She'd driven to the dealership several weeks ago intending only to get an oil change, but Taryn Maso-Soto instead impetuously fell in love with a Jeep Wrangler. Succumbing to a salesman's aggressive pitch, she drove away in the shiny, black car that afternoon, committed to a five-year lease.
She regrets it now, feeling none too pleased with herself for giving in to impulse and having to deal with the consequences.
But Maso-Soto, a 40-year-old widow, is no stranger to hardship, and she's determined to get herself out of this predicament and get on track toward meeting her most cherished goal: buying a home with a yard for herself and her two young sons.
It will take some doing, said Scott Leonard, a fee-only financial planner in Santa Monica, and hard choices must be made. But he feels "she can buy a home someday." First, Maso-Soto will need to change her spending habits and stick to a firm budget that will allow to her to reduce her considerable debt load as quickly as possible.
Maso-Soto earns a modest $27,540 a year as an office computer operator for the Los Angeles Unified School District, where she has worked since the '70s. She also receives $6,924 a year in federal assistance for her two children, both of whom are disabled. She is carrying more than $5,000 in credit card debt and has less than $200 saved.
Retirement savings is not something she can even contemplate at this point in her life. Right now, she is barely meeting all her monthly obligations, which include $700 in rent for her Los Feliz apartment, $360 per month for child care and $227 in minimum payments on her credit cards.
The car lease added greatly to her burden--$388 per month, plus $134 a month for insurance. Fortunately, as an employee of a public agency, Maso-Soto will receive a lifetime pension when she retires, and she receives comprehensive health benefits for herself and her two boys.
Not surprisingly, Maso-Soto often feels panicked about her finances. "Life has not been easy for me," she said. "Sometimes I'm just overwhelmed with what I have to face."
Her parenting challenges began with the birth of her first son, Neiko, in 1989. A few months later, Neiko's father left the family and has not met his child-support obligations. Maso-Soto has been pursuing the matter through the Los Angeles district attorney's office, but has received only $300 in the last several years.
In 1994, she married Hilario Maso-Soto. Her second child, Khiobon (the name means "little one" in Swahili) was born one year later. However, Khiobon's delivery was difficult, and the boy was born with a severe nerve disorder impairing movement in his arm, hands and fingers, and which has required several surgeries and ongoing weekly physical therapy. Hilario, who worked as a car salesman, had an outgoing personality. He showered Taryn with roses and often swept her away to romantic dinners.
But it was not to last. In February 1995, Hilario was killed during a robbery at a convenience store.
"My world collapsed," Taryn said. Hilario's death left the family devastated financially as well as emotionally. Taryn received no survivor benefits from her husband's employer. There was no life insurance and relatives were unable to help.
Taryn had been grappling with financial difficulties as it was--she had in fact filed for bankruptcy protection in 1991--and now she was left with a funeral to pay for and two young children to support by herself. California's crime victims fund did provide the family with $2,000 in emergency assistance, which Taryn used to buy groceries and pay burial expenses.
Determined "not to fall backward," Maso-Soto vowed to be strong for her boys.
Soon, however, she noticed disturbing things in the behavior of, Neiko, then a kindergartner. He wasn't concentrating in the classroom and was often irritating other children. The problem was diagnosed as attention-deficit hyperactivity disorder, a condition characterized by restlessness, aggression and distractibility. Some time later, Maso-Soto learned that her younger son has a similar disorder.
Maso-Soto found help at a Los Angeles clinic, MCC Behavior Care of California, which provides weekly therapy for Neiko and counseling for Maso-Soto.
As Maso-Soto was coping with the aftermath of her husband's death, with her boys' special needs and with some medical bills not covered by insurance, she found herself coming up short. She turned to the Lanterman Regional Center, which helped her meet her rent on a couple of occasions and pay her medical bills. The nonprofit organization, located in the Mid-Wilshire area, provides financial assistance, health services and referrals to parents of children with special needs.
"Things just felt out of control" at that point, she said. But she got through it, one day at a time, keeping the family going and attacking the debts as best she could.
"Working to pay off my debts and achieve homeownership, so my children could have a place to call home, is my No. 1 goal and my American dream," she said.
Unfortunately, Maso-Soto wasn't thinking about that when she spotted that jazzy-looking Jeep. Her impulsive decision to lease the car will postpone homeownership several years, Leonard pointed out.
Leonard did some math to drive the point home. She would have come out ahead in several respects had she used her trade-in as a down payment on the purchase of a less expensive car.
First, when the five years are up, she'd own something. With the lease, she'll need a car in 2003. Second, the large lease payment puts her that much farther behind in paying off her credit cards, which charge annual interest rates of 21%.
Maso-Soto could try to persuade the dealer to break the lease and put her into a less expensive vehicle--but generally speaking, unless someone is on the verge of bankruptcy, getting out of a car lease is virtually impossible.
"For most of us," Leonard said, "life is a constant decision, and most decisions involve trade-offs. Many times a decision is an emotional one, where we only look at the now. But if a client knows that the reason she is going without instant gratification is so that she can fulfill another, more important goal, the process becomes much easier.
"I think if Taryn had realized that the house was truly achievable, she may not have leased the car."
The principle applies to smaller, everyday expenses too, of course. Thus sticking to a budget should be Maso-Soto's first priority, Leonard said. She should see if there's any expense at all that can be eliminated or reduced, any costly thing she could substitute with a cheaper one. She should avoid all temptation to overspend by paying cash for everything.
Next, he offered advice for overcoming her credit card debt, which includes more than $3,000 to Sears and more than $2,000 on other cards, including bank cards and a gasoline card. Maso-Soto would be wise to make an extra effort to pay off Texaco soon, Leonard said--although the balance is just $67, the interest rate is a very high 31.79%. Plus, she'd get the psychological lift of having polished off an account, he said.
Overall, he said, it should take Maso-Soto less than three years to pay off her cards.
However, Leonard pointed out, had she been able to apply an extra $188 a month to her credit balance--the difference between a $200-a-month car payment and a $388-a-month car payment--Maso-Soto would have been able to pay off her cards in 15 months and save about $950 in interest.
In any event, "paying off the debts," Leonard said, "should provide Taryn with great mental satisfaction." And once the credit cards are cleared, the $227 a month now going for debts can be applied to savings.
It appears likely that Maso-Soto would qualify for HomeChoice, a Fannie Mae home-loan program designed for low- and moderate-income people who have disabilities or live with disabled family members. Participants make down payments ranging from as little as $250 to as much as 2% of a home's sale price, depending on their income.
So based on Maso-Soto's current income, and assuming she gets her debts under control, she could afford a $100,000 home under the program, Leonard said.
She would need to save for a down payment of 2% (other grant programs would pay 3% of the home's cost, for a total down payment of 5%), and she'd have to save an additional $5,000 to cover closing costs.
The mortgage payment on $95,000, assuming interest rates don't deviate much from their current 7% to 8% range, would not be more than the rent she's paying now, Leonard said. Once she buys a home, the amount previously used for debt reduction and home-purchase savings will be absorbed by property taxes, insurance, maintenance and other homeowner expenses.
If all goes well--if Maso-Soto can get through five years of stick-to-it fundamentals and fate hands her no costly emergency--then the family could be in a home of their own in 2003.
As time goes on, Leonard said, Maso-Soto should have an easier time of it.
"As the children become older, her child-care expenses will decrease. With the credit-card debt paid off and the end of the expensive auto lease, her cash flow will be more comfortable for her home purchase.
"At any rate," he said, "there is a house in her future."
Margaret Leslie Davis is a Los Angeles-based freelance writer. To be considered for a published Money Make-Over, send your name, age, phone number, income, assets and financial goals to Money Make-Over, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053.
Information about choosing a financial planner can be found at The Times' Web site at http://www.latimes.com/finplan. The site offers stories, phone numbers, addresses and links to related sites.
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This Week's Make-Over
* Investor: Taryn Maso-Soto, 40
* Occupation: Computer operator
* Gross annual income: About $34,000
* Financial goals: Buy a home for herself and two children as soon as possible; get out of debt
* Savings: Less than $200
* Debts: Owes about $5,000 on bank and department store credit cards
* Make sticking to a budget the No. 1 priority and pay cash for everything
* When debts are eliminated, focus on saving for a down payment on a home
Meet the Planner
Scott A. Leonard is a certified financial planner and registered investment advisor. He is the president of Leonard Capital Management, a fee-only financial planning and investment advisory firm in Santa Monica. Leonard is on the board of directors of the Los Angeles chapter of the International Assn. for Financial Planning. His firm's primary business is developing and implementing company retirement plans and financial and strategic investment plans for trusts, foundations and high-net-worth individuals. The firm has a site on the World Wide Web at http://www.lcminvestments.com.