When to begin planning and how

The obvious answer to that question is now, but let me explain my
situation. Realizing that my two degrees (bachelor's and master's in
the same field) and the previously planned Ph.D. and university
professor career did not create the kind of financial picture for me
and my wife that we wanted, I have decided to do an undergraduate
degree in computer science. The degree will take three years to
complete, and my understanding is that in the third year, I will
already be employed full time. I have an idea what kind of salary I
will be making at that point. So, a little more than two years from now
(05/2008) will be when I begin my full time employment. My wife and I
have around $15,000 in credit card debt (Yikes! I know...) not to
mention around $115,000 in combined student loans. (Now can we see why
the professor route wasn't going to work?). In discussing with my wife,
she is going to continue to work at her job until the end of 2008,
which will enable us to pay off all of our credit card debts and make
regular (usually extra as well) payments to our student loans.

My question is how I can begin setting out some financial plans for
2009 and beyond. Should I speak with a financial planner? If so, how
soon? What do financial planners charge for their time? I have some
specific aims in mind such as real estate investing, saving for a
special occasion (around $10,000), and of course emergency savings and
such like that. I am of the impression that it's never to early to
start planning, but is it too early if you aren't yet earning the
money??? Also, how can I plan for expenses that I don't yet know the
amount of such as insurance on a house we will buy or increased life
insurance and expenses associated with increasing our family size. (We
don't have kids now and don't plan to until my wife leaves her job at
the end of 2008.) Expenses such as car payments and mortgage I suppose
should come after the planning stage and should be adjusted to fit the
plans, not the other way round.

This question has been bothering me for a good while (since I decided
to forego Ph.D. studies in favor of the computer science route) and I
would appreciate any direction you all could offer.

Re: When to begin planning and how

a simple plan- get out of debt, invest for retirement, save for future
occasions.

these might be itemized and prioritized some, but getting the credit
cards paid off and the student debt under control are probably the two
main goals.

A few points: I graduated with half that amount of debt and paid it off
in 7 years. My starting salary was about 2/3 of my total debt. Had I
consolidated, I think I'd still be paying off the debt, so watch the
consolidation plans (for example most student loans are 10 year
repayment cycles, but consolidating increases duration of payments to
30 years in some cases to lower the monthly payment.)

Pay off credit card debt first
Pay extra to one loan, when it is paid off, send all money to next loan
then pay off second and send all that money to third loan

the tough part is getting the first loan paid off. Took me about 4
years for loan #1. Once the first loan was paid off, I was able to pay
off another loan every 3-9 months after that. I used a $25 dollar
rule- pay an extra $25 to all loans to reduce their payment, and send
more money to loan with lowest principle balance (all my loans has
similar interest rates). What also really helped was a $4000 bonus
from work which went to pay off a loan instead of buying a big toy.

Re: When to begin planning and how

In reading my question again in light of your response, it occurs to me
that your answer is really obvious. What I had in mind was charting
where/when milestones will occur. Sorry for not being more clear.

Re: When to begin planning and how

"Berko" <> wrote
> I am of the impression that it's never to early to
> start planning, but is it too early if you aren't yet earning the
> money???

Berko, you have huge debt to pay down, and it would seem insufficient income
to do so quickly. "Right now" is indeed the time to start.

I suggest trying to assemble a financial plan on your own first (via reading
and questions here and elsewhere), then finding a financial planner to
assist you after you've nailed down the details of your situation and
compartmentalized them in your mind or with the help of a few good ol'
Microsoft software spreadsheets. That way, you'll learn something and so be
much more able to digest what the planner says. This will save you time (and
so financial planner fees). It also will empower you with knowledge, which
might only need a little sprucing up here and there, anyway.

First, about this second bachelor's degree you're considering: Do you have
passion for this subject area and related real-life work (computers etc.)?
Or are you thinking you're doing it just for the future earnings you
envision (but cannot guarantee)? Because three more years of school is
expensive in itself, on a few levels. Also, you're counting chickens before
they hatch. If you are thinking that this three years is ultimately a
financial investment, then re-consider this "strategy."

A person should pursue studies in that for which s/he has a passion (within
reason). In general, from the passion follows financial success. (This is
not merely my personal philosophy but derives from reading on the subject.)
If you have no passion for compuer science, do not do the second bachelor's
degree. If you have some passion for it, then I would seek entry-level
employment in the computer area now to see if you really like it. Then maybe
consider part-time studies.

Employment as a professor certainly would have helped pay off your
(presumably low interest) student loans and, with careful planning, the
(you're right, ridiculous) credit card debt. So I think your view of things
needs some adjustment. You didn't necessarily make the wrong decision, re
the PhD. But I think the reasons for your decision need review. ISTM it's
not entirely the lack of a suitable salary preventing paying off debt. It's
more likely your lifestyle choices.

I recommend listing your and your wife's current:

-- income (gross and net)
-- monthly expenses (breakdown somewhat into food, rent, transportation,
utilities, monthly debt payments, etc.)
-- savings
-- debts (include interest rates and years remaining on)

Put this on a spreadsheet. It's time to put yourself in control of money in
and money out!

Then list any pressing needs you have right now, like a car, or life
insurance, or health insurance, or an emergency fund.

Afterwards, we can talk about saving and buying a house and the financial
prudence of having kids in a few years or maybe waiting a bit longer.

Good for you for /planning kids, by the way, consistent with your finances.
>From what I see, that foresight and careful consideration is brutally
important to a marriage's success and so raising happy, productive children.

Hang in there. You are taking a huge step in the right direction by asking
these questions. If every American did this, then there wouldn't be a c.
1930s Depression-era rate of savings today (that is, negative savings
rate!), and record personal bankruptcies.

Re: When to begin planning and how

<<I have decided to do an undergraduate degree in computer science. The
degree will take three years to complete, and my understanding is that
in the third year, I will already be employed full time.>>

I'm curious as to what type of job you are aiming at - in the computer
science field, an undergraduate degree in computer science would
usually only be good for an entry level job, but many companies will
gladly hire pretty much anyone with a master's degree in *any* field
for a computer science management job.

At my last company, they wanted computer programmers to have master's
degrees, but the group leader jobs which supervised the programmers
only required a bachelor's. Your tax dollars at work.

I also wonder if you are aware of the large amount of outscourcing that
is going on in the computer science field. Many jobs are going to India
every year.

John Cowart

Re: When to begin planning and how

In article <>,
"Berko" <> wrote:

> The obvious answer to that question is now, but let me explain my
> situation. Realizing that my two degrees (bachelor's and master's in
> the same field) and the previously planned Ph.D. and university
> professor career did not create the kind of financial picture for me
> and my wife that we wanted, I have decided to do an undergraduate
> degree in computer science.

I think you need to think this one through again. You are
$130,000 in debt, and you are thinking about quitting your
job and going back to school? And giving up 3 years of income
and piling on even more debt? That sounds like a plan for
bankruptcy.

First off, the grass is always greener on the other side of
the fence. That is, until you cross the fence. In reality,
the Computer Science gravy train is over. H-1B visa litter
the landscape. Here in Minneapolis, 30% of the computer people
are unemployed or now working in fields other than computers.
People that billed $125 per hour in the late 90's are being
offered $12 and $18 per hour for the same work today.

I'd rather see you work on paying off your debt before you
take any fliers. First, you and your wife have to consider
taking on some extra part-time work. You can do pizzas at
night, she can do a few part-time shifts at Target or Wal-mart.
The both of you can get up early and run a paper route.

Next work to cut down the expenses. You didn't say what you
had for cars, but if you have any that cost more than about
$5,000, you have too much car. Maybe you can move to a cheaper
and smaller apartment. Cut out the extras like the upper tier
of cable TV and the carry out sushi, and think of reruns with
beans and rice a few nights a week.

Once you start down this path, the debt will start melting
away. And when you focus on earning money and living more
economically, good things will start happening to you and
opportunities will magically present themselves to you. You
might even find that you like that professor job, and without
all the debt, you will be able to afford to keep that job.

So, for get planning and forget the 3 year trip to Disneyland,
you need to attack that debt like a madman who is defending
his family from the attacking vandals.

-john-

--
============================================================ ==========
John A. Weeks III 952-432-2708
Newave Communications
============================================================ ==========

Re: When to begin planning and how

Wow, thanks for all the responses. I guess I should give even more
background on my situation. I am currently in graduate school in the
field I got my bachelor's in working on a second master's that I have
no intention of finishing; I had planned to roll into a Ph.D. program
from this degree. Either way, I am going to be in school for the next
three years (Ph.D. or Co Sc degree), most likely longer if I do the
Ph.D. I won't be taking on more debt for this degree. My wife is on
staff at my university, so I will have my tuition paid (except for
$25/hr for fees).

@bo peep: I have a master's degree (although not in any way related to
computer science), and project management was the kind of thing I had
in mind. I am also interested in developing my own applications.

Thanks for all the responses of caution. I would really like some ideas
on my initial concern: how I can anticipate financial milestones and
such.

Re: When to begin planning and how

I have to say that my background is similar to yours (I started with
two college degrees for professions that didn't pay well, so I went
back to school and got three more college degrees in fields that do --
law, financial planning and tax). To answer your query about how to
anticipate financial milestones, there are financial cycles that most
people go though (or hope they will). Namely there is the debt period
where your expenses exceed your income, there is the savings period
where you pay off debt and begin saving, and then their is financial
independence (which may mean retirement) where you can do what you
want.

Lifestyle impacts when you will go though these phases. Based on your
level of education, I am guessing that you delayed having children. If
that is the case, do you plan on having children in the near future?
If so, that will probably be the largest impact on your financial
picture in terms of when (i.e., at what age) you will pass through
these financial cycles. If you are not going to have children
(assuming that you have adequate medical insurance, don't do anything
crazy, and don't have a drug addiction or some other extreme
circumstance), then you should easily be able to filter through these
cycles by just setting up a budget and an emergency fund, starting a
prudent investment plan, re-structuring your insurance and asset
protection plans, and creating an estate plan. Once you have these in
place you then just have to stick to it and review/tweak it every now
and again as things change.

As far as speaking to a financial planner, that would be ideal. The
problem is that the type of financial planners that you want to talk to
will probably not give you the time of day. There are three types of
financial planners, one charges commissions only, the other charges
some sort of fee only, and the other charges both commissions and fees.
You want to avoid the commission only and probably the commission and
fee advisors as they are typically less knowledgeable about financial
planning (and more knowledgeable about marketing) and they are looking
to sell you products that may or may not be in your best interest.
These commission type of advisors work for banks, brokerage, insurance
and other large companies (you probably see their ads on TV and
magazines nearly every day). The fee only guys are typically
Registered Investment Advisors and they work for smaller boutique
firms. You can find some of them by visiting the NAPFA website
(napfa.org).

Good luck.


Gary Brolis

Re: When to begin planning and how

Gary, you have it right. We have delayed having children and don't plan
to until my wife doesn't have to work. Your three stages of finances
sound pretty obvious, but it helps to see it written out like that. I
think I would benefit greatly from talking with a financial planner
since my investment goals are rather aggressive, but it seems more
suitable to do that in the spring semester of my second year of this
new degree, just a little before I begin full time work when the kind
of planners you recommend are more open to talking with me. Thanks for
the NAPFA resource. I will file that one away on del.icio.us for future
reference.

Re: When to begin planning and how

My experience is degree means little and passion/ attitude mean more.
I have a BS in mechanical Engineering and now work for a large software
company. I work with many displaced Aerospace, Mechanical, Structural
and other Engineers.

He is what I would do: Start working for a software company. I might
suggest an assignment as an Implementor, Instructor or Call Center
Engineer. Once you have the assignment, there are always special
projects to improve and optimize things.

If the job is with a smaller company, you will probably implement one
week, do call center the next week, and teach a class or two for a
customer on occasion. If you have a passion and the software is a good
one, you will like your situation 3 years down the line, IMO.