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Checks & Balances
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April 17, 2000: 6:51 a.m. ET
A USAF captain in Kosovo wonders what she should do about coming home
By Staff Writer Alex Frew McMillan
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NEW YORK (CNNfn) - Checks & Balances is a new feature that runs weekly on CNNfn.com. People with questions about financial planning are invited to write in explaining their financial picture and their short- and long-term investing goals. See the bottom of this article for details. For those selected, financial planners will review the details and suggest ways to meet those goals.
Crystal White, 31, has been in Kosovo for five months. A captain in the Air Force, she left El Segundo and sunny southern California late last year. Since then, she has been working as an operations officer at Camp Bondsteel, an Army camp. That's near the city of Urosevac, or Ferizaj, depending on whom you're talking to -- Serbs call it Urosevac. To the Kosovar Albanians, it's Ferizaj.
Whatever you call it, winter was cold. "I think the coldest we got was -23C," or minus 9 degrees Fahrenheit, White wrote. "The snow really wasn't that bad because it meant the mud had frozen. Now that spring is trying to come in, and rainy season is approaching, we are not looking forward to the tons of mud we will have." The camp is in a former wheat field, and there are no paved roads.
 White works as an operations officer at Camp Bondsteel. She and another officer run "force protection," making sure all the troops are safe if they have to leave camp, to inspect troop locations for instance.
She also coordinates with other agencies in the various services and with a contractor, channeling a stream of paperwork. White and her colleague are also in charge of making sure the computers, faxes and copy machines work at the camp, as well as taking care of the vehicle they're assigned.
"Things have improved greatly since I first got here," she said. "We now sleep on beds instead of cots, and have plastic plates and metal silverware instead of paper plates and plastic silverware. We eat in a building instead of a tent, and have bathrooms with running water instead of port-o-lets."
Still, she's glad to be heading home next month, in the middle of May. After "outprocessing" in Germany and elsewhere, and a little vacation, she'll head back to El Segundo in mid-June.
She's with the Air Force while it's still fun
White still works for the Air Force there, but she's a program integrator at a large defense contractor in the Los Angeles area. She makes sure the contract work is on schedule and budget, reporting to the services and agencies involved about the status of the projects being built for them.
She's been on active duty with the Air Force for eight years. She plans on staying "until it's no longer fun." The idea is to stay at least another 12 years -- if White leaves before serving 20 years, she doesn't get her Air Force pension. After that she plans on working, perhaps as a math or physics teacher.
White moved to El Segundo from Mountain Home, Idaho, in June 1999. She has another two years in southern California when she gets back from Kosovo. Though she owned a home in Idaho, she figured she couldn't afford one in the Los Angeles area -- at least not in a decent neighborhood that was less than an hour's commute from her job.
She's not sure where she'll move for her next station in 2002. But her primary short-term goal is to buy a home when she does move. Through the military, she has access to home loans that don't require a down payment. "That has a significant impact on the kind and price of homes I have available to me," she writes.
Looking a little further out, she wants to set aside some money to pay for either her 3-year-old niece, Hailey, or her own children to go to college. Not that she's about to have a family. "Know any great guys who are willing to follow a woman in the military?" she joked.
Because Kosovo is classified a "hazardous duty zone," her five months of income there are tax-free. When she returns to California, she will go back to paying tax on her income. White figures her total income for the year will be around $48,000 this year, with $25,000 of it tax-free.
But she will still get a tax-free housing allowance that covers her $1,150 a month rent she pays to share a house with a roommate, also in the military. Utilities run around $150 a month. She spends $8.20 a month for $100,000 in life insurance coverage through the military, which she said she won't step up while she's single.
Time to step up savings?
White also still makes payments of $300 a month on her Toyota RAV4 while she's in Kosovo. But another short-term goal is to sell that.
She's going to pick up a BMW Z3 while she's outprocessing in Germany. That, she figures, will take a $5,000 down payment and then monthly payments of $550 a month on a 60-month loan at 7.3 percent from USAA, an insurer that specializes in insuring military personnel.
White sets aside $166.67 a month -- or the $2,000 maximum allowed a year -- for her Roth IRA. She also pays $100 into her USAA Cornerstone Strategy mutual fund (USCRX), and buys a $100 savings bond at $50 every month. She has $5,000 in checking that she wants to put to work when she moves back to California.
All told, she has saved a little under $20,000 in three mutual funds, mostly in retirement accounts; a few shares of Microsoft she bought at $95; and a total of $8,000 between a money market account and her savings bonds.
Otherwise, most of her spare cash goes to eating out and entertainment. "I think I can afford to invest a couple of hundred dollars more a month," she wrote. Her commander has been talking about international investing. White has also read it's a good idea to diversify your portfolio. "Do I need to diversify into international stocks, or increase the amount I invest each month?," she asked.
What the planners say:
"It sounds like you have prepared well for the financial changes that are likely to occur when you move back to the States," said Marc Freedman, a certified financial planner and president of Freedman Financial Associates in Peabody, Mass. "Your commitment to monthly savings programs is encouraging and should be continued."
But Freedman suggested that Captain White reconsider her monthly buying of a U.S. savings bond. While White's service in the military is "extremely honorable," Freedman said the return the U.S. government gives her on her investment is anything but. "It is likely that it will take upwards of 14-to-18 years before your bonds come to reach their face value," he said. Other more aggressive investments likely fit her objectives better.
Don Boegel, a certified financial planner in Plymouth, Minn., agreed. She should stop buying savings bonds and instead buy a stock mutual fund with that money, Boegel asserted.
Rule of thumb: save at least 10 percent
Overall, a good rule of thumb is to try to save 10 percent of your gross income toward retirement, Boegel said. White should be able to do that easily, given her tax-free income. Should she invest more? Boegel suggested yes, setting aside as much as 15 percent-to-20 percent of her gross pay if possible.
White should direct the savings mainly into her mutual funds, Boegel said. But he liked the idea of White building up her money-market account as an "emergency fund." She should slowly put money into it until it reaches three-to-four months of her expenses, Boegel said.
As far as buying a house goes, Boegel says homeowners are best keeping their mortgage payments under 30 percent of their gross income. That's including the principal, interest, tax and insurance.
Given White's $4,000 monthly gross pay, she is looking to keep her payments at or under $1,300, Boegel continued. Assuming she can get 7.5 percent financing for 30 years, that means she is looking at a home valued between $130,000 and $150,000. "She may want to consider this if she is able to choose between geographic areas," Boegel said.
More international exposure than she may realize
White asked whether she should increase her international exposure. "Were you aware that the USAA Cornerstone mutual fund is classified as a multi-asset, global fund?" Freedman asked. It already invests 35 percent of its money abroad, primarily in Europe.
He pointed out that another fund White owns in her Roth, the American Century Strategic Allocation: Aggressive fund (TWSAX), has international exposure, too. So White already has international exposure, and much more than she may realize, Freedman suggested.
Boegel stated that White should invest 30 percent of her retirement assets overseas. If, after reviewing the international exposure she already has, she isn't at that level, American Century has an international growth fund (TWIEX). It's "pretty good," Boegel said, and staying in the same family makes it easy to move money into it.
"International exposure is an excellent way to maintain an aggressive strategy and provide some diversification," Boegel said. "She should continue to manage her IRAs very aggressively, primarily because time is on her side."
White might want to target her investing more specifically, according to Freedman. She generally holds mutual funds that let the fund manager decide the asset allocation. White ought to consider buying funds with specific investment objectives from the fund families she already owns, he said.
"Utilizing a large-cap value fund, or a small-cap international fund, allows you to better measure your fund's performance compared with its peers," Freedman asserted. More general asset-allocation funds "can sometimes allow the manager to "cheat," and you may not always own what you think you initially purchased," he pointed out.
Life insurance just right
For the long term, White is right to stick with her relatively low level of life-insurance coverage, Freedman said. She has a very competitive rate on it, he noted. All she should do is review her beneficiary designation once a year.
Boegel agreed that White should keep the low level of coverage until she has a substantial change in her life, such as marriage. But she might want to consider looking at a private insurer if she can get similar coverage to give her more flexibility if she leaves the military, he suggested.
Since she has her niece and a possible family in mind, White should make sure she has a will, Freedman added. That will allow her to dictate specifically where her assets go - - a luxury she doesn't have if the court distributes her estate.
Some planning can wait
As far as saving for a child's college goes, "she is light years ahead on this one," Boegel said. The college planning comes after her own Roth IRA and retirement planning "on the totem pole of savings priority," Boegel said.
But if she is serious about it and has money to set aside, she could consider buying a tax-efficient mutual fund. She could give it to her niece in 15 years and reduce her own income tax, or use it for her own kids, Boegel explained. White could also use the investment for retirement or another purpose, which is why Boegel, like last week's panelists, thinks that option is better than a custodial account. If White has her own kids, she should also consider an Education IRA.
If she does leave the Air Force and become a teacher, White should take advantage of the 403(b) retirement plan, Freedman said.
There's one vital plan White needs to set in motion once she's stateside, according to Freedman. "Be certain to take your new BMW convertible out, cruise the beaches and enjoy diverse cultures of Southern California. You have served your country well and should enjoy the freedom it offers to you each day."
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. 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. CNNfn.com regrets it cannot respond to every e-mail. 
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