Happily ever after means less debt

To hear Summer Brown and Briana Biddle talk about it, their upcoming wedding and civil commitment will be a fairy tale, complete with happily ever after.

But fairy tales can turn dark pretty quickly, and a look at the couple’s finances shows that the poisoned apple in this story could be money.

Let’s start with the wedding: Brown has a $986 wedding dress and a $2,600 engagement ring, both bought on credit. Then there are older debts: a $20,000 time share on which Biddle is not making payments and $17,000 in student loans for Brown, among others.

To the rescue rides financial planner Alfred McIntosh, who has agreed to look at the couple’s finances as part of The Times’ Money Makeover series.

Except here’s where the fairy tale skids into reality: If the couple, who together earn about $79,000, don’t clean up their finances, happily ever after is going to be awfully hard to reach.

“This situation requires change from both of you, quite honestly,” McIntosh, founder of McIntosh Capital Advisors in Los Angeles, told the women when he met with them this month.

Biddle, 28, and Brown, 27, met four years ago as students at Cal State Northridge and fell in love last year. They share a Pico Rivera apartment with an affectionate, high-energy pack of three small dogs and a cat.

Like many young people, they’re learning the hard way about managing their money -- by overspending, underestimating how much income they need and generally getting in over their heads. Now, they say, it’s time to get out of debt and set realistic goals for saving and spending money.

Although a domestic partnership between two people of the same sex is not legally considered to be a marriage in California, Brown and Biddle would assume many of the same risks that married couples run, such as the higher earner potentially becoming responsible for spousal support of the other, according to family law attorney Melissa Mayer of Mayer & Glassman in Los Angeles.

Because they plan to register as domestic partners with the state, any dissolution of the partnership would have to be legally formalized, often involving many of the same costs and complications as in a divorce, she said.

Brown earns an annual salary of $45,000 from a nonprofit social services agency where she counsels troubled children to help them stay with their families. She is working toward her license as a therapist. Biddle makes $34,000 a year from the Greater Los Angeles Agency on Deafness, where she advocates for deaf people who are looking for jobs. It’s exhausting work for both of them.

“I don’t know how she does what she does every day,” Biddle said of her partner’s job. “I get just one case of discrimination against a deaf person, and I’m destroyed.”

Brown has saved $2,200 in a retirement account, and they have $57 in their joint savings account. But their balance sheet is dominated by debt.

Biddle carries about $11,250 in debt on two credit cards, at interest rates of 25% and 30%, and $553 in a line of credit associated with her checking account. Brown carries about $1,450 on one card at a 7.23% interest rate.

They’re racking up 45.2% interest on the credit line they took out to buy the engagement ring because they stopped making payments and the rate jumped. And they owe $3,000 on two more credit cards that they hold together.

Brown also has $17,000 in student loans at 2.48% and a $21,000 car loan at 4.99%.

It was during the discussion of debt that the meeting with the financial planner became tense. With a hollow look on her face, Biddle confessed that she hadn’t been completely straightforward about her debts and spending.

Brown became upset.

“I’m bitter now,” Brown said, “because I’ve done everything I was supposed to do financially and she didn’t.”

McIntosh slipped into his therapist role.

“Since you don’t like letting her down,” he told Biddle, “and you want to do better at this, you have one choice: to get better at this.”

All that debt -- and its continued accumulation -- is the most pressing problem and the first thing the pair need to address, McIntosh said. “Stop using those cards,” he told them.

Brown and Biddle can start taking responsibility for their finances by holding weekly meetings. To start each one, each should share the progress she has made that week on financial issues. Then they should discuss ongoing challenges. The meetings could end, he added, with a discussion of their goals for the coming week.

He praised them for coming in to see him now, more than a year before their planned wedding. “They need to be on the same page if this marriage is going to work,” he said.

Right now, their financial goals are somewhat different: Biddle wants to get a master’s degree in education. Brown wants to buy a house.

They need to talk about priorities, McIntosh said. But neither of those goals will be attainable if they don’t get their finances under control. Both have spending issues that are sending them into debt at more than $800 a month.

They’ve overspent on going out in the evening and traveling for work and family obligations. They’ve also been to Las Vegas three times and are planning a fourth trip.

Biddle goes to Starbucks twice a day five days a week at a cost of $2.65 a trip. She also smokes a pack of cigarettes every two days, at $5 to $6 a pack.

The costs of just those two habits add up to 10% of her net income, McIntosh calculated.

In fact, McIntosh said, it costs as much to smoke and go to Starbucks as it does to make several trips a year to Vegas.

Because Biddle is the smoker and coffee drinker and Brown is the one who likes to go to Las Vegas, they could each cut back and save significant money, McIntosh said. He urged Biddle to drop her Starbucks visits to once a week and Brown to go to Las Vegas just once a year.

“If Briana is going to give up going to Starbucks each day and smoking, then Summer has to forgo some of the trips to Vegas,” he said. “It’s a beautiful compromise.”

Over the course of their meeting and discussions with McIntosh, the couple decided against getting married at a banquet facility at a country club with a base cost of $11,000. Now they’re looking at renting a local recreation center for less than $1,000. They think they can limit the full wedding budget to $5,000.

McIntosh told them to pay for their wedding with money earned outside of their regular salaries. Brown believes she can bring in about $1,000 a month by throwing parties to sell products out of her home. Biddle predicts she can bring in $1,300 extra a month by doing freelance interpreting for the deaf.

“You should get married only at the time that you can pay for your wedding without taking out any more debt,” he said. “This is making a dream come true.”

The planner also recommended that they reduce the number of their checking and savings accounts to track funds more easily and carry only one credit card at a time to use solely for emergencies. Although both carry short-term disability insurance from the state through their employers, they should look into buying additional long-term disability insurance policies that would replace 60% of their current salaries, if necessary.

Brown, he said, should stop paying more than the minimum required every month for her student loans; she needs to take care of the credit cards first. He praised Brown for applying to a program that could pay off $15,000 of her student loans in exchange for two years of work for an underserved population, a condition she might already be fulfilling.

Biddle runs the risk of being sued by the company that sold her the time share, said real estate lawyer Robert Mayer, who is Melissa Mayer’s father. If that happens, she should contact an attorney, perhaps through a free service such as Public Counsel in Los Angeles.

The couple should also contact a nonprofit credit counseling agency to make their debt payments more manageable.

The couple’s meeting with McIntosh provided a stark encounter with reality. At one point, the two listened to him with tears streaming down their faces.

They swore that they would change their ways -- and McIntosh said he believed them.

“Maybe Alfred can be my best man,” Biddle joked.

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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.

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(BEGIN TEXT OF INFOBOX)

This month’s money makeover

Who: Briana Biddle, 28, and Summer Brown, 27

Income: $45,000 for Brown and $34,000 for Biddle, both with benefits

Goals: Pay for their wedding. Pay down debt. Buy a house. Pay for a master’s degree for Biddle and a doctorate for Brown.

Assets: $2,200 in Brown’s retirement account, $57 in their joint savings account and a 2006 Mini Cooper that Biddle owns outright

Debts: $56,850 in debt, including: Brown’s $17,000 student loan, Brown’s $21,000 car loan, Biddle’s $11,800 in credit card and checking account overdraft debt and Brown’s $1,450 in credit card debt. The couple jointly owe $3,000 in credit card debt and $2,600 in a line of credit for an engagement ring. Percentage rates on the debt are as high as 45.2%. Payments are delinquent on a $20,000 time share that Biddle bought last year.

Recommendations: Consolidate debt to a much lower single rate with the help of an organization such as Consumer Credit Counseling Service.

* Biddle should research, understand and address her time share investment liability.

* Earn extra money, Brown by selling products from home and Biddle by freelancing as an interpreter for the deaf. Use only this extra income to pay for their wedding. Lower the total wedding budget to $5,000.

* Stop using credit cards. Carry only one card for emergencies.

* Brown should stop paying more than the minimum on her student loans and should continue to pursue a program that could pay off $15,000 of those loans.

* Meet weekly to discuss finances: First talk about progress, then discuss ongoing challenges and, finally, set next week’s financial goals. Discuss which should take precedence, a master’s in education for Biddle or a family home.

* Over time, pay off all debts. Review this financial plan regularly.

About the planner: Alfred McIntosh is a fee-only financial planner and founder of McIntosh Capital Advisors in Los Angeles.