A Procrastinator Gets Proactive

Inger Jensen always considered herself pretty self-reliant, but lately she’s been thinking she may need a little help.

Thanks to some career missteps, Jensen, 33, earns $21,000 a year--less than half the money she did four years ago. Her stock portfolio has fallen 57% from its peak, due largely to her love affair with technology companies and other highfliers.

“I had Enron, and that was supposed to be my blue-chip play,” the single Huntington Beach resident said. “I made some very irrational decisions during the ‘tech revolution.’”

Jensen’s major investment outside the stock market was in rental real estate, and that too ended badly when she had to evict her tenants.

All this led Jensen to consider getting some professional advice about her investments--and her life.

“I’ve dropped the ball completely,” she said.

Not quite, said financial planner Joel Framson after reviewing Jensen’s finances. In fact, the West Los Angeles planner said, Jensen has done plenty of things right over the years.

Jensen started investing early, purchased a condominium in a good neighborhood and avoided debt, except for her mortgage. Even though she lost $70,000 in the stock market, her net worth is $250,000, thanks mostly to the rapid appreciation of her condo.

This strong financial foundation--and Jensen’s youth--will help her rebound from her mistakes, Framson said.

“This is somebody who’s showing signs of being a successful person,” he said. “She has issues ... but she’s always been a saver and even though she’s not making a lot of money, she’s avoided the temptation [to get into debt].”

Getting Swept Along in Investing Fads

Jensen’s biggest financial sin was that she didn’t take the time to set financial goals and build a sound strategy for achieving those ends, Framson said. Instead, like many other investors during the bull market, she let herself get swept along in investing fads.

“She abandoned any prudent long-term investment strategy,” Framson said, “and chased what was hot.”

Jensen’s portfolio is a virtual who’s who of crashed technology and telecom companies. She lost $8,000 on JDS Uniphase Corp., $3,200 on Cisco Systems Inc. and $7,500 on AT&T; Corp., among others. And then there’s the $3,100 she lost on Enron Corp., the formerly highflying energy trader.

Instead of picking through the wreckage, Framson first asked Jensen to talk about her goals. When she had trouble defining them, he suggested she think about where she wanted to be three years from now in her finances, her work and her life.

After a weekend of soul searching, Jensen realized she wanted to be employed in a job that challenges her intellectually and creatively, while giving her plenty of time off for leisure travel. She also envisioned living a more comfortable life financially, with enough money to save for retirement while also enjoying a few luxuries.

Although she has a roommate to help pay her mortgage, Jensen’s $2,300 monthly salary doesn’t go far in pricey Orange County.

“I’d like to be able to go out to dinner,” Jensen said, “and not worry about it.”

Jensen used to know what that was like. After college, she made $50,000 a year or more as a production coordinator, setting up photo shoots for catalog companies and other clients.

The long hours and work-related travel eventually took their toll, however. Jensen tried her hand at being a real estate agent, but after 18 months of few sales and little income she took a job as an office manager.

Although the job doesn’t pay well, it does offer flexibility--something Jensen prizes. She arranged to set her own hours and take two months off each year to visit her boyfriend’s mother in France and his father in South America.

Jensen and her boyfriend stay with his parents, which reduces lodging costs, and use frequent flier miles she accumulated as a production coordinator to buy plane tickets.

Real Estate Investments Should Be Pursued

After discussing Jensen’s desires, Framson suggested she consider a career as a public schoolteacher. Although not stress-free, teaching would give her a couple of months off each year, plus excellent benefits, such as a retirement plan that would replace up to 70% of her working salary.

The average starting salary for California schoolteachers is about $33,000; a mid-career teacher makes about $48,000. Jensen said a job helping other people appeals to her, and the salary would be enough for her to reach her goals.

“She wants to make more money, but she doesn’t have an extravagant lifestyle,” Framson said.

Jensen probably would have no trouble finding a teaching job. California is expected to hire 260,000 to 300,000 teachers over the next 10 years, according to the California Teachers Assn., a union that offers career information at www.cta.org. The California Center for Teaching Careers offers additional information at www.calteach.com.

To get her teaching credential, Jensen could apply for financial aid, such as a governor’s teaching fellowship that covers her education costs if she promises to teach at a poorly performing school.

She also could pay for her education herself, tapping her $190,000 in home equity or her $65,000 stock portfolio.

Jensen should sell her stocks anyway, Framson said, because she doesn’t have enough time to monitor individual stocks.

Some of the stock-sale proceeds should be used for an emergency fund, Framson said. Jensen should set aside at least three months’ worth of expenses, and preferably six months.

Jensen can invest the rest of the money for retirement, said Scott Brewster, a financial planner in Framson’s firm. Jensen’s taxable portfolio would supplement the $25,000 she has saved in a Roth IRA.

Jensen should invest both accounts in a mix of stock and bond index mutual funds, Brewster said. Index funds, which mimic market benchmarks, tend to have lower expenses and pay out less in annual taxable capital gains, making them a good match for most long-term investors, Brewster said.

The planners also encouraged Jensen to pursue her interest in buying more real estate.

She could use some of her considerable home equity, Framson said, to help make the down payment on a rental property such as a duplex or single-family house.

Not only would a rental property help further diversify her investments, but such a project also could give Jensen an outlet for her do-it-yourself skills.

Jensen bought her first rental at 22, doing most of the repairs herself. After four years and a run-in with “the tenants from hell,” Jensen barely broke even when she sold the home. Jensen believes she will do better next time--particularly if she buys a place with her mother or sister so she has someone to share the costs and repairs.

After years of doing it all herself, Jensen said she was ready to accept some help. She said the process of discussing goals and strategies with Framson had helped her make decisions instead of procrastinating.

“With my portfolio, I did nothing for so long, and that just made it worse,” Jensen said. Having a game plan “gives me more confidence to make these changes because I’m not just doing it on my own.”

Editor’s Note: In the Money Make-Over published Feb. 19, the make-over subject was incorrectly advised that she could contribute as much as $12,000 annually to a Roth IRA. In fact, the Roth IRA contribution limit for individuals is $3,000 a year.

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This Week’s Make-Over

* Subject: Inger Jensen, 33

* Occupation: Office manager

* Annual income: $21,000

* Goals: Make more money at a job that allows significant time off; overhaul a stock portfolio that has lost more than half its value; save for retirement

Current Portfolio

* Retirement savings:

$25,000 in a Roth IRA invested in two mutual funds

* Other investments: $65,000 invested in individual stocks, mostly technology issues, and $9,000 in a stock mutual fund; $3,200 in a municipal bond fund

* Cash: $300 in a credit union savings account

* Other assets: $190,000 equity in her condo

Recommendations

* Explore teaching as a possible career alternative

* Sell individual stocks and invest in index mutual funds, putting 30% of total portfolio in a large-company fund, 20% in a small-company fund, 20% in international funds, 20% in an intermediate-term bond fund and 10% in real estate investment trusts.

* Sell municipal bond fund and buy a taxable bond fund.

* Gather $7,000 to $15,000 to put into a short-term fund to cover emergencies.

Meet the Planners

Joel Framson is a certified public accountant and certified financial planner with Glowacki Framson Financial Advisors in West Los Angeles.

Scott Brewster is a CFP with the same firm.