Former exec could use some management
As an executive, Lesley Hawks earned as much as $400,000 a year. But the business acumen that made her a success in the corporate world is not reflected in her personal finances.
She can’t say how much is in her checking account, guessing (incorrectly) that it is somewhere between $10,000 and $100,000.
She let $100,000 idle away for 16 years in a wrap account, a type of catch-all investment fund, that earned her just half of 1% annually. The account held technology stocks bought at the peak of the Internet bubble in 2000 that were never sold.
Even worse, she trusted a friend with $200,000 to invest in two risky ventures -- a Long Beach restaurant and a bicycle rental shop in New York. She lost it all, and then got stuck with $18,000 in legal bills to shut the operations down.
Recently, however, the 46-year-old Long Beach resident has been forced to keep a closer watch on her money. Two months ago, she was let go from ISold It, a company that franchises stores that help people sell goods on EBay.
“Even though I did make big bucks there, I don’t really know where it’s gone,” Hawks said. “I don’t open bank statements. It really is head-in-the-sand, and I know it.”
Financial planner Sandra C. Field thinks Hawks needs to take command of her money. And quickly.
“She’s completely scatterbrained right now. There’s no reality there around money, and she readily admits that,” said Field, who works out of Los Alamitos. “She needs direction.”
Hawks never planned on a career in business, nor expected she would one day need to manage her own finances. She moved to the United States from Britain 24 years ago to work as a tennis coach. After marrying, she focused on raising her son, Conor.
When her marriage broke up in 2000, she lucked into what proved to be a lucrative career -- consulting on franchise operations -- which eventually led to an executive position with ISold It. But she never took the time to manage her own finances.
“I do feel I’m underwater most of the time. The thing that goes is organizing my financial life,” she said. “Throw a little bit of midlife dating in there, and it’s really the Superwoman syndrome.”
Fortunately, Hawks earned $70,000 this year before her layoff, and she is free of debt. The franchising expert has begun consulting on a freelance basis and has landed three clients.
She also has about $180,000 in retirement savings, including more than $100,000 in the wrap account. There’s $8,000 in a checking account (not the $10,000 to $100,000 she had imagined) and $35,000 in a savings account. Her estranged husband pays $44,000 a year in child and spousal support.
Also on the positive side of the ledger, Hawks owns a home outright in Verfeil, a village in the French countryside outside Toulouse. She bought “my folly,” as she calls it, to buoy her older sister’s spirits through a death-defying bout with breast cancer.
The so-called folly has turned out to be Hawks’ one solid investment. She paid $100,000 for the property, then sank $70,000 into renovations. Its estimated worth is now $200,000, implying a $30,000 gain. She rents the house out about two months a year, but the income goes back into maintenance and repairs on the property.
But she doesn’t own the place she lives in -- a two-story, three-bedroom, vacation-like home with canal views in the Naples area of Long Beach that she rents for $3,250 a month. Out front sits a Duffy electric boat that cost $12,000. She spent $30,000 of her own money to dress up the house with outdoor landscaping and cheery furnishings.
Her monthly expenses are also sky-high. She needs $7,000 to $8,000 a month just to cover her nut, which includes a $500 car lease and $400 for medical insurance under COBRA (an acronym for the legislation that created it).
Many of her expenses are discretionary. Hawks and her son travel to Britain and France each year to visit family and relax at her home in Verfeil, but that takes about $10,000 out of her annual budget.
Then there’s the money she spends solely on Conor, who is 14. Private school costs $11,000 a year, and $240 a month goes for a personal trainer to help him get ready to play football at school. He also attends tennis academy, for $200 a month.
The price tag for braces recently came in at $7,500. Don’t forget entertainment. Hawks forks out $100 a month for Conor’s paintball excursions with friends.
“These days, 14-year-olds have lunch and then he wants to go to the movies,” Hawks said. “Every time he walks out the door, it’s $20 or $30.”
That’s part of the reason Hawks hasn’t saved much for her retirement despite making about $200,000 in 2005 and $132,000 last year from ISold It. Her peak earnings year at the company was 2004, when she made $400,000 -- most of that in commissions from selling franchise licenses.
As the business chilled, Hawks was laid off before she could meet one of her top financial goals: buying a home to serve as her primary residence.
Field’s first task in assessing Hawks’ finances was to open a lot of envelopes.
Hawks dropped off a year’s worth of bank statements with Field. The planner discovered that the primary checking account contained just under $8,000, while $35,000 lingered in a low-interest savings account.
Field recommended that Hawks start tracking her spending and making automatic contributions to her retirement accounts. She should contribute $4,000 a year to an IRA and pop up to the $5,000 maximum when she turns 50. She should also funnel $15,500 into a one-person 401(k), which she is allowed to do as a sole proprietor.
Field also thinks Hawks should buy a house.
“I would hate to think she would continue to rent a home in Naples,” the planner said. “She has no mortgage interest write-off, so she’s getting hit really hard with taxes.”
Field sees several easy ways for Hawks to cut expenses, starting with a cellphone plan that costs $250 a month. If her overseas calling volume isn’t too high, she might be able to bring that down by $100.
It goes almost without saying that Hawks would do well to avoid any more high-risk investments. She can substantially improve her returns, though, by paying attention to her languishing retirement funds. She needs to start by separating out her share of her estranged husband’s $216,000 IRA, of which she is legally entitled to half.
Field recommends that she invest 75% of her retirement money in a balanced allocation of large, small and mid-size company shares. About 20% should go into fixed-income investments -- short-term bond funds or floating-rate securities. The remainder should be invested in international stocks.
Hawks will need to spend some money to round out her financial planning.
She needs to write a will and buy a life insurance policy, a benefit she lost with her layoff. As an independent contractor, she should purchase disability insurance through the state of California for about $600 a year. It’s not as comprehensive as a policy through a private insurer, but it costs a fraction of that expense and will cover up to 66% of Hawks’ income for a year in the event of serious illness or injury.
Field recommends Hawks hold off buying long-term-care insurance for a decade.
She also needs to be better about using separate credit cards for her business and personal expenses in case of an audit.
Field urged Hawks to hire a financial planner to spend an hour or two a month going through her bills and other documents and checking her investments, which she thinks would cost about $100 a month.
“If you don’t have the energy to do these things, you need an accountant,” Field said. “Reporting to someone else might be enough to get her to be honest with herself.”
Hawks says that looking at her finances was “alarming.” But it got her thinking. She now carries a small folder in her car, into which she files business receipts she can use for tax deductions.
She’s thinking of leaving her home on the canals and buying a condo farther inland near her son’s school. She figures moving could save her $1,000 a month.
Once her son enters high school in the fall, she might look for a full-time position for the 401(k) match program, medical coverage, disability insurance and other benefits that are likely to come with it.
After her son graduates from high school, she says, “all bets are off.” She might move to Britain or elsewhere in the U.S. Or spend more time in the unspoiled French countryside, maybe even run women’s retreats there with her sister.
“[I’m] painfully aware of missed opportunities,” Hawks said.
“There are major errors I’ve made financially. Overall, I feel better about confronting it.”
Do you need a money makeover? Each month the Sunday Business section gives readers a chance to have their financial situations sized up by professional advisors at no charge. To be considered, send an e-mail to makeover@latimes.com. Include a brief description of your financial goals and a daytime phone number. Information you send us will be shared with others. You can also send a letter to Makeover, Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012.
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(BEGIN TEXT OF INFOBOX)
This month’s makeover
Subject: Lesley Hawks
Income (projected): $140,000
Goals: Take control of finances. Buy a house. Pay for her son’s education. Prepare for retirement.
Assets: $180,000 in retirement accounts, $200,000 country home in France.
Liabilities: No debt.
Recommendations: Save aggressively for retirement by making the maximum contribution of $4,000 a year to an IRA, raising that to $5,000 at age 50. Contribute $15,500 annually to a one-person 401(k). Move out of her rental home and buy a small residence to gain mortgage interest tax deductions and build equity. Avoid high-risk investments. Hire a financial planner on an hourly basis to help with bills and investments.
About the planner: Sandra C. Field, CEO of Asset Planning Inc., is a fee-only certified planner in Los Alamitos. She specializes in pre- and post-retirement planning.
