to eliminate what debt he has and save $25,000 to put toward a real home for his family. His ultimate professional goal is to start his own property management or security company.
Though having custody of his children means additional expenses, O’Mard believes that they have actually helped keep him focused on his aspirations. “I’m not thinking of just myself,” he says. “I’m thinking of what’s best for us.”
THE ADVICE
BLACK ENTERPRISE consulted Fitzgerald Miller, a financial consultant at AXA Advisors L.L.C., to review O’Mard’s finances. He offered the following advice:
REFINANCE OR SELL PROPERTY
Compared to recent market rates, O’Mard has high interest mortgages, and they’re consuming about $1,200 of his money each month. Miller says O’Mard should be able to refinance both houses and lower their interest rates to about 7%, taking advantage of the current trend in real estate. Refinancing would allow him to tap into the equity built up in his properties and eliminate debt.
Miller suggests that O’Mard review the rents he charges his tenants. He should charge rent comparable to current market rental rates and make every effort to have his delinquent tenant removed. Paying a mortgage that should be covered by rental income is putting a strain on his finances.
He might also consider simply selling one or both of his properties so he can concentrate on managing his personal finances rather than dealing with the hassles of being a landlord. The funds from the sale would allow him to eliminate his debts, invest for retirement, and put a $25,000 down payment on a new home.
START AN EMERGENCY FUND
Once O’Mard has increased his cash flow, he should build an emergency fund to cover three to six months of living expenses in case he loses his job.
SAVE FOR COLLEGE
O’Mard should put $100 per month, along with his $2,000 in contest winnings, into his growth mutual fund. Although there is added risk, this would give him a higher rate of return than the 4% he is currently getting from his savings account. He could also invest the money in Maryland’s 529 plan, which offers a $2,500 tax deduction on contributions.
Miller says O’Mard’s goal should be to set aside $200 per month for each child as he will need at least $200,000 to send each of them to college. Although he doesn’t want to ask the children’s mother for support, as the custodial parent, O’Mard should make an effort to receive some funds from her to contribute to the children’s college accounts.
BUY MORE INSURANCE
Given his profession, it is important that O’Mard have adequate life and disability insurance to pay off his debts and provide for his children in case anything happens to him. He also needs a will, which should clearly stipulate who would care for his children if he was unable to. O’Mard has sufficient disability insurance, which covers 80% of his income if he is unable to work. He also has $250,000 of life insurance through his job, but Miller thinks it’s a good idea for O’Mard to at