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Two paychecks to broke
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September 4, 2000: 9:14 a.m. ET
A New Yorker fights to keep her head above water on a slim budget
By Staff Writer Alex Frew McMillan
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NEW YORK (CNNfn) - It's been five years since Tara Bash took a vacation. In a city where the cost of living is high, she's getting killed.
"I'm living from paycheck to paycheck," she writes. "I'm seriously two paychecks away from being homeless."
Bash, 28, makes $38,000 as a traffic manager for a company that arranges educational dinners for doctors. By attending the events and taking a test, M.D.s complete the continuing education credits they need to get recertified.
 "I love my job," says Bash, who found it after posting her resume online. "I really enjoy what I do."
She coordinates the production of the printed materials for the meals and tests. She picked the post because it offered her the chance to work around creative people such as graphic designers.
Bash graduated with a bachelor of science in marketing from the State University of New York-Oswego in 1995. After a couple of other jobs, she put her qualifications on the Internet and had a headhunter contact her. A couple of interviews later, she was offered a position.
"I also like working in this type of environment, which is very relaxed and very team-oriented," she states.
It's been tough for too long
Unfortunately, the job just doesn't pay quite enough. Bash owes about $7,000 on her credit cards and $9,000 in student loans.
"When I first graduated, I thought it was going to be tough," she says. "But I thought it would be for a couple of years." Now it's been five.
She was OK her first year out of college, when she lived at home. But it all went pear-shaped when she got her own place.
"When I first graduated, I was really good with managing my money," she explains. She could go shopping, spend freely, with little in the way of costs. That changed.
Checks & Balances runs weekly. People with questions about financial planning are invited to write in explaining their financial goals. See the bottom of this article for specifics.
"Once I moved out, I had bills," she says. "I don't think I'm frivolous at all, I just don't know where it goes when it's gone."
 After $775 in rent for her apartment in the New York borough of Queens, her debt payments, and her other day-to-day expenses, she says she's left with about $200 to $250 a month for groceries and personal spending.
That doesn't go very far toward her current life, let alone the future. "I would like to have a family and a house and the whole picket-fence thing, but I've got to get my debt in order," she says. "I just got a kitten and that's enough."
She has already been to a debt counseling service, which helped her consolidate seven credit cards into one. Many of the cards dropped their financing charges in exchange for a promise of regular payments, Bash says. She still has Visa and Discover cards and tries to pay $50 a month on each.
Outlook for extras is grim
Bash isn't asking for much. But right now, she feels she has to scrimp and save for anything out of the norm.
 "I'd like to be in a position where I'm financially stable. I don't mean rich, but comfortable enough to go on vacation when I want, or be able to go shopping when I want," she says.
Long-term, she would like to buy a house. "But at the rate I'm going, it looks grim!" she writes. "I'm still young, but time is going to catch up with me. I just don't want to be broke."
Her straits leave her considering options like moving out of New York, which the Brooklyn native likes but which is proving tough to navigate financially. She might like a quieter neighborhood and tree-lined streets, she says. Maybe she will change careers down the line, she thinks. Something has to give, anyway.
"I don't want to live like this for the rest of my life," she says.
What the planners say:
"Ms. Bash is caught between a rock and a hard place," says Jon Duncan, a certified financial planner with J. Duncan & Associates in Tacoma, Wash. "She must either spend less or earn more."
Since earning more is a long-term solution, in the near term she can only reduce her cash expenses, Duncan states.
First, though, Duncan would like to remove some of the fear from Bash's life. Bash dreams of taking a vacation or going shopping when she wants to. But even if she is exaggerating a little, it is the idea that she is two paychecks away from being homeless that leaps out at Duncan.
It indicates that she has no "cash safety net," Duncan explains. "If this is indeed true, then Ms. Bash should focus first on building up a cash reserve in, for example, a money-market fund."
Emergency money, just in case
Many planners recommend setting aside from three to six months of expenses in case of emergencies. With Bash struggling to get by, she should shoot for the low end of the range, three months, according to Duncan.
Still, her priority No. 1 should be to set aside about $5,000 to $6,000, the planner says. Otherwise a financial emergency would wipe her out.
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Click the following link to read last week's Portfolio Rx, a column that runs every Tuesday in CNNfn's Retirement section. Each article reviews an investor's long-term portfolio, using financial experts to offer advice.
Russell Owen, a certified financial planner and president of Portland, Ore.-based Strategic Research & Management Corp., also thinks Bash should start saving, little by little. Plunk $50 a month toward savings, he suggests, "preferably a credit-union account if you have one available."
Owen also recommends that Bash get a roommate. She says she has tried that before, and it didn't work out.
"I understand that you do not like this idea," Owen writes. "However I want you to understand that this would free up some cashflow! You will have to make some tough decisions about what your goals really are!"
Owen suggests that Bash review why it didn't work out with her previous roomie. "Choose not to make the same choices again," he suggests.
Get your refund now
Bash got a tax refund of more than $1,000 for 1999. While very pleasant when the refund check arrives, she could have used that money during the year. So Owen says she should consider adjusting her tax withholding.
She should review her withholdings with her payroll manager, Owen says, and have $50 a month less deducted. That's not the full amount of the refund but it will give her more cash on hand each month.
"When you get a refund from the IRS at the end of each tax year, it means that you gave the IRS an interest-free loan," Owen says. "As you are well aware, you cannot get an interest-free loan."
In fact, Bash is paying interest on her loans. Even though she is only withholding as a single person and head of household, she could override the amount being deducted, Owen says.
Owen would redirect that money into Bash's 401(k). She wasn't seeing the money in her take-home pay anyway because it was being withheld, he points out.
Duncan believes Bash should leave her 401(k) alone until she builds her emergency fund, though. "Plans are great long-term investment vehicles. They are not of much use in short-term cash-reserve planning," he points out.
Budget a little better
Because she is mystified about what is happening to her money, Duncan instructs Bash to track her expenses over a quarter.
A personal-finance computer program like Microsoft Money or Quicken, a partner of CNNfn.com, might be a good investment, he says. He likes their "excellent budgeting and tracking features."
She seems to have some take-home pay going AWOL, Duncan reckons. "Carefully tracking her monthly expenses for about three months should give Ms. Bash a good idea of where her money is going, and where she might cut expenses," he says.
Once she has identified the areas to cut back in, she should free up some cash. She could then have an automatic transfer set up from her employer to her money-market account, forcing her to save, Duncan points out. Of course, she could do it voluntarily, too.
"Any amount will do, even a small amount," he says. "The point is to do it and do it regularly."
This calls for drastic measures
Besides budgeting and cutting back on cash expenses, she could make some more-drastic moves, the planner goes on. Though Duncan also says Bash might consider living with someone, she could move into a less-expensive apartment.
Career counseling might be in order, too, he believes. "It sounds like she is well-educated and possesses some marketable skills," Duncan says.
She will spend a lot of her life working. If she can identify what she really wants to do as a career, she can then pursue the necessary training and education. Ultimately she could obtain a higher-paying job she would enjoy more, Duncan believes.
"While it sounds a bit trite, it is really true that we are much more successful doing what we enjoy doing," he says. "Becoming employed in one's chosen field, as opposed to taking a job for more money, is more likely to lead to long-term, steady employment." And that is a key to steady pay increases and vesting in company-sponsored plans.
Duncan thinks Bash should not post her resume on the Internet again or work with another headhunter, "as doing so is likely to result in another job hop with no clear direction." Instead, many community colleges have trained career counselors, to match aptitudes, interests and career choices, he says.
Bitter, bitter pills
Both the planners end their advice on a similar note. Bitter medicine now makes you better in the future.
"Tara, your situation is not as desperate as it might seem," Owen says. "It does require that you adjust the way that you think about money and the lifestyle choices that it can create."
Bash should envision how she wants to live three to five years from now, Owen believes. Then she should make choices and sacrifices to get her there. Owen also recommends the book Smart Women Finish Rich, by David Bach.
Duncan quotes the workout motto 'No Pain, No Gain.' It seems to apply here.
"Making some short-term sacrifices may be very hard, even unimaginable," he commiserates. "On the other hand, it is the only way for Ms. Bash to get to where she ultimately wants to be."
* Disclaimer
Got questions about financial planning? Need some advice? CNNfn.com has organized a panel of outside experts to answer your questions. If you want to be considered for the "Checks & Balances" column, where professional planners suggest ways you can manage your money, send us an e-mail at checksandbalances@cnnfn.com. For those selected, financial planners will review the details and suggest ways to meet those goals.
Include information about your age, occupation, income, assets and monthly expenses -- imagine you're providing a full income statement and balance sheet. Also, share with us any short-term and long-term financial goals you may have. And don't forget to leave your phone number. 
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