Money Make-Overs : Young Couple Wants American Dream--Own Home, No Debt and White Picket Fence
Erin and Chris Futterer are two married twenty-somethings who know what they want--to own a home. One hitch: the down payment.
Armed with a combined annual salary approaching $85,000 this year, the two salespeople hope to trade in their Newport Beach apartment, where they pay $1,160 in monthly rent, for a $200,000, three-bedroom home in South Orange County.
To do this, they figure they will need at least $27,000 for a down payment and closing costs.
“We want the tax write-off and we want to know our money is going to something we own, not to just some Irvine Co.,” said Erin Futterer, a 24-year-old UCI drama graduate. “First we get the house, then we get the kids. I want that white picket fence.”
Their dreams for such a well-ordered life would seem assured, given their combined income. But the young couple face a few roadblocks: meager savings and a few current debts.
With only about $3,000 in savings and $3,500 in stock certificates, the two college graduates have a ways to go to amass that down payment.
They are not too concerned about their abilities to maintain high salaries, even though they live mainly on commissions that could vary from year to year. Fortunately for the Futterers, this year has been a good one. Unfortunately, they said, they learned “zero” about money management in college.
They earn about $7,500 each month, from which they take home about $5,700.
Chris is paid only on commission as a manufacturer’s representative for office supplies and furniture at Byram Tri-West Associates in Commerce. Erin has a base pay and expenses of about $28,000 and earns commissions selling forms, marketing materials and other printed products for Versyss Inc. in Boston.
Donald Chou, a certified financial planner in San Juan Capistrano who met with the couple recently, said they hold some of the toughest jobs for good fiscal management because their salaries depend so much on commissions.
Still, Chou said, he is confident that the pair will be shopping for a home in two years, based on current cash flow.
“I think they are highly motivated, unlike other couples their age,” said Chou. “They have a higher income for their age and average amount of debt. The key for them is to control their debt.”
The Futterers have about $1,500 in credit-card debt and $3,800 in outstanding personal loans that they took out to pay for their Feb. 20 wedding. In addition, they are making payments on an $8,000 loan for a 1991 Mazda and a $15,000 loan for a 1992 Honda Accord.
After paying bills and rent, the two usually have $1,400 in discretionary income each month.
To save for a home, Chou advised the couple to put at least $1,000 of that monthly leftover amount in a limited term municipal bond fund. This way, the couple will have the down payment they need in about two years. Erin said she hopes to get the money in about eight months.
Chou also advised them to pay their credit-card debt completely as early as next month and repay the personal loans as soon as possible.
“They have good income and good instincts,” he said. “Considering the fact they just got married, they’re actually in pretty good shape. I was impressed.”
Chou said a “definite plus” for the couple is that they have no student loan debt.
Chris, 26, said his parents paid for his education at UC Santa Barbara where he received an environmental studies degree. Erin’s parents paid for most of her schooling at UCI. She took out a small loan from her sorority to help, and recently paid it back.
Chou cited other smart fiscal moves: The couple paid all cash for their Christmas gifts and prepaid a $1,400 January skiing trip to Taos, N.M.
The planner said the Futterers also need to begin thinking about retirement. He suggested that Chris set up a Keogh plan, a tax-deferred pension for people who are self-employed, and that Erin keep contributing to her company’s 401K pension plan, in which she has invested $300.
“They need to set up a balance between how quickly you want to get into a house and the advantages of putting away money early for retirement.”
Chris, noting that his father hopes to retire at age 55, also wants an early exit from work.
“I want to retire at 35,” he said, smiling.
Adviser to Futterers Name: Donald Chou, 41. Title: Certified financial planner.
Company: Professional Financial Advisors Inc., San Juan Capistrano.
Background: Bachelor of arts degree, with high honors, from the University of Arkansas; law degree from Boston College Law School; certified financial planner degree from the College for Financial Planning in Denver; worked as a lawyer for the federal government and in private practice for seven years before becoming a financial planner.
THE SUBJECTS:
Name: Erin Futterer, 24, Chris Futterer, 26
Occupation: Salespeople
Assets: Stock in EMC Corp. worht $3,500, pension funds valued at $300; savings valued at $3,000; jewelry valued at $4,300. total $11,100.
Liabilities: $1,500 in Visa bill; $250 for Nordtrom; $350 for Firestone; $3,800 personal loans; $8,000 car loan on a 1991 Mazda and $1,500 car loan on a 1992 Honda Acord. Total: $28,900.
Financial goals: Save nearly $30,000 to buy a house and pay off credit card bills by March.
