Couple Should Start Small, Build to Big Dreams Later

By JEANETTE MARANTOS

Jan. 11, 2000 12 AM PT

SPECIAL TO THE TIMES

At 21, Corinne and Neftali Duran have plenty of responsibilities--a new baby, an apartment, a mortgage for his mother’s house, room and board for her teenage brother--all on a take-home income of about $2,800 a month.

Throw in an expensive residency application for Neftali and an evening college course for Corinne, and their obligations seem enough to bring even most thirtysomethings to their knees.

But the Durans are not whining. They are cheerful parents and are determinedly upbeat about their future. They want to finish college, own their own business, start saving for a house and retirement, and become a financial resource for their families--people their parents and siblings can turn to for help.

They’ve already helped two relatives, buying a house for Neftali’s mother in Mexico and providing free room and board to Corinne’s 16-year-old brother, Emmanuel, who goes to high school and works to pay for his other expenses.

“My husband and I have been required to take care of ourselves most of our lives,” Corinne said, “and we always understood that the only thing we could depend on financially was ourselves.”

They know they have some serious short-term obstacles to their goals: about $10,000 in debt and Neftali’s limited earnings until he gets a green card.

“But you’re way ahead of where I was when I was 21,” said Dale A. Walters, a certified financial planner and personal financial specialist in Phoenix.

“When I was 21, I was still in college and didn’t have a nickel to my name, and my only objectives were drinking and raising hell. Your No. 1 advantage is that you have ambition and some objectives. Just having that ambition will get you by.”

Corinne, the oldest of three children, grew up in a Denver household that often had little money. When she was 11, she and Emmanuel earned $50 a week cleaning houses, doing yardwork or shoveling snow. At 14, Corinne enrolled in a Denver job program that taught office skills to low-income teens by having them work for nonprofit groups such as the Red Cross.

Corinne also was involved in theater in Denver and, after two years in college, followed her theater friends to Los Angeles. She met Neftali while working at a restaurant in Venice.

Her flirtation with Hollywood didn’t last long, but her romance with Neftali led to marriage. She found another job, as the assistant to an executive at Southern Pacific Bank in Brentwood, and was overwhelmed when, six months after she started, her co-workers gave her “a fabulous baby shower with everything we needed--a crib, stroller, car seat, clothes--every single thing. I guess they like me. I really like them.”

Despite their debt and small income, the Durans have a few more assets than liabilities, thanks to the $12,000 house they are buying in Oaxaca, Mexico. They began paying the mortgage in December 1998 and owe only $5,000 on it now. The house is for Neftali’s mother, who lost her house in 1994 during the Mexican recession.

Buying the home will give Neftali’s mother and youngest brother a place to live rent-free. “I just feel it’s necessary for me to do that, to find a way for her to live more easily,” Neftali said.

Corinne agrees. “It’s really an important priority for us to make sure my mother-in-law is in a home that’s safe and up to Western living standards,” she said.

But the mortgage payments, to a private party, have ranged from $500 to $1,000 a month. Originally, the owner expected payments of $1,000 a month, but gave the Durans some wiggle room when they couldn’t pay the full amount.

Now the owner is insisting on at least $800 a month to get the house paid off.

On top of that expense, the Durans also pay $650 a month for a one-bedroom apartment near Santa Monica, $140 for car insurance, $160 for part-time child care with a next-door neighbor, about $150 for telephone and utilities, and $400 a month for food and diapers. They’re also putting $100 into savings every month and $120 into a 401(k) that Corinne has started at work.

But there are several other expenses that make saving difficult. They pay $140 a month on a $4,000 personal loan they took out to consolidate some of their credit card debt and catch up on their Oaxaca house payments. And they still owe $1,100 on another credit card. Corinne said the debt dates back to when she was single. Now, they say, they would only use the card for an emergency.

Then there are the immigration expenses. They have recently paid $300 to lawyers, and that’s just the beginning. Their income potential is severely limited unless Neftali gets legal residency. He left his home in Oaxaca in 1997 to visit his older brother in Los Angeles and never returned. “I wanted to see another part of the world, and I wanted to make some money,” he said.

He took classes at a community college to learn English and is bilingual now, but because of his status he can only find work as a busboy.

An added complication is that to complete the immigration process Neftali will have to return to Mexico, possibly for three or more months, next fall, leaving Corinne to pay the household bills on her income alone.

They figure that they’ll need to save at least $2,500 by next fall to cover the attorney’s fees, air fare and Neftali’s lost wages.

The figure is daunting, considering their other expenses, but they’re matter-of-fact about making it happen. Corinne said they managed to save $1,200 in six months so she could take some maternity leave when their baby, Emiliano, was born.

“I’ve never known so much joy and happiness [since the baby was born], but when I realized I was pregnant I thought, ‘Oh, my God, how will we support ourselves when I’m not working for three months?’ ” Corinne said.

“We just did it. We decided to save a quarter of my income for six months, and we just cut it out like we didn’t have it and made everything work with that. We paid the necessities and bought food with the money that was left over. When you only have $50 to spend for food, you only spend $50.”

That kind of budgeting discipline will be crucial as they plan for their future, financial planner Walters said. Neftali is already looking beyond their immediate financial needs. He wants to save at least $10,000 so they can start their own business. And they both want to start investing in the stock market. They practice investing by pretending to buy certain stocks and funds and tracking their progress.

But Walters said their top priority now must be Neftali’s green card, and that to achieve that goal they have to free up more cash for savings.

Walters recommends that, first, the Durans see if they can borrow $5,000 from a lender and pay off the Oaxaca house, although it may be difficult to get such a loan in Mexico. But if they can pay a loan off over five years at 10% interest, that would drop their monthly payments to $106.

“Normally, you wouldn’t ever finance something if you could pay it off,” Walters said, “but in your case, you have a critical need for cash. You need to build some liquid savings as quickly as possible to take care of the things you need to do.” If there is no alternative, they probably could increase credit card debt to cover the mortgage and should be able to shop around for interest rates to minimize the cost of using unsecured debt.

Either way, Walters suggests that the next goal after the house in Mexico is to pay off their credit card bill and then start saving $500 a month religiously until they create a $5,000 emergency fund in a money market fund.

“You could say you were going to save more, but $500 is an achievable amount you could commit to every month and not miss,” he said. “If you say, ‘Let’s put $700 a month in there,’ you might do it some months and not other months, so it won’t be ingrained as well.”

The $5,000 should be used as an emergency fund, to cover Neftali’s immigration expenses, for instance, or sudden medical problems. And any time they withdraw from the fund, they should resume their savings to build it back up to $5,000, Walters said.

To help the cash-flow situation. Walters recommends that Corinne also reduce her 401(k) contributions from $120 a month to about $88 a month--4% of her income. That will at least take advantage of her employer’s offer to match $1 for every $2 employees contribute to their 401(k) fund up to 4% of income.

Another priority should be making out a will so they can specify a guardian for their son. “If something happened to you, it would be up to a judge to decide what would happen to your child,” he said.

That’s a big plate of goals for the coming year, Walters said. In another year or so, once they’ve built an emergency fund and gotten Neftali’s green card, they can pursue their other dreams, such as saving for a home or business or investing in the stock market.

One option for low-income investors is no-load mutual funds that permit contributions as low as $25 a month. As their income grows, he said, they should put their increases into savings or investments. “My experience, with myself and others, is if you don’t save it, you always find some way to spend the money, and you increase your standard of living to the point that you’re right back to living paycheck to paycheck.”

For now, Walters said, focus on a short list of objectives. “I believe in working on goals in small, workable bits. If you give people too many objectives at one time, it’s like starting the new year with 15 resolutions. They never get done. But if you have two or three, you can get those out of the way and then make up some new goals.”

Jeanette Marantos 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 or to money@latimes.com. You can save a step and print or download the questionnaire at https://www.latimes.com/makeoverform.

Information on choosing a financial planner is available at The Times’ Web site at https://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

* Investors: Neftali Duran and Corinne Duran, both 21

* Family status: Married, living with 6-month-old son and Corinne’s 16-year-old brother.

* Occupations: Corinne is the assistant to a bank executive, Neftali is a busboy.

* Gross annual income: $41,000

Goals

* Immediate: Obtain permanent U.S. residency for Neftali

* Long-term: Finish college, start a business, buy a home, save for retirement and be a financial resource for their families

Current Assets

A $12,000 house in Mexico (for Neftali’s mother)

Debt