Alexis James has entered a new season in life. She recently turned 30 and is ready to pursue investments with the potential for greater returns, which includes buying rental property and investing in her family's business. James, a purchasing manager at a generic pharmaceutical company, makes a decent salary at $70,000, plus a 10% annual bonus, and has been shrewd with her income over the last four years. Since 2001, she has contributed 12% of her salary to her company's 401(k) plan, worth $25,581. In addition, she owns individual stocks valued at $12,508 and has $9,531 in cash savings. James wasn't always disciplined with money. "It all started when I got a job in Syracuse, New York," recalls James, who now lives in North Plainfield, New Jersey. "I had this two bedroom apartment that had no furniture and I needed bath towels and everything you can name. On top of that, there was nothing to do, so I would go to the mall at least four times a week and I would always come out with a bag." That's how her credit card bills grew out of control. "I also charged a portion of my car on my credit cards, enrolled for online courses, and I bought a time share and charged half of that as well," adds James. These charges have amounted to more than $14,000 in debt. Fortunately, she always pays her bills on time and her credit score is good. At last check, it was 720. Because of this, she hasn't paid interest since 2000. "I always get offers for 0% interest credit cards and I keep very accurate records. A month before the 0% offer is [due] to expire, I take advantage of another 0% offer and transfer my balances," explains James. Typically, card surfing (moving from one card to another) only works if one is disciplined enough to close the initial card or stop using it. Otherwise, the debt will get out of control and one could end up with five cards with balances on all of them. "My goal is to have $30,000 in [cash savings and stock investments] and to be debt free by the time I buy a house," says James. She has her eye on purchasing a two-family home by the end of next year, with the goal of living in one unit and renting out the other. James is performing a balancing act between her full-time job and part-time work at her family's embroidery business, helping oversee the computer-operated production of several hundred pieces. In order for the business to thrive, James knows she must put in even more hours beyond the weekends to help solicit new clients. Called University Fashions, the business was started by her parents in 1991. Her mother, Janet, passed away in 2000 and her father, Ulysses, has since been running the Turnersville, New Jersey-based business solo. James' brothers, Zachery and Joshua, also hold outside jobs but put whatever time they can into the family enterprise. University Fashions, which mainly produces signature corporate logos on hats, T-shirts, canvas bags, and the like, generates annual sales revenues of approximately $240,000. The James family realizes future growth depends upon two things: access to investment capital and human capital. There is only one part-time employee, and profits from the business are reinvested. "It is a legacy issue for me and my brothers to keep the business going, but there hadn't been much interest on our parts to do the work until now," says James. The Advice Although James is in good financial shape, she may need to defer or delay some of her goals. "She has an excellent foundation for building wealth," says Danny Freeman, financial adviser at Darda Wealth Management in Winston-Salem, North Carolina. However, "several of her goals are going to compete for her available funds." BLACK ENTERPRISE had Freeman review James' investment portfolio and financial objectives. His recommendations are as follows: Invest in the family business. At some point James will have to decide if she wants to leave her corporate job to work full time in the family business. However, to support her current $70,000 salary, the family business would need to generate $600,000 to $857,000 beyond its current revenue stream (wage expenses usually run between 7%-10% of revenue for similar industry firms). Freeman says James and her brothers need to map out a strategy to help their father secure more clients and achieve realistic sales increases that could support new hires or salaries for family members wishing to join the business full time. The James family also needs to explore the long-term growth potential of the business as well as establishing an exit strategy: Meaning, will this become a generational entity or will they seek future sale to a larger company? Pay off existing debt. James' No. 1 priority should be to eliminate debt. Currently she is paying about $1,100 per month on three credit cards that have balances (she has eight altogether). If she doesn't add to her debt, she should be able to pay off her credit cards within the next 12 to 15 months. In addition, Freeman advises James to begin to "superpay"–meaning, make the minimum payment on two of her three credit cards with the highest balances but apply her disposable income toward paying on the credit card with the smallest balance until it is paid off. Repeat this process on the remaining cards until all balances are paid. Since James is looking to buy a house in the near future, she shouldn't look to close her accounts, since this could negatively impact her credit standing. Increase savings. James has the disposable income available to save an additional $200 to $400 per month to contribute toward a down payment on a home. "The shorter the time horizon, the more conservative one's investment strategy should be," says Freeman. Therefore, any extra money that James saves should go into a money market fund. Delay homeownership time frame. James should consider extending her target date of becoming a homeowner until 2007, because buying a home in 2006 would likely preclude her from substantially increasing her savings rate, says Freeman. James lives in an area where year-over-year increases in home prices were up 18%-25% through June 2005. "This rate of increase is not sustainable, which means that home prices in her area could come under pressure, especially if rates continue to rise," he predicts. Freeman advises James to save for a down payment and to be on the lookout for condo foreclosures where the homeowner may have had an adjustable rate mortgage or interest-only mortgage that he or she can no longer afford. "This will allow her to pick up a nice unit at a good price," he says. James can go to the local courthouse to get a listing of foreclosed properties and then do a drive-by of the houses to see the condition of each of them. She can then contact the bank holding the loan and make an offer. If James insists on purchasing a home sooner than later, Freeman offers this alternative: Based on her income, James should have no problem qualifying for a mortgage in the $200,000 to $220,000 range. Assuming a 5% down payment, she should be looking at condos with a purchase price of $210,000 to $231,000. Any purchase price above this range will require resources over and above that which she could reasonably accumulate by the fourth quarter of 2006. Readjust her investment portfolio. James' stock portfolio is overexposed in large-cap growth stocks, at 40.61%. She has 20% in cash, 17.5% in large-cap value stocks, 7.08% in U.S. government bonds, 6.18% in mid-cap growth, 4.92% in corporate bonds, 2.39% in international equities, and 1.24% in small-cap growth. To help manage risk better and to provide the long-term growth she needs, Freeman suggests James diversify more into large-cap value stocks as well as mid caps and small caps. James also is heavily weighted in tech stocks, at 32% of her overall portfolio. Freeman suggests liquidating some of these investments so that she has no more than 15% in this sector. He also recommends that James further diversify by adding growth stock mutual funds to her portfolio, using the $2,000 contest winnings toward this objective. In addition, James should reallocate funds in her 401(k), to be more aggressive, given her young age, so that it has 80% in equities and 20% in cash/cash equivalents versus 68% in equities, 12% fixed income and 20% cash. Each year the family awards the Janet M. James Sewing Scholarship, a $1,000 scholarship to a local high school student in memory of James' mother, a former schoolteacher. James, who chips in $300 annually, should consider establishing a donor advised fund or similar charitable entity (see "Seven Ways To Give To Your Favorite Causes," August 2005). This way, family members could take advantage of tax breaks for their benevolence. Financial Snapshot: Alexis James HOUSEHOLD INCOME Gross Income $70,000 ASSETS Cash/Cash Equivalents $9,531 Stocks 12,508 Shares in Investment Club 2,272 401 (k) 25,581 Real Estate (Time Share) 6,000 Art & Collectibles 1,350 Value of Car* 7,000 Total $64,242 LIABILITIES Credit Card Debt 14,288 Total $14,288 NET WORTH $49,954 *According to Kelley Blue Book.