"When I was on public assistance, I used my credit card a lot. I was getting just under $400 a month [in welfare benefits]," says the 29-year-old single mother of Morgan, 12, and Jamal, 5. Burrowes describes welfare as a "sad cycle of life" because many people stay on public assistance to get the benefits of reduced rent, food stamps, and Medicaid. "It's more of a struggle when you are in a low-income bracket; there is no one helping you with your bills. [Before welfare,] I had trouble with my finances because all the jobs I had were low-paying," she explains. She was living paycheck to paycheck, earning less than $20,000 a year. Her past employment included working as a lab technician at Howard University Hospital, where she was enrolled in classes for three semesters, and as a legal assistant for the Maryland Park Service. Burrowes also earned a certificate in computer assembly from a local community college. Two years ago, she interviewed for a work-study job at the University of the District of Columbia Office of Urban Affairs, Science, and Social Work. Impressed by her résumé and computer skills, the university hired her as a program assistant. At the time, Burrowes had completed a semester at the school, thanks to financial aid. "My goal was always to find a higher-paying job because I knew I had skills. While on public assistance, I decided to go back to school to improve myself. I ended up getting a full-time job and going to school for free," says Burrowes. Today, she is earning a B.A. in both marketing and accounting, but she ultimately wants to be a contract attorney. Burrowes started out earning $27,000 in her job as a program assistant, but currently grosses $34,000 annually. She anticipates getting future pay raises, thus pushing her into an even higher income bracket. "My five-year plan is to buy a house, complete law school, save for my kids' college education, and secure my financial future for retirement." THE ADVICE Like many people, Burrowes is clueless about how much money flows in and out of the household. She needs to create, and stick to, a budget to determine how much discretionary income she has after expenses. She has $1,000 in savings, $6,350 in debt, and $650 in a 457 Plan (a salary reduction plan for nonprofit and public employees). To help Burrowes get a better handle on her finances, BLACK ENTERPRISE had her consult with financial advisor Walt Clark, president and CEO of Clark Capital Investments in Columbia, Maryland. Ideally, Clark says Burrowes ought to contribute 8% to 10% of her net salary each year to emergency savings and another 10% to retirement savings. If she discovers that money is tight, she must make a concerted effort to cut costs. As long as she continues to get pay raises and avoids the common trap of buying things instead of building assets, Clark believes Burrowes will be in a position to save and invest more. His other recommendations are as follows: FOCUS ON IMPROVING CREDIT SCORE Burrowes needs to resolve her outstanding student loan from the National Education Center. Because the school closed before she could finish attending classes, Burrowes is fighting the $1,500 bill. Even if she is in "the right," this could tarnish her credit (FICO) score--a three-digit number ranging from 300 to 900. The higher the number assigned to a person, the better his or her chances of being approved for a mortgage. Burrows' FICO score will also affect whether she qualifies for a conventional mortgage, subprime loan, or FHA government loan. Also, the lower her FICO score, the higher the interest rate she will pay. Since Burrowes has aspirations to own a home in the next two years, it is imperative that she maintains a good credit rating. Therefore, she would be better off making a settlement to pay half of her student debt or pay it off all together. (She also has a $2,350 student loan from her Howard University days.) Clark cautions that lenders look at these situations (whether you're in the right) like this: They did you a favor and now you want to stick them by not paying the money back. He recommends Burrowes prequalify for a mortgage to see where she currently stands as a potential home buyer. She can call Fannie Mae's mortgage division or try her local bank. Moreover, she needs to get her FICO score, available for a nominal fee through Equifax or any of the other major credit reporting agencies. To have a favorable credit rating, over the next 18 months, Burrowes must pay her bills on time, maintain clean, active accounts, and not apply for too many new credit lines. MAXIMIZE EMPLOYEE RETIREMENT PLAN Burrowes has to work another three years at the university before she can claim money in her 457 Plan, to which the university automatically contributes 5% of her salary. Still, she may be able to borrow against the money in the plan for the purpose of a first-time home purchase. She is also eligible to partake in her company's 401(k), to which she should start contributing 10% of her salary. Once she gets comfortable with the decrease in her paycheck, and as her salary increases, Burrowes should contribute 15%, says Clark. The goal is two-fold: to increase her retirement savings and to increase savings for a down payment on a home. Clark suggests Burrowes invest in equity markets, primarily growth mutual funds that are invested in large-cap and midcap companies. SET ASIDE MONEY FOR CHILDREN'S HIGHER LEARNING Burrowes has $1,000 or $500 per child in Coverdell Education Savings Accounts (formerly Education IRAs). Leave the money there. If necessary, she could always withdraw the money tax-free for elementary and secondary education expenses as well as college costs. Taking the $2,000 in contest winnings, Burrowes should open a 529 College Savings Plan or state prepaid tuition plan. She should put two thirds of the money (roughly $1,300) into a plan for her daughter, since she is closer to college age, and earmark the remainder (almost $700) for her son. She should also set up an automatic investment program, contributing $150 a month on Morgan's behalf and $50 a month for Jamal. Again, Clark says invest the money in mid-cap and large-cap growth mutual funds. Financial Snapshot: