Pass go, collect $200, buy a house
This Atlanta couple has to multi-task with their money to reach their goals.
February 25, 2002: 10:54 a.m. ET
By Annelena Lobb
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NEW YORK (CNN/Money) - Jason and Ashley Kean are versatile people when it comes to having fun.
They enjoy going to the opera, board games, working on home improvement projects, and entertaining their friends. Jason loves to cook (he's a big fan of Emeril Lagasse), and recently showcased his culinary abilities at two parties they threw -- a slumber party on New Year's Eve and a party on Groundhog Day.
"We had 18 guests, which is about the limit for our one-bedroom-with-a-den apartment," Ashley said. "It was marvelous! We played board games, watched the movie "Groundhog Day", and just generally had a great time."
Board games may be a favorite pastime, but the Keans know it'll take more than Monopoly money to meet their financial goals. They hope to buy a house, save money for Jason to go back to school, and pay off their credit card, auto and student loan debts.
The situation
Jason, 28, a customer service manager for AutoTrader.com, and Ashley, 27, a specialist in child psychology, say they feel spread too thin.
At present, Jason brings home $41,000 a year -- about $25,000 net after his 401(k) contributions, insurance payments, and taxes.
"I started in the sales department -- and quickly realized I am no good at sales," he said. "I moved over to customer service, and finally found a job I liked doing. I've been the manager since April of 2001."
Ashley was recently laid off from her job, where she made $28,000, but anticipates having a new one by the end of March. "The Atlanta market is swamped with eager, newly graduated therapists, but I'm hoping that a company will appreciate my multiple talents," she added.
Their assets include Jason's 401(k), valued at about $4,700, a VUL (variable universal life) insurance policy through Western Reserve Life Insurance, valued at $200,000, and shares of stock in AutoTrader.com, still valued at the initial "buy price", because the company has not yet gone public.
Until Ashley lost her job, they made double the minimum monthly payments on all their debts -- that meant paying $160 a month on student loan debt, $350 a month on their car loan, and between $300 and $400 a month on their credit card debt. They also pay $715 a month for their rent on a 2-bedroom apartment in Norcross, GA.
The strategy
Managing cash flow: "We need a little more money, or we just need to manage what we have a little better," Ashley said.
"Their issue is cash-flow oriented," said Doug Flynn, a certified financial planner with Flynn/Zito Financial Planning in Garden City, NY.
The Keans need to consider exactly how much cash they have and where it goes, in order to reduce their debts faster and squeeze out the needed dollars for a house or education savings.
They might also want to rethink those double payments they've been making on their low-interest loans.
Double payments should be applauded as proof of their determination, said Scott Kahan, a certified financial planner with Financial Asset Management Corp. in New York, NY, but paying extra toward their 2 percent student loan and 6.5 percent car loan may not be the best strategy.
"Doubling the student loan payment will reduce the time it takes to pay the loan, but the total savings in interest will be marginal," said Kahan.
Flynn said the same is true of their car loan. Minimum payments will do, and should free up cash flow first for their 10.99 percent credit card debt, then for savings.
"Focus debt payments on the credit card, then the car, and then the student loans -- always pay your loans in interest rate order, not in order of balance size," added Flynn.
Overly cautious: Flynn also suggested the Keans re-evaluate their life insurance policy, because they might have more insurance than they actually need at this point in their lives.
"They have no children and no mortgage," he said. "They are 28 and 27 -- as a financial adviser, I have real concerns about that permanent type of insurance at this point in Jason's life."
If they are paying several hundred dollars a month into a variable universal life insurance policy, they might consider switching over to term insurance for a few years, which is substantially cheaper. "If you get term insurance, you can always convert it to permanent protection later on, if [you] have a mortgage or kids to think about," Flynn said.
Switching to term insurance could free up several hundred dollars a month, which could, again, be redirected toward debt payments or savings.
A matter of priority: Their first savings goal should be an emergency fund, Kahan said.
"Ashley's recent layoff illustrates the need for a stash of cash," he added.
Kahan suggested they set aside a few hundred dollars a month in a money market fund or savings account until they've reached the equivalent of 3 to 6 months' living expenses. Then his advice was to begin saving for a home.
Flynn said the Keans could start saving for a house or Jason's education, whichever is the higher priority, as soon as they feel comfortable.
"The real question is: Do you really want the house soon, or do you really want zero debt first?," he asked. "That dictates what your immediate goals are."
The road to retirement: "I applaud Jason's 15 percent contribution to his 401(k), and encourage him to continue contributing the maximum," Kahan said.
He also encouraged Jason to further diversify his portfolio by allocating some of his contributions to small cap funds, particularly small cap growth funds. Kahan recommended Vanguard Explorer and Vanguard Small Cap Growth Index for appropriate small cap growth exposure.
Flynn also added that Jason might consider allocating less of his portfolio to bonds. "They need growth, they're young, they've got close to 30 years before they can touch this money," he said. "If I were [Jason], I'd lose the bonds." 
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