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Living on a Budget
AARP The Magazine, May 2010
Certified financial planner Rick Mayes has given Judy and Hiro Seki—parents of nine—a Money Makeover plan. Bookmark this site for updates to their story
June 8, 2009
The Sekis' conference with planner Rick Mayes produced several immediate changes. The couple transferred most of the money in their checking account to a high-interest online savings account, closing out their youngest son's college savings account and adding that small balance as well. They plan to contribute to the new account steadily until they have about six months of living expenses set aside.
After a little research, Judy determined she could save money by consolidating their home and auto insurance policies with the same company, increasing coverage on both policies to provide the extra protection Mayes recommends.
The Sekis have completed the paperwork to close their corporation as of December 31, and they have an appointment in July—after Hiro becomes an American citizen later this month—to reformulate the trust in their estate plan, as Mayes advised.
One change, however, has been difficult for everyone involved. Mayes stressed that the home equity loan Judy and Hiro got to help one of their sons buy a condo should be paid off as quickly as possible. The young man rejected Mayes's proposal that his siblings chip in to settle it and recover their money later, but he and his parents have worked out another solution. Once his condo is in foreclosure—which could be by August— he will move back home for a year or two, paying no rent or food costs. The savings on living expenses will allow him to put much more of his income toward paying off the loan. "We think this is fair because we bear at least some of the responsibility for this problem by agreeing, against our own better judgment, to take the loan in the first place," says Judy. And it won't be an easy way out since "no grown man wants to move back in with his parents," she adds. "I admire his commitment."
July 2, 2009
The Sekis have been grappling with financial planner Rick Mayes's recommendation that they put saving for retirement ahead of paying any college expenses for their three youngest sons. Mayes suggested the boys rely on grants, loans, and part-time work to see them through. With Mario, 11, still years from college and Masato, 20, working at Home Depot and aiming to become a building contractor, for now the matter comes down to Tomio, 17, who'll enter community college this fall.
Despite some grants and plans for part-time work, Tomio isn't sure he'll have enough money to cover all his expenses. After weighing the options, Judy and Hiro decided they will cover any shortfall, rather than make Tomio apply for loans. Tuition and books should not come to much more than $500 per semester, and Judy says they are "comforted by the fact that, as Rick pointed out, we will receive a sizable federal tuition tax credit next year." (Families can offset up to $2,500 in tuition and certain other educational expenses in 2009.) The Sekis figure that, in the end, the outlay for college will have little or no impact on their ability to contribute the maximum $20,500 to Judy's 403(b) this year.
To help them gauge their spending habits over time, the Sekis hit on a method that Judy says "definitely wouldn't work for everyone." They charge virtually everything on credit cards, which gives them a complete and orderly record, keeping them fully informed on where their money goes. "But we are scrupulous about paying them off every month so we never owe finance charges." As a bonus, by choosing only cards that offer cash back on purchases, "we also get 1 percent to 5 percent back on almost all that we spend."
Aug. 4, 2009
The Sekis are about to implement the last few recommendations in Rick's plan. Judy and Hiro have an appointment to update their will and estate plan at the end of August, and Judy will increase her life insurance during the fall open-enrollment period for employee benefits at her job. To simplify their financial lives, the couple has consolidated savings accounts at three different banks into one.
Meanwhile, the Sekis' economic prospects have also improved. After Hiro completed his second illustrated book, his publisher requested a third one. Payment terms have not been agreed upon yet, but, says Judy, "With most publishers cutting back, we think this shows they expect Hiro's books to sell very well." Despite California's budget crisis, she reports that her scheduled raise at her publicly funded charter school came through.
One unexpected development is that 11-year-old Mario has been tapped to appear on What a Life!, a five-minute TV spot on the Disney Channel featuring kids whose parents have interesting occupations. Mario will receive a small one-time payment for appearing with his dad, who, besides being an illustrator and author, is a skilled puppeteer. Mario's earnings as a young actor will be placed in a Coogan account that he can access when he turns 18.
Dec. 10, 2009
With the end of the year approaching, the Sekis filed the necessary papers to dissolve their corporation, as planner Rick Mayes had suggested. From now on, they'll save more than $1,000 in yearly fees by simply reporting the $5,000 or so Hiro makes from freelance photography as business income on their regular tax forms. They also took Mayes's advice to update their wills. They decided not to name their adult children as executors, choosing Judy's three sisters instead. "We didn't think it was wise to have them manage their siblings' inheritance," says Judy. "This may change in the future." Meanwhile, the family is still growing. The Sekis welcomed their first grandchild—a girl named Azalea.
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