With Marriage Ahead, They Ponder Next Move

Neal Jesse and Stephanie Gomez are planning a July wedding. But before they tie the knot, they want to make sure that their finances don’t unravel.

It’s not that the couple are extravagant--in fact, Gomez doesn’t own a car and neither of them has taken an extended vacation in years.

But they fear that Jesse’s years of preparation and effort to become a tenured professor are becoming a serious financial liability--delaying or even endangering other long-term goals such as buying a house, having a child and Gomez returning to school for a graduate degree.

Jesse enrolled in UCLA’s doctorate program in political science in 1989. At the time, educational experts were confidently predicting a teaching shortage in the field by the mid-1990s. Jesse developed a specialty--the politics of Britain and Ireland--and aimed to become a professor.

Unfortunately, the prognosticators were wrong, and tenure track positions have become increasingly rare.

Since completing his graduate education, Jesse has attempted to pay off nearly $24,000 in student loans while working in temporary university teaching positions for the last three years.

Jesse is currently lecturing at Scripps College in Claremont, earning $40,000 annually in a position that will end this spring.

“I love what I do, and I don’t want to give it up,” Jesse said. “However, I’m in the exact same position this year as I was last year. If I don’t get a tenure track position by the end of this year, I’ll probably hang it up.”

Both Jesse, 31, and Gomez, 26, expected a financial planner to advise Jesse that it was indeed time to begin looking at using his degree in a different career track, such as government and private foundation research positions.

But Joel Framson, the fee-only certified financial planner brought in by The Times to talk to the West Los Angeles couple, didn’t think the situation was particularly dire. Framson thinks Gomez’s fairly steady employment as an administrative assistant at UCLA, grossing a bit more than $30,000 annually, combined with the couple’s frugal habits, gives Jesse time to try a bit longer.

Gomez, who takes the bus to work, and Jesse have the flexibility that comes with frugal habits. Framson approved of their one indulgence--the $1,000 annually the couple spend on puzzles and board games--since it is much less expensive than many other common pastimes.

“I devised this financial plan based on maximizing savings and getting you to your goals faster, but having a little fun isn’t bad either,” the planner told them.

Even while paying more than $500 a month on their student loans--Gomez owes about $4,000--the couple are saving every month. They have $6,300 in their joint account in Neuberger & Berman Partners Fund (five-year average annual rate of return: 18.1%) and $4,700 in Schwab International Index Fund (five-year return: 9.2%).

Together they also have $6,000 in bank savings accounts.

In addition, Jesse has an individual retirement account worth about $3,700, divided among the Neuberger & Berman Genesis Fund (five-year average annual return: 14.5%), the Oakmark Fund (five-year average annual return: 17.1%) and the Babson Value Fund (five-year average annual return: 16.6%). Gomez has $6,700 in a deferred retirement account through UCLA, invested in an equity fund. Their only liability, other than low-interest student loans, is a stubborn $800 credit card tab.

“Both Neal and Stephanie have dreams,” Framson said. “For Neal, it seems his dream is to find a gig teaching. I think you can give it more time, but if, say, it’s three years and there’s still no financial security in it, it might be time to look somewhere else so Stephanie can begin to achieve her goals.”

That’s not to say Framson didn’t have financial suggestions for the couple. While impressed with their prudent fiscal habits, he found a few potential problems.

First off, the planner questioned the way the couple coordinate their finances--or, that is to say, don’t coordinate them. Jesse alone handles their investment portfolio and many of their day-to-day money decisions because Gomez says the subject can bore her.

“Stephanie, you really need to step up to the plate and be a full partner with Neal,” Framson said. “You need to understand what the investments are and educate yourself so it is not like speaking Greek.”

“You hear that, Neal?” Gomez said, laughing.

“It’s fine with me,” her fiance said.

The planner then turned his attention to the couple’s lack of a formal emergency savings account. Gomez’s savings is earmarked for their wedding expenses, and Jesse’s tends to be money left over after he’s paid monthly bills. Since Jesse expects to be unemployed come spring, the planner urged the couple to get six months of living-expense money consolidated in one account. At the same time, he strongly counseled them to pay off their high-interest credit card bills as soon as possible.

Framson also believed the couple could make better use of workplace retirement plans. He suggested Gomez begin to contribute 10% of her gross salary to the UCLA 403(b) plan. Gomez had opted out of the tax-deferred savings plan because she felt that she and Jesse would need the funds long before retirement.

But the planner pointed out that Gomez could convert the funds to an IRA if she left UCLA and that the government allows for retirement plan withdrawals of up to $10,000 without penalty for certain uses--including higher education and home purchases. Meanwhile, she would enjoy the tax advantages of the plan--and would be ahead of the game if the money weren’t needed after all.

Framson recommended that the couple place 80% of their overall investments in equity funds, with the remaining 20% in short- and intermediate-term bond funds.

As for their existing portfolio, the planner felt the couple’s mutual fund choices need adjusting. He was particularly concerned that several of their funds are subject to so-called style drift, which is what happens when a fund manager changes the kind of investments held in the fund.

Framson highly recommended the Dimensional Fund Advisors family of index funds as one alternative. Available through such financial supermarkets as the Vanguard Group and Charles Schwab & Co., DFA funds are well-regarded by some advisors because they closely track market benchmarks and have low management fees.

For Jesse’s IRA, Framson recommended DFA U.S. Large Cap Value (five-year average annual rate of return: 18.2%) and DFA U.S. 6-10 Value (five-year average annual rate of return: 13.9%), a fund that invests in small undervalued non-U.S. companies.

For the couple’s joint account, the planner advised replacing Neuberger & Berman Partners Fund with DFA U.S. Large Cap Value as well. Framson maintained that the Neuberger & Berman fund lacks tax efficiency due to high turnover and large dividend distributions.

For short-term savings, Framson suggested the couple avoid the stock market and park the money in corporate bond funds.

*

Helaine Olen is a regular contributor to The Times. 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. You can also e-mail to money@latimes.com, or you can save a step and print or download the questionnaire at https://www.latimes.com/HOME/BUSINESS/FINPLAN/make-over.htm.

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This Week’s Make-Over

* Investors: Neal Jesse, 31, university instructor; and Stephanie Gomez, 26, administrative assistant

* Combined gross annual income: $71,000

* Financial goals: Save for summer wedding, build up emergency fund, set aside funds for Gomez to attend graduate school, put money away for retirement.

Current Portfolio

* Cash: $6,000 in bank accounts

* Mutual funds: $11,000

* Retirement accounts: Jesse, $3,700; Gomez, $6,700

* Debts: $28,000 in student loans, $800 on credit cards

Recommendations

* Pay off credit card balances.

* Establish emergency fund of six months’ living expenses.

* Both should participate in making financial decisions.

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Meet the Planner

Joel Framson is a fee-only certified financial planner and certified public accountant with Glowacki-Framson Financial Advisors in West Los Angeles. He holds a master’s in business taxation from USC.