for a couple of months, he tried to cook more often, but that experiment was short-lived. He laments that it’s not unusual for him to eat out for breakfast, lunch, and dinner.
At the time of our profile, Butler was poised to buy a duplex that would provide both a home and rental income. It was a step in the right direction for building his personal wealth, and it’s the foundation for the be Declaration of Financial Empowerment, Principle No. 1: I will use homeownership as a foundation for building wealth.
Unfortunately, the deal never came to pass. In the end, the owner didn’t want to budge on the $207,000 asking price. But Butler is still optimistic about his chances for homeownership because of the downturn in real estate prices, which he says have fallen about 8% in his area. And he’s patient enough to wait for a further dip.
But even bigger changes may put off his plans. Butler is waiting to hear about a job opportunity that could require him to temporarily relocate to England. So, for Butler, it’s wait and see. In the meantime he wonders when his spending issues will be history. “I’m proud of my promotion, but I’m disappointed that I haven’t been able to get my spending under control.”
New Year’s Resolution: “To continue to enjoy life, move to England, and to increase my salary a minimum of $10,000 to $20,000 by the end of 2008.” be
MONEY MANAGEMENT
THE ADVICE
- Eliminate credit card debt. Use at least $300 of monthly savings to pay down debt. Never charge anything he can’t pay off in 30 days and never borrow for pleasure.
- Take advantage of tax credits for his student loan.
THE ACTION
- Butler didn’t follow the advice. Worse, his credit card balance ballooned from $2,500 to $8,000. His credit limit was raised from $6,000 to $10,000. Then he asked that it be raised to $15,000, and it was. He says he asked for an increase in case he moves to England, as he will need money to get set up there.
- He made the adjustment and saved approximately $500.
INVESTMENT STRATEGIES
THE ADVICE
- Assess asset allocation. Diversify beyond one asset class into four or five. Increase monthly contribution in 403(b) and invest in mutual funds.
THE ACTION
- He increased his contributions to a total of $300 a month in his 403(b) and IRA. He ignored the advice to diversify but has no regrets because his heavy allocation in international stocks paid off. His IRA balance went from $2,200 to $7,000. He says he will diversify into U.S. stocks once the domestic market is a bit more settled.
PREPARE FOR THE FUTURE
THE ADVICE
- Use $2,000 contest winnings to increase emergency fund to nine months of expenses.
- Pursue real estate, especially a duplex that would provide supplementary income.
THE ACTION
- Instead of the emergency fund, he put the $2,000 in his IRA. His emergency fund still stands at $3,000.
- Butler is waiting for prices to continue their decline and also waiting to see if he’ll be moving overseas.