Getting a strong dose of financial reality

You probably don’t know the name Fran Tunno Mills, but there’s a good chance you’ve heard her voice — during her 24-year radio career, she was the announcer in hundreds of commercials, including some for financial institutions.

But now, Mills, 54, finds herself in a financial bind, brought on by a layoff and a divorce.

“I don’t know what to do,” said Mills, who lives in Glendale. “I need direction.”

She is $39,500 in debt and spends far more than her $40,000 annual income. She has just $29,000 in savings, including her retirement account and college funds for her children.

“I don’t like living like this. It makes me nervous,” said Mills, sitting in the sun-drenched backyard of her home, which has a “for sale” sign in front.

Mills listed the home at $849,000 and has an offer on it. If it closes at that price, she’ll reap $176,500 after paying the existing mortgage and splitting the proceeds with her ex-husband.

She wants to buy another home for herself, her two teenage kids and two rambunctious dogs. And if she allows herself to dream about her future, she imagines traveling to Italy and going to school to become a pastry chef.

But in a two-hour meeting with Jennifer Hartman, a certified financial planner with Greenleaf Financial Group, Mills got a strong dose of financial reality.

“Of course you can’t buy a home,” Hartman said. “Right now, you can’t order Dominos pizza.”

Hartman said Mills’ income from Salem Communications, a Christian-themed media company where she is a contract radio copywriter and voice-over announcer, wasn’t enough to get a home loan, even if she could make a sizable down payment with proceeds from her current house.

At some point, she might be able to afford a condominium, Hartman allowed. But right now Mills’ expenses are too high compared with her income.

“I’m wondering how you’ve been doing it because the numbers don’t add up,” Hartman said.

Part of the answer of how Mills has been doing it, unfortunately, is credit cards.

Mills put various charges including for kitchen appliances and attorney fees on the cards. She owes $17,700 on two of them, combined.

Her non-credit card debt includes an additional $5,400 in attorney’s fees, $2,000 to a dentist for a root canal and about $8,400 for home improvements and property taxes.

To keep her afloat, Mills’ 94-year-old father recently lent her $6,000.

Despite the debt, Mills said she didn’t spend extravagantly. She cans vegetables grown in her yard and cuts her kids’ hair.

But she spends $200 a month on a maid, $340 a month on a car lease and she sometimes splurges on sushi. She contributes $300 to her kids’ college funds.

Overall, she spends nearly $66,000 a year, including payments on her cards and other debts.

Back when she and her then-husband had more income, they didn’t save.

Mills said they stretched to buy the five-bedroom Tudor-style home in Glendale for $325,000 in 1997, while also holding onto a condo they owned as a rental property.

When they eventually sold the condo, they plowed money into the house instead of socking it away. Mills said they spent roughly $110,000 on a kitchen remodel. Thereafter, the couple refinanced several times, taking out about $80,000 to pay off credit card debt. But the refinances doubled their monthly mortgage payment to $2,800 on a $407,000 mortgage.

“The house has been our bank,” she said. “It’s all we had.”

Mills wasn’t always so freewheeling. She grew up in a frugal family. Her father worked as a bricklayer and on Sundays, went to the 5 a.m. Mass so he could make money doing odd jobs the rest of the day. Mills once worked two jobs: doing a syndicated morning traffic report heard on several local stations and producing segments for a public relations company. She also did voiceovers on the side.

She was laid off from a full-time job with Salem in 2008, and then did contract work for the firm. At around the same time, her husband, who was an assistant director for movies, TV and commercials, started to get less work, she said.

Mills said the money troubles helped strain the relationship, and they divorced earlier this year.

Hartman told Mills she needed to drastically cut costs and instead of envisioning the money from the house sale as a windfall, it should be viewed as a lifeboat. The proceeds should be used to pay off debt and build emergency funds.

Once her finances have stabilized, Hartman said, she could consider buying a condo, but only if her expenses are under control.

The maid and expensive dinners have to go, Hartman said, and when the car lease expires in August, Mills should buy a reliable used car. The contributions to the college funds should also stop.

Hartman advised her to look for an apartment with a $1,500 monthly rent and adopt a more frugal mindset. She could get free videos from the library for entertainment and insist that her kids pick up odd jobs to earn their own spending money. “This is sobering, but I’ll need a drink when I get home,” Mills said with a half-hearted laugh.

Mills’ financial predicament becomes more sobering when her lack of retirement savings is considered. Based on a fairly aggressive 7% growth rate and her roughly $20,000 in retirement savings, Mills needs to save nearly $2,300 a month for the next 11 years to accrue $500,000 for old age, Hartman said.

“Your clock is ticking, and you need to bring in more money,” she said.

Mills had gotten spooked when the market tanked, and she stashed her savings in a low-interest bearing money market account. Hartman advised she should instead put her retirement savings in a target fund that includes a mix of stocks and bonds.

Because Mills’ daughter has health issues, Hartman recommended that in the near term Mills stay with her current health insurance plan, which has ample benefits and a low deductible. But because the plan is costly, about $830 a month, Mills should shop for a cheaper policy to which she can switch after her daughter’s health issues are resolved.

Mills was shaken by the planner’s assessment of her situation and advice.

“This has been ridiculously eye-opening,” she said.

Mills said she nonetheless felt she had clarity. Since the meeting with the planner, she has begun slashing expenses and looking for ways to earn more money. She’s also considering radical changes, such as moving back to a small town not far from Pittsburgh, where her father resides and living expenses are cheaper.

“You get so used to living on the edge that you forget how close you are to something terrible happening,” Mills said.

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. You also can send a letter to: Makeover, Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012. Include a brief description of your financial goals and a daytime phone number. Information you send us will be shared with others.