Brandy Williams learned that mistakes can offer teachable moments. As a college student at the University of Cincinnati, she used her eight cards to purchase "silly stuff –food, pizza, clothes. I crapped away $5,000,†says Williams, now 33. "Back then, I remember getting cards in the mail pre-loaded. Other times I would use my card in a store and the clerk would say, ‘Hey, you should apply for our store card and get 10%, 20% or 30% off your purchase, so I was lured with the thought of savings,†she reflects. By the time she graduated in 2001, her credit cards were in default. She got credit counseling from an agency that negotiated with creditors. It took her three years under the program, but she managed to wipe out a total debt load of $8,000, including late fees and interest. "I was foolish and my mistakes hindered me from going to law school. I was trying to get a private loan and was turned down because of my credit. Several years later I went back to school to get my M.B.A., but I realized just how serious credit is,†says the Thomas More College graduate. But Williams has stayed clear of credit cards since paying them off in 2006. "I rip up offers. I don't want to go back down that road.†(Continued on next page) Instead, as a contract negotiator for the Department of Defense, Williams is focusing on moving forward. She bought a three-bedroom, one-bathroom house in Cincinnati in 2006. She earns more than $58,000 a year, has about $7,000 in her Thrift Savings Plan (she socks away about 5% from each paycheck), nearly $3,200 in an IRA, and has $3,000 in her checking and $1,000 in her savings accounts. Her liabilities include $40,000 in student loans (she pays $204 on her undergraduate loans and her employer pays for her graduate loans), $72,000 on her mortgage, and $4,000 for her car. Last year, she became a part-time real estate agent. She hopes this will generate an additional $10,000 a year in income once she recoups her startup costs and gets into the swing of selling homes. As vigilant as she has become since her spendthrift days, Williams yearns for greater financial security and has an interest in learning more about investing and boosting her credit score. Ideally, she would like to call it quits at 55, hoping that the real estate business and investing in real estate will help finance her retirement and her three nephews college education. Within the next few years, she plans to help the eldest with his freshman expenses as well as assist with purchasing a car. "Even though I have an M.B.A., I admit I still have so much to learn when it comes to personal finance.†(Continued on next page) The Advice Black Enterprise and Lee Baker, a certified financial planner with Apex Financial Services Inc. in Tucker, Georgia, developed a plan for Williams. Develop a formal budget. "No more budgeting on sticky notes. She needs a more organized, consistent budget,†says Baker. "She needs to know where all her money is going in order to meet her goals and make changes,†he says. Williams created a budget on Mint.com, which revealed her expenses to be about $1,900 a month, not including gas. The information inspired change. "I'm looking forward to paying off my car this year and I'm also considering other cost-saving cuts to my budget,†says Williams. Increase emergency savings. Williams has $3,000 in her checking account and $1,000 in savings, and has been using both as her emergency fund and for her short-term savings goals. It's important for her to know the difference between the two. A savings account is for short-term planned expenses; an emergency fund is designated for unplanned expenses. Baker would like to see her have $15,000 socked away. She can use the $2,000 contest winnings to get started. Despite her good intentions, Baker doesn't think Williams should plan on giving more than a couple hundred dollars on a one-time basis to her nephews for college. Instead, she should direct her nephews to scholarship opportunities. (Continued on next page) Polish credit. Williams credit sources are currently 597, 598, and 639. Her scores are low due to closing all her credit cards, a short credit history, and errors on her credit report. She currently has a dispute pending with the three credit bureaus. "Getting a credit card would help her score if she uses it properly,†says Baker. Williams should get a card with a $500 to $1,000 limit and pay her bill in full monthly, he adds. She should also look into secured credit cards, but make sure the card issuer reports her payments to all three credit bureaus. Williams should check her credit report annually at www.annualcreditreport.com to ensure all her information is accurate. Inaccuracies should be submitted in writing to the credit report company. Sample dispute letters can be found at www.ftc.gov. Prepare for the future. After Williams builds her emergency savings over the next couple of years she can begin to explore investing outside of work. She was thinking of individual stocks, but, "mutual funds with various asset classes would serve her better,†says Baker. Given Williams's age, Baker recommends she invest 29% of her investment funds into large-cap stocks, 9% in midcaps, 6% in small-caps, 6% in real estate, 3% in alternatives, 16% in international stocks, and 31% in fixed income. In the meantime, her Thrift Savings Plan is 100% invested in a G fund that is entirely government treasuries. These funds place a higher priority on the stability and preservation of your money than on the opportunity to potentially achieve greater long-term growth. Williams should place her monies into the other equity options such as S, C, and I funds to expose her to increased volatility. To address her concerns about financial security as a single woman, Baker says she should sit down with her human resources department to be sure she is making good choices in her benefits. Unfortunately, as far as retiring at 55, it's unrealistic given her current savings, says Baker, "Unless real estate really takes off and she's making an additional $10,000 to $15,000 a year.â€