their debt, particularly since Rafael is debt-averse. “In college (undergraduate), I ran up $3,000 in credit card debt. I got behind on my payments. It was a terrible experience having creditors hound me,” he says.
The Richardsons would like to reduce their debts by paying extra on their balances. They owe about $1,000 in credit card debt, $12,000 on what’s left of a home equity line of credit, $22,600 in student loans, and $175,000 on their house note. When the couple recently refinanced their mortgage, they were able to roll over a prior home equity loan ($30,000 for home repairs) and the majority of a home equity line of credit ($33,000) that they’d taken out to buy a 2001 BMW. “[With the home equity line of credit], we got a lower interest rate—4.5%. Plus we could write it off on our taxes,” explains Rafael. “That was a better deal than taking on a new car payment.”
The Richardsons add, “We are very conservative at this stage in our lives.” Married seven years, the couple plans to have children down the road. Beyond saving for retirement, they are already thinking about building generational wealth.
Financial adviser Cheryl Creuzot, president and CEO of Wealth Development Strategies in Houston, notes that in terms of budgeting and cash flow management, “the Richardsons have done an excellent job holding down their spending.” However, she adds, “they don’t have the wherewithal from a budgetary standpoint to do a whole lot of saving because he is not working right now.”
To aid the Richardsons in developing a financial plan, BLACK ENTERPRISE paired the couple with Creuzot.
The following are her recommendations:
APPLY FOR GRANTS AND SCHOLARSHIPS. Even with the $15,000 fellowship, Creuzot says Rafael needs to explore other options to pay for school. He can check with