Director needs to change her financial script

Jodi Binstock has the long resume of a steadily employed Hollywood creative type: She has directed movies and plays, put in stints working for TV networks and had her share of fallow periods.

Her income has gone up and down. And as the single mother of a 10-year-old, she's chosen frequently in recent years to bypass some well-paying but demanding gigs in favor of work that lets her get home by dinnertime. A decade of that, however, has left Binstock, 50, in a financial bind.


FOR THE RECORD:
Money Makeover: An article in Sunday's Business section that featured a financial makeover of Jodi Binstock identified her as the director of the online series "Web Therapy." Her title is producer. —



She juggles several freelance entertainment jobs, including serving as a graphics producer for the E and Style networks and producer of "Web Therapy," an online series starring Lisa Kudrow. She typically earns $60,000 to $80,000 over the course of a year.

But her monthly expenses exceed her income by more than $2,000. She carries $45,700 in credit card debt. There's no equity left in her small Los Angeles home. And to keep payments low on her $454,000 mortgage and $71,000 home equity line of credit, Binstock is paying mostly interest and not reducing the principal balances. She has about $2,500 in emergency savings and $68,000 set aside for retirement. Her pension from the Directors Guild of America will be less than $200 a year.

"I see a total disaster 10 years from now," said fee-only financial planner Sandra Field, founder of Asset Planning Inc. in Cypress. "The question is, does she really want to be a burden to her daughter? Because she might be. This is a crossroads for her."

The crossroads is a significant one, and goes beyond Binstock's balance sheet. Her fiance died in September from complications of a brain tumor, and her mother was diagnosed with lung cancer at the beginning of this year.

Binstock displays a mix of financial savvy and head-in-the-sand emotional avoidance. She has made a select number of smart planning decisions, including talking thoroughly and openly about her mother's finances and estate planning.

But the burden of being the sole provider for her daughter, Logan, whom she had on her own, may have led Binstock to neglect her own needs now and in her retirement. Despite having a resume with strong work experience in many corners of the entertainment industry, she insists she won't go back to working long hours if it means being away from Logan.

But Binstock needs to focus on her future, Field said. In particular, she should seek higher-paying work -- even if it requires longer hours or frequent trips out of town. Binstock made as much as $120,000 in the years that she was working more intensely, and she is in enough trouble now that she needs to try to increase her income again, the planner said.

If Binstock cannot make more money, she may need to consider filing for bankruptcy or selling her modest house and renting a home, Field said.

The planner, a single mother herself, urged Binstock to talk things through with Logan. "Ten-year-olds are pretty astute," Field said. Even if Binstock is away for long hours, the additional income, after child care, "is going to improve things for both of them."

Before meeting with Field, Binstock had been brainstorming ways to create "passive" income -- reliable monthly checks from a strategic investment that does not require long work hours. She told Field she was considering buying a dog-walking business for $100,000 or two supermarket kiosks for about $35,000 each. The kiosks sell and rent DVDs and video games. She hopes to finance either purchase with a Small Business Administration loan.

Field, however, said she doubted that Binstock could obtain an SBA loan while carrying so much debt. That aside, Field noticed irregularities in the accounting paperwork for the dog-walking business and rejected it out of hand. She urged Binstock to investigate the DVD kiosk business thoroughly. With maintenance to buy and stock the DVDs and the fact that the machines must be fixed quickly when they jam, Field said she suspected that the income they generated might not be so passive after all.

Even if the DVD kiosks were a good investment, the planner said, Binstock simply doesn't have the money to make payments on an SBA loan. She's not covering her expenses as it is. For example, Field pointed to Binstock's upcoming property tax bill of $3,588. "I don't see where money is going to come from" to pay it, Field said.

Instead, the planner urged Binstock to focus her energies exclusively where she has had success before: in her own field.

There's a pressing reason to do so, Field said. At her age, Binstock needs to take full advantage of whatever time she has left to work in a field that favors younger directors and producers. Her resume includes jobs designing animated logos for network television shows, stints directing in TV and work on feature films. She has directed two of her own full-length features. At the E and Style networks, Binstock will make about $36,000 working half the year. She brings in about $20,000 directing "Web Therapy."

Binstock has made many smart decisions, Field said. She put $2,500 in stocks at the market's bottom, an investment that is now worth $8,000. Her credit score is high. She has tried and failed twice to get the loan on her home modified. Field urged her to keep trying, possibly by going to nonprofits that are helping consumers negotiate with banks.

And she keeps her living expenses down. After her fixed monthly costs of nearly $2,000 for her credit card payments and $2,500 for mortgage payments, she and Logan spend less than $3,000 a month.

Over the years, Binstock has created a strong support network for her daughter. She estimates that she has paid for child care only 20 times in Logan's life because she trades baby-sitting with other parents in the neighborhood.

But she has not taken a sophisticated approach to life insurance or retirement saving, Field said. Binstock has been so afraid that she might die while Logan is young that she is carrying four life insurance policies, worth about $1 million. She's paying $468 a month in premiums.

Field grimaced when she learned that this year Binstock moved $12,000 she had accrued in one of her policies to a restrictive universal life insurance policy that would require her to forfeit all but $2,200 of that money if she were to cancel it now.

"I've never seen surrender fees this bad," Field said.

Field urged Binstock to negotiate with the insurer to drop the death benefit on that policy from $700,000 to $400,000 to reduce her premium payment, which amounts to $3,700 a year, or evaluate whether she should drop the policy altogether.

Another downside of the policy, Field said: Binstock would lose her death benefit the moment she stopped making those premium payments.

"She thinks this is providing Logan with security by guaranteeing a payout on her death," Field said. "But what happens when she's 95 and Logan has to keep making those premium payments so she doesn't lose the payout?"

If Binstock had purchased another type of policy, known as term life because of its fixed life span, she could have bought up to $1 million in coverage for less than half the cost.

The planner was also unhappy to find that Binstock had rolled her individual retirement account into an annuity, which she bought from a life insurance salesman.

"You've absolutely been sold the wrong things," Field said. "An IRA should never be inside an annuity" because it allows the insurance company to tack on extra fees, she said.

Binstock will also have to leave her retirement money in that annuity for years before she can exit it without paying high surrender fees, the planner said.

Field also told Binstock to call her credit card providers to negotiate lower interest rates, telling them that otherwise she faces bankruptcy. Her seven cards charge 11.5% to 18.2% in interest. Field also told Binstock to start separating her business and personal expenses onto different credit cards to avoid troubles with the Internal Revenue Service in case of an audit.

Binstock stands to receive only $1,260 a month in Social Security income when she retires, although she has worked steadily. This is because she writes off many of her business expenses through her own corporation. As a result, Binstock reports less income to the IRS every year than she might otherwise.

That's another reason to increase her income by working more, Field said. Binstock should start reporting more income to the IRS to get a higher Social Security benefit in retirement, according to the planner. When she can afford to, Binstock also should begin making up to the $16,500 maximum allowable contribution into her tax-deferred retirement account, Field said. On top of that, Binstock can save $5,500 more annually because at 50 she qualifies for "catch-up" contributions to the account.

The planner also urged Binstock to stop saving money for Logan's college education until she has saved enough for her own future. "She needs to focus on retirement, not on her daughter's education," Field said. "Her daughter can get grants and loans. You can't get a loan for retirement."

Binstock said the meeting with Field provided a wake-up call. She realizes she needs to focus on her own needs for her own good, as well as her daughter's.

"I always hoped I would find someone to share the burden," Binstock said. Now, "I realize I've got to do it all. I've got to figure it out."

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