As part of the BLACK ENTERPRISE Black Wealth Initiative, we hope that an award of $2,000 and the advice of a financial adviser will enable contest winners to make some real changes in their financial lives. But we all know a lot can happen in a year, and sometimes the best-laid plans fall short. With that in mind, we checked in with three winners from 2006 to find out if they’re still in the starting blocks or nearing the finish line of financial stability.
Each of our contest winners told us that they’ve been presented with life-changing opportunities. Two of the three seized the moment and are taking steps forward that are already showing promise. Another contest winner is awaiting word on a job opening that may transform his lifestyle.
While there was plenty of good news–a purchase of rental property, new jobs at higher pay in a new town, and the chance to relocate overseas–some of our experts’ advice has yet to be acted upon. And one winner confesses contritely that, much to his disappointment and detriment, he hasn’t reined in his spending.
Here’s a closer look at three past winners.
Baton In Hand; Jennifer Bogar : SEPTEMBER
A self-proclaimed slave to fashion has changed her ways. Jennifer Bogar has traded her shoe shopping jaunts for trips to Home Depot. Bogar, 32, says that over the past year she’s taken her love for real estate a step further. Last December, she purchased an investment property, a two-family house for $289,000 in Irvington, New Jersey.
The investment was prompted in part by a desire to help her father, whose apartment was damaged in a fire, forcing him to stay with Bogar and other relatives until he could make other arrangements. Together they decided that a rental property would help them both. “He had the money and I had the credit,” says Bogar, a single mother to her son, Aaron, 6.
Her father now lives on one floor of the home, and the other is rented. The rental income doesn’t quite cover the mortgage, but they plan to renovate and rent the attic to make up for the shortfall.
Buying the rental property was enough to kill her shoe addiction; she hasn’t splurged in quite some time. She’s also curbed her travel habit. Fortunately she was lucky enough to win a four-day, three-night, all-expense-paid trip to Barbados from a New York City radio station. That provided a welcome break from her job as a paralegal.
Now her shopping appetite is for more property. She plans to start an L.L.C. to put her existing and future rental properties in to reduce her personal liability. “I’m on a kick,” she says. “I want another house.” Bogar is beating herself up because now she realizes that if she had done more saving than shopping, she would be in a better position to do just that. “It’s a wake-up call. I see these foreclosures in New Jersey and I could have snatched them up.”
She’s learned another important lesson. “I got that house and helped fix it up too,” she says. “If I put my mind to it, I can do what I need to do.”
New Year’s Resolution: “Downsize the BMW. The lease is up in 2008. I’ll go for less glitz and shoot to cut my car payment from $400 to $200. Buy more property. Real estate is the way to create wealth.”
MONEY MANAGEMENT
THE ADVICE
- Wait 24 hours before purchasing anything that costs more than $50.
- Eliminate her monthly cash deficit by cutting expenses.
- Get real about debt. Get rid of two of her three credit cards. Pay off balance monthly, or commit to pay it off within three months.
- Increase her income by possibly joining the real estate agency where her mother works, on a part-time basis.
THE ACTION
- Rather than spending time at the mall, her free time is more often occupied by sanding floors and laying bathroom tile.
- With her shoe shopping under control, Bogar’s cash flow has improved. Plus, she received a $4,000 raise.
- She still has three cards but no longer carries them and hasn’t made any purchases. She obtained a Sears card for emergency repairs on the rental property.
- Though her mother no longer works there, Bogar and her boyfriend, also a real estate agent, now partner in selling properties.
PREPARE FOR THE FUTURE
THE ADVICE
- Use the $2,000 contest winnings to build an emergency fund equal to six months of expenses.
- Maximize her 401(k) contributions. Also begin her estate planning by preparing a will, a revocable living trust, a power of attorney, and guardianship documents. Be sure ex-husband is no longer beneficiary on any of her assets, avoid more college debt, and ask employer about tuition reimbursement for law school.
THE ACTION
- She used the $2,000 to help with her son’s private school tuition and camp. Still, she increased her savings from $1,000 to more than $4,000.
- Bogar increased her 401(k) contributions only slightly, to 6% of her salary. She also set up a will, naming her son’s father as guardian, and has named her mother as the beneficiary of her life insurance policy. She is still working out other estate planning issues. As she begins to study for the LSAT, she’s learned that she will be eligible for tuition reimbursement.
STEADY STRIDE: Danny &_Shante Quinzy : OCTOBER
Sometimes to move forward, you have to move. This past summer Danny and Shante Quinzy said goodbye to Detroit and hello to sunny Orlando, Florida.
The attraction was more than Disney World and sunshine. Danny, 34, made a lateral move with DaimlerChrysler, as a supervisor for a parts division, boosting his salary nearly $10,000 to $78,000. Wife Shante, 35, would reap similar fortunes, landing a process improvement engineer position at aerospace contractor Kaman Dayron, increasing her salary from $61,000 to $77,000.
“This was unexpected,” says Danny. “A position opened in Florida and my bosses allowed me to apply. With the grace of God and luck, I got it.”
Chrysler is in the process of buying the couple’s former home in Michigan, but not for a profit. Still, they will have enough to pay off the mortgage. Given the severe downturn in the Detroit housing market, the Quinzys count Chrysler’s purchase of their home as a blessing.
For now, the parents of two young boys–Dante, 6, and Donovan, 2–are renting a house. The pricey Orlando market is coming off its boom and the Quinzys will wait until early next year to see if prices decline further. They will eye foreclosures too.
When the Quinzys won the contest, their struggle was separating their wants from their needs when it comes to spending. At the time, Shante said, “We wasted thousands of dollars on stuff we can’t even name. … It was nothing for us to spend an $8,000 tax refund on big-ticket items instead of saving.” But there’s excellent news: The couple says they have stuck to their budget, and Danny estimates they’ve slashed 50% of unnecessary spending.
“Moving feels like a fresh start. It’s made a difference,” he adds.
New Year’s Resolution: “Continue to pay down debt; stick to buying a house we can truly afford; and save, save, save.”
MONEY MANAGEMENT
THE ADVICE
- Stop giving Uncle Sam a free ride by overwithholding.
- Make debt reduction a priority.
- Find ways to increase cash flow.
THE ACTION
- They made adjustments so that each claims one withholding exemption. It’s too soon to see any results yet.
- They cut their credit card debt from $20,000 to $15,000 and now purchase very little on credit. They’ve also managed to shave $2,000 off their student loan debt, which now stands at $58,000.
- The couple got new car leases that cost them $400 less each month.
INVESTMENT STRATEGIES
THE ADVICE
- Reduce the percentage of c
ompany stock in their retirement accounts to 15%. Shante had all of her money in her company’s stock, and Danny had 30% in company stock. - THE ACTION
- Danny held on to the company’s stock, given the sell-off at Chrysler. “The stock jumped quite a bit. That’s how I made money,” says Danny whose 401(k) climbed to $55,000. He increased his percentage of bonds to about 10% of holdings. Shante rolled over her former 401(k) into an IRA and now has about $4,000.
PREPARE FOR THE FUTURE
THE ADVICE
- Deposit $2,000 contest winnings into an emergency fund.
- Establish will and trust, other estate planning documents.
- Save more for the children’s college educations.
THE ACTION
- They put the $2,000 in an emergency fund and now have $10,000 in savings, double what they had.
- “With the move we haven’t done anything yet,” says Danny. “It’s our next thing to do.”
- This is also on the to-do list. They have continued to save, however, and have about $3,000 toward the boys’ education costs.
FACING HURDLES; Chris Butler : JUNE
The good news for Chris Butler is that he recently was promoted to the position of Web developer for Ohio State University and will now bring home $70,000 a year, a 13% raise of almost $10,000.
But the bad news is that he’s not likely to benefit much from the extra bucks because his money is still evaporating. “I still eat out a lot,” says Butler, 28. “I like my toys, like my big flat-screen television. I try to at least buy on sale.” Butler says that, at least for a couple of months, he tried to cook more often, but that experiment was short-lived. He laments that it’s not unusual for him to eat out for breakfast, lunch, and dinner.
At the time of our profile, Butler was poised to buy a duplex that would provide both a home and rental income. It was a step
in the right direction for building his personal wealth, and it’s the foundation for the be Declaration of Financial Empowerment, Principle No. 1: I will use homeownership as a foundation for building wealth.Unfortunately, the deal never came to pass. In the end, the owner didn’t want to budge on the $207,000 asking price. But Butler is still optimistic about his chances for homeownership because of the downturn in real estate prices, which he says have fallen about 8% in his area. And he’s patient enough to wait for a further dip.
But even bigger changes may put off his plans. Butler is waiting to hear about a job opportunity that could require him to temporarily relocate to England. So, for Butler, it’s wait and see. In the meantime he wonders when his spending issues will be history. “I’m proud of my promotion, but I’m disappointed that I haven’t been able to get my spending under control.”
New Year’s Resolution: “To continue to enjoy life, move to England, and to increase my salary a minimum of $10,000 to $20,000 by the end of 2008.” be
MONEY MANAGEMENT
THE ADVICE
- Eliminate credit card debt. Use at least $300 of monthly savings to pay down debt. Never charge anything he can’t pay off in 30 days and never borrow for pleasure.
- Take advantage of tax credits for his student loan.
THE ACTION
- Butler didn’t follow the advice. Worse, his credit card balance ballooned from $2,500 to $8,000. His credit limit was raised from $6,000 to $10,000. Then he asked that it be raised to $15,000, and it was. He says he asked for an increase in case he moves to England, as he will need money to get set up there.
- He made the adjustment and saved approximately $500.
INVESTMENT STRATEGIES
THE ADVICE
- Assess asset allocation. Diversify beyond one asset class into four or five. Increase monthly contribution in 403(b) and invest in mutual funds.
THE ACTION
- He increased his contributions to a total of $300 a month in his 403(b) and IRA. He ignored the advice to diversify but has no regrets because his heavy allocation in international stocks paid off. His IRA balance went from $2,200 to $7,000. He says he will diversify into U.S. stocks once the domestic market is a bit more settled.
PREPARE FOR THE FUTURE
THE ADVICE
- Use $2,000 contest winnings to increase emergency fund to nine months of expenses.
- Pursue real estate, especially a duplex that would provide supplementary income.
THE ACTION
- Instead of the emergency fund, he put the $2,000 in his IRA. His emergency fund still stands at $3,000.
- Butler is waiting for prices to continue their decline and also waiting to see if he’ll be moving overseas.