IF YOU'RE SO SMART, WHY AREN'T YOU RICH? THE BIROZYS HAVE HIGH IQS -- BUT EVEN HIGHER DEBTS.
By Suzanne Seixas

(MONEY Magazine) – Strangers often assume that Dennis Birozy, 44, and his wife Judy, 41, must be very affluent. After all, the couple are unquestionably brainy, and they have credentials to prove it. They belong to Mensa, a social and service organization open only to people who score in the top 2% of the population on IQ tests. Unfortunately, the truth is the Birozys are up to their formidable frontal lobes in debt. The couple married last May and live with Dennis' sons from his first marriage, Adam, 15, and Douglas, 14, in Bel Aire, Kans., near Wichita. They have total liabilities of around $67,300, more than double their annual income. And their $9,940 in nonmortgage debt, at interest rates as high as 21%, strains the family to the limit. Dennis earns about $30,000 a year as a securities salesman for a three-man brokerage. Judy, whose three grown daughters from a previous marriage live in other states, is unemployed. But she brings in $206 a month from payments on two small houses in Hutchinson, Kans. that she bought cheap, fixed up and recently sold. The Birozys are having so much trouble meeting their monthly bills that they consider themselves acutely in need of emergency financial counseling. Dennis confesses to having been late recently for the first time in 10 years on his $649-a-month mortgage payments. The couple figure they also need advice on how best to unload a house that Judy owns. They were counting on using the sale proceeds to lighten their debt burden, especially the consumer portion, which is some $4,000 higher than the national average. (For more on debt in the U.S., see ''Americans and their Money'' on page 159.) Financial squeezes are not uncommon among Mensans. Despite their high scores on intelligence tests, few of the organization's 52,000 members earn big money. U.S. Mensa executive director Margot Seitelman says the membership's median family income is roughly the same as the national median, $28,740. ''They could probably make more,'' she says, ''but they tend to work at what they like, not at what pays best.'' Founded in 1960, the U.S. Mensa is modeled on the 40-year-old British original, which was named after the Latin word for table, to signify a roundtable of equals. To join, applicants usually take two intelligence tests (cost: $20) administered every month by 143 local Men- sa chapters. (For their addresses, write American Mensa, 2626 E. 14th St., Brooklyn, N.Y. 11235.) Or applicants can submit proof of having notched a top 2% score in any of more than 150 IQ tests that Mensa recognizes. Yearly dues are $33. (To test your own IQ -- and your financial smarts as well -- take the quiz on page 210.) At chapter meetings, Mensa members, who call themselves Ms (pronounced ems), pursue interests ranging from space science to telepathy to indoor roller skating. But the emphasis is on social contact. In fact, critics dismiss the organization as a dating service for lonely eggheads. Even Dennis Birozy, who directs his regional chapter, concedes the popularity of noncerebral attractions at Mensa get-togethers: ''The best- attended meetings we held were when we had a belly dancer and a practicing witch.'' Adds his wife wryly: ''At our next, we'll be showing a film about gifted children, and we expect three people to show up.'' Total members in Birozy's chapter: roughly 160. The Birozys met seven years ago as newly anointed Ms who had joined chiefly in search of companionship. Dennis was married at the time, but after his divorce at the end of 1985, the couple's friendship turned into courtship. Their wedding last spring was the third for both, and in a hopeful splurge, they marked it by spending $6,000. A hefty $5,000 was on platinum and white gold rings and gold and diamond Longines-Wittnauer watches for both; the rest went for the nuptial celebrations. Judy's youngest daughter, Mindy Baliszewski, 18, who had become engaged six months earlier, added to the festivities by holding her wedding in Wichita the day after her mother's. Mindy's wedding cost the Birozys $1,000 or so, and they shelled out another $1,200 for their own honeymoon in Tacoma, where one of Judy's daughters lives. While the couple enjoyed the celebrations, it was hardly the best time to go through $8,200. Dennis' divorce settlement had just set him back more than $20,000 in savings and liquidated securities plus a $5,000 share in a real estate partnership that he had to cede to his ex-wife. He must pay her $250 a month in alimony until the end of this year. In addition, he was forced to take out a $15,000 second mortgage, on top of the roughly $43,000 balance on the first one, to buy her equity in their $75,000 three-bedroom home -- where Dennis, Judy and his sons now live. While interest on his first mortgage, obtained through the VA, is only 7 1/ 4%, the variable rate on the second, taken out at a local bank late last year, started at 12 1/4% and is currently 11 3/4%. Dennis was already paying off a $10,000 credit union loan at 15% for a 1980 Mercedes when he added payments at 21% for the jewelry. Explains Dennis: ''Clients expect their brokers to look successful.'' Then there is his MasterCard balance, which he keeps at the $2,500 limit despite 18% annual interest. In sum, the Birozys began their married life saddled with monthly consumer loan payments of around $1,075. Yet they were not unduly worried, for they expected shortly to collect on the sale of Judy's four-bedroom split-level house in Hutchinson (pop. 41,900), 53 miles northwest of Wichita. Judy and her daughters -- the offspring of an Air Force noncom whom she wed at 17 and divorced after nine years of marriage -- had lived in the house with Judy's second husband, John Pitzer, who operated a front-end loader for Morton Salt. But in 1977 Pitzer developed bone cancer and was advised to swim for therapy. So the couple paid $17,000 for a backyard pool encased in a fiberglass building. Two years later, he died. Judy inherited the house free and clear because his insurance paid off the mortgage. She also collected Social Security payments for her daughters until this spring, when the youngest finished high school. To the Birozys' dismay, Judy's house is still unsold. Original asking price: $64,900. ''That pool is the millstone,'' laments Judy. ''Hutchinson's economy is in a slump, and nobody wants to buy a big house with a huge backyard building.'' She considered having the structure dismantled, but when she learned that it would cost $7,000, she decided instead at the real estate agent's suggestion to drop her asking price to $59,900. Now, with winter nearing and still no nibbles, Dennis thinks she should take out a $40,000 mortgage on the property. ''We'd pay only 10 1/2% interest on a three-year balloon,'' he figures, ''so we could clear up our other loans with their ridiculously high rates. What's left over could go into an income mutual ^ fund to increase our cash flow until the house sells.'' Judy, though, is dubious. ''I hate debt,'' she counters, ''and I don't want another mortgage.'' She would rather try to help end the couple's cash troubles by going back to work. For 11 years until her marriage and move to Wichita this spring, she was a part-time office assistant at a clinic pharmacy in Hutchinson, a job she describes as ''exhausting but not intellectually stimulating.'' The pay was poor too -- $6.05 an hour. She doubts she can make much more in Wichita: ''I have just two years of college, and that plus a Mensa membership will buy you a nickel cup of coffee.'' Though she attended a junior college in Hutchinson and North Dakota's Minot State College while in her twenties, she dropped out, she says, ''because of money and kids. I lacked one and had the other.'' Still, she is sending out resumes in response to newspaper want ads, in part because the Birozys worry that Dennis' earnings will not rise soon. A Brooklyn boy, Dennis was raised by a father who worked in the printing business and a mother who was a secretary. Formal schooling was never his strength. He deadpans: ''The Mensa mind is very inquisitive and finds courses dull.'' Dennis left Long Island's Hofstra University, where he was studying psychology, after three years. ''I was flunking out,'' he admits. He spent a four-year hitch as an Airman 2nd Class in the Air Force and learned enough electronics to get a post-service job installing and repairing computers for IBM in New York City. That led to a 14-year stint in computer operations for Metropolitan Life, during which he rose from programmer to office manager. The company relocated him to Wichita 10 years ago, with his sons, who have been in his custody since the break-up of his first marriage. In 1976, Dennis married a woman he met while visiting his parents in Florida. Although he says he and his wife were seldom happy, ''galloping inertia'' kept them together until last year. Two years ago Birozy gave up his $40,000-a-year job at Met Life ''to see if I could turn an avocation -- investing -- into a vocation.'' For years he had amused himself by following the market and trading stocks on paper in a kind of intellectual game, though his actual investments were few. He was hired and trained as a broker by Merrill Lynch in 1984. But as a new salesman he made no more than $19,200 annually until he left this year for his present job. Currently he draws $2,500 a month against commissions while attempting to build a clientele. ''At Merrill Lynch I sold the company rather than myself,'' he explains, ''so when I came here, few of my customers followed me.'' But he doubts his own skills as a salesman enough to have given himself a deadline. Says he: ''If I don't net $36,000 in 1987, I'll go into another business -- though I haven't figured out what.'' A lack of substantial cash reserves lies behind Birozy's decision to race the clock. He and his wife have only $12,900 in savings, most of it in Equitec Seibel Total Return, a growth-stock mutual fund. Dennis also has a $14,000 selfdirected Individual Retirement Account. It is invested in such volatile securities as penny stocks, options and even 1,000 shares of LTV, the bankrupt steel company. ''Since I can't lose more than the $2,000 contribution a year,'' he says ''I consider my IRA play money.'' Judy's greatest asset, aside from her former home, is the $20,500 that she is collecting in monthly payments on the two houses in Hutchinson. In addition, this winter she is due to receive a lump-sum pension payout of between $7,500 and $8,000 from her old job. The Birozys plan to invest the money in their Equitec account, which they view as a combined emergency-retirement-college fund. Dennis aims to provide enough to send his sons to the local public university, Wichita State, but leaves it to the boys to raise the extra money if they opt for more expensive schools. Even so, he has only three years until his older son is college-bound -- and four years' tuition for two at Wichita State is expected to total $10,400 by then in today's dollars. In view of their cash crunch, the Birozys have been looking for ways to cut back on recreational expenses. A health-conscious bunch, they spend $80 a month for membership in a fitness club to which they go almost daily to play racquetball and lift weights. All four also like to ride Judy's laid-back six- year-old quarter horse Jackie. Judy, who grew up in the flat Hutchinson farmland where her father was a locksmith and her mother owned two restaurants, likes to paint oils of icy mountain landscapes from postcards, while her city-bred spouse enjoys fishing for bass and trout. And once a month they hold a Mensa board meeting at their house. Usually little business gets done, but conviviality sustains the group. ''People in Mensa have a common problem,'' observes Judy. ''Many of us are underachievers because we were ridiculed in early life for using big words that no one understood. So we learned to hide our lights under bushels. But with each other, we can say it's okay to be bright.'' BOX: A passing grade After working out the figures below, Dennis Birozy was pleased to find that in spite of the couple's recent spending ''our net worth is still respectable.'' Income and outgo for the 12 months that ended Aug. 31: Income Dennis' commissions $27,500 Dennis' liquidated investments 20,015 Joint withdrawal from savings 15,688 Dennis' second mortgage 15,000 Judy's job earnings and rental income 8,840 Judy's Social Security payments 4,572 Tax refunds 1,974 Interest and dividends 1,120 Wedding gift 70 Total $94,779 Outgo Divorce settlement and alimony $38,015 Mortgages 7,792 Taxes 6,923 Jewelry 5,000 Pre-martial living expenses for Judy's daughter 3,895 Medical expenses 3,262 Food 3,200 Car loan payments 3,024 Household maintenance 2,793 Clothes 2,750 Utilities 2,700 Gifts 2,500 Car costs 2,324 Weddings 2,030 Entertainment 1,900 Credit-card payments 1,800 Honeymoon and sons' vacations 1,400 Miscellaneous 1,044 Insurance 978 Horse boarding and vet bills 700 Legal fees 650 Dues 99 Total $94,779 Assets (as of Aug. 31) Houses $134,900 Judy's land contracts 20,500 Personal property 20,000 Dennis' Individual Retirement Account 14,000 Savings 12,900 '80 Mercedes, '80 Honda Accord '78 Honda CVCC 11,600 Debt receivable 800 Bank and credit union accounts 225 Total $214,925 Liabilities Mortgages $56,381 Car loan 5,797 Credit-card balance 2,500 Charge-card balance 1,650 Alimony 1,000 Total $67,328 Net Worth $147,597

BOX: The advice Roll over and rent Unable to sell her house for $59,900, Judy and Dennis Birozy are debating whether to mortgage the property for $40,000 to wipe out some high-interest car and personal loans. To discuss that idea and other options for easing their cash squeeze, Money brought the couple together with John Jones, a financial planner at the Wichita branch of the brokerage firm Waddell & Reed, and real estate agent Craig Graham. The advisers' points: John Jones: Do not mortgage the house. Not only would you be creating debt to pay off debt -- rarely a good idea -- but you would also be adding a liability to property that's already difficult to move. Instead, try to renegotiate the 15% loan on your 1980 Mercedes. Credit unions are charging three to four percentage points less than when you bought the car two years ago. If that doesn't work, use $4,000 or so of your mutual fund balance for debt reduction. What you are paying in steep interest cuts into the value of the fund's earnings to you anyway. Also, put at least $1,000 of your fund money in a money-market fund as a cash reserve. That way you will gain liquidity be able to pay cash for purchases and avoid carrying so much credit-card debt. I wouldn't advise adding Judy's pension distribution to your savings. Earnings on that money currently are tax sheltered, and you should roll it over into an IRA. I won't suggest how to invest it, since you probably have some ideas about that, Dennis. But I will point out that your own IRA seems very aggressively invested and yet limited in that you have 1,000 shares of one shaky stock, LTV. If I were you, I'd reinvest in a growth-stock mutual fund such as United Vanguard (8.5% load; 816-283-4000). It is aggressive enough to suit you, yet it has an excellent track record. Craig Graham: I don't think you should mortgage the Hutchinson house either. To get rid of it quickly, though, drop the price to at least 10% below what the average home in the neighborhood is selling for. If the pool building is an obstacle to a sale, offer an even lower price. If no one shows interest in the next month or two, try to rent the place. If it is occupied for the winter, at least some cash will be coming in. Look into replacing the second mortgage on your Wichita home with one at a fixed rate. Some local mortgage companies don't charge closing costs, so your only expenses would be a nominal fee for an appraisal, plus title insurance. Dennis Birozy reported a few days later that his credit union would only refinance his car with a two-year loan at higher payments than he now makes. But he was thinking of paying off his highinterest debt by replacing the variable-rate second mortgage on the couple's Wichita home with a $20,000 fixed-rate mortgage at 12% from a company that Craig Graham recommended. The Birozys asked their Hutchinson real estate agent to reduce the price of their house there to $54,900 but had not yet suggested renting it until they were sure they had failed again to find a buyer. The couple decided not to roll over Judy's pension payout into an IRA in case they need the cash before retirement. ''We'll keep it for that purpose,'' insisted Dennis, ''but we'll put it into either an income-oriented mutual fund or a single-premium life insurance policy.''