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Artist avoids starving
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May 22, 2000: 1:43 p.m. ET
Fundraiser wants to spend more time and make more money with her real love
By Staff Writer Alex Frew McMillan
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NEW YORK (CNNfn) - Checks & Balances runs weekly on CNNfn.com. People with questions about financial planning are invited to write in explaining their financial picture and short- and long-term goals. See the bottom of this article for specifics. For those selected, financial planners will review the details and suggest ways to meet those goals.
Helen Dannelly works in fundraising at Macalester College in St. Paul, Minn. But her passion is her artwork. She wants to spend more time with her painting and sculpture, which she regularly enters in shows and displays at her downtown studio.
It's tough, with a full-time job. "It is an artist's biggest frustration not to have time to do her work," she wrote.
 Selling her work brings in a little money on the side, between $200 and $1,500 a year. But she wants to build the business by selling on the Internet.
She and a friend are working up a Web site, which should help her sell back in her hometown. She studied painting and print making at San Francisco State University, and had some success selling pieces there. "They love me back home!" she said.
A money-saving move
Dannelly, 42, moved from San Francisco to Minnesota five years ago, to save money. She figures the rents on her studio and her apartment, which run her $90 and $350 a month, are half what they were in San Francisco.
Besides building her art business, she also wants to buy a house or a condo. With homes a little more affordable in the St. Paul area, Dannelly reckons she can sew one up somewhere in the $80,000-to-$120,000 range.
 At the back of her mind, she knows she may also have to replace her 1991 Ford Escort hatchback sometime soon. It's not pretty -- the bumper is cracked, and one front blinker and rear-view driver's side mirror are broken. She got a new transmission for her Escort last fall. "I'm hoping it'll hold up," she said. "It's kind of shabby looking, but that doesn't mean it won't start."
Since it's not worth much as a trade-in, Dannelly thinks she may donate the Escort to charity. She's keen on scouting for a two- to four-year-old used car through Hertz. Two of her friends have had good luck picking up used rental cars there.
"I would like to put $700 away, but don't know if I can afford that," she said. She'd like to keep her payments below $200 a month. She lives near work and only drives 5,000 miles a year. "I don't care what I drive, so long as it's semi-reliable and low maintenance. As a single woman, that's what I look for," she said.
Struggling to save
 She also doesn't have money set aside for a downpayment on a home. In fact she worries that if she gets a new car, she may not qualify for home loans. But she has joined ACORN, a program that helps first-time homebuyers with low- or no-interest loans.
She used to have horrible credit-card problems, but after going through Debtors Anonymous 12-step program, she paid off the $11,000 she owed and cut up the cards. She has never used credit cards again.
Now the only debt she has is $4,500 in student loans. That means she makes payments of $98 a month.
As far as savings go, she has a little under $6,500 in a Lincoln Life 403 (b) retirement plan from a previous employer. She has also just started contributing $500 a month into a TIAA-CREF 403 (b) through Macalester and $300 a month to a money market account.
A friend is paying Dannelly $100 a month over 10 months to pay for some artwork. She also makes a little extra money with a part-time job as an education consultant at her church, a job she'll quit in August. But she relies on her $30,000 salary from the college for her living.
 "I have lived very frugally, but I have a hard time saving unless it's taken out of my paycheck immediately," she said. She knows she is a bit of a compulsive spender. She is thinking about opening a money-market account somewhere other than her credit union to help her save.
"I can do online banking with my credit union, and if I see money in my savings account, I unfortunately tend to spend it," she explained.
She shares her apartment with a friend. But she has no children. She wants to set herself up for old age. Right now, though, her main focus is her artwork.
"I want to know how to not feel deprived and still save and get a car and possibly a home of my own, as well as increase my art production and sales," she said.
What the planners say:
"The fact that Helen has moved from San Francisco to St. Paul to reduce her expenses shows how dedicated she is in realizing her financial goals," said Christiane Delessert, a certified financial planner with Delessert Financial Services in Newton, Mass.
Delessert praised Dannelly's resourcefulness. That's evident in her decision to join the ACORN program and look at Hertz as a source for a used car, the financial planner said. "She also knows herself quite well," Delessert pointed out, realizing she is a bit of a spender and cutting up her credit cards.
"That being said, Helen needs to step back and prioritize her goals," Delessert wrote. It will take discipline and time for her to meet her objectives. But with some flexibility and creativity, she could afford to buy a condo and a car, while even setting some money aside, according to Delessert and Christopher Dalto, a Delessert employee and MBA who ran Dannelly's numbers.
Not going to be easy
That doesn't mean it will be easy. "Unless she commits herself to living like a monk, it is not likely she will be able to achieve all of her goals in the next few years," said Phil Cook, a certified financial planner in Los Angeles.
On the surface, Cook figures Dannelly has $300 a month in take home pay to cover a car loan and mortgage, after her $500 payment to her 403 (b). But figure in rent, around $340 in discretionary spending -- such as on eating out, snacks and charity for her church -- and the money market savings, and Cook calculates that she can carve out another $990 a month.
That certainly brightens the picture, Cook continued. But he has a few caveats. "It's a rare individual who is able to forego all of life's pleasures over an extended period of time," he says. Dannelly may also consider some of the "discretionary" items, like the charity giving, as necessities.
So creating a budget is essential. "It must be religiously followed," Cook said. She needs to set aside some of the $990 for an emergency fund, too, in case she needs to make repairs or in case of an unexpected event, like her roommate moving or Dannelly losing her job.
Low-interest loans
A no-down and no or low-interest loan is the only way Dannelly can afford a house or a condo in the near future, Cook said. She should explore those options and consider taking on a roommate to cover some of her mortgage costs, he thinks. If she does buy a condo, she needs to figure in common-area costs as well as her mortgage.
Cook does not think Dannelly should count on her art sales in her budget. They are unpredictable. But costs like a car loan and a mortgage are anything but.
"In general, Ms. Dannelly should put off buying a car for as long as absolutely possible," Cook concluded. Unless the car has absolutely no resale value, she should not donate it, he said.
As far as buying a condo goes, Dannelly qualifies for downpayment and/or monthly payment assistance from a Minnesota Housing Finance Agency mortgage loan, the Delessert financial planners found out. The MHFA's Homeownership Assistance Fund has $2 million a year for first-time homebuyers, they said.
HAF will provide half the downpayment and closing costs, up to $3,000, for qualified homebuyers. The loan is zero-interest. Dannelly qualifies in the Twin Cities, where the income cutoff is $38,000.
Any house would have to be less than $121,842 for her to qualify. Though Dannelly was willing to spend up to that amount, Delessert Financial figures she can only really afford a $90,000 home.
Assuming she saves $1,125 toward a downpayment, HAF will kick in another $1,125. If Dannelly can get a reduced 6.5 percent interest loan, she could then borrow $87,750. That would mean monthly payments of $564 over the next 10 years, while she pays off the HAF loan, and $554 for the 20 years after that, according to Delessert's calculations.
She will stop paying $350 in rent. Since the savings don't cover the $564 mortgage payment, Dannelly needs to get creative. Delessert suggested she find a home with enough space for her to have her art studio there. That would save another $90 a month. Then she would need to make another $1,488 a year from art sales or current savings.
Art would be the better route, according to Delessert. "While Helen could borrow up to 50 percent of her retirement plan for a downpayment on her house, we do not recommend this," the Delessert planners write.
As far as a car goes, Dannelly needs to look at buying an $8,000 used car, putting $500 down, Delessert said. If she gets a five-year, 9 percent car loan, she would have monthly payments of $155 per month.
"There are some concerns about buying through a rental-car agency, as renters generally do not care for the cars as well as owners," Delessert continued. Dannelly needs to consider other options, too, such as sales of reposed cars by banks and of unclaimed stolen cars by the police, according to the planner.
Around $930,000 needed for retirement
Dannelly needs to plan on saving 80 percent of her current expenses for retirement, according to Delessert Financial. Figuring in inflation, she'll need $46,422 a year by the time she's 65, the planners said. That means she needs a nest egg of $928,440. To be conservative, Delessert Financial did not include social-security payments.
Given her existing 403 (b)s and the $9,000 a year she is contributing, she will save $774,090 in the next 23 years when she hits 65. That assumes a 10 percent return. Dannelly should roll the 403 (b) from her past employer into an investment account such as at Charles Schwab and Fidelity, to get access to better no-load mutual funds, according to Delessert.
Like Cook, Delessert agrees Dannelly is wise to be building up her money-market account for an emergency fund. Once she has three to six months' worth of expenses there, though, she should set that $3,600 a year aside toward the downpayment on the car and house, according to Delessert.
Most of the money will then be needed for increased expenses on her car and home. But Delessert figured she could pay an extra $250 a year into her retirement portfolio. Given a 10 percent return, she would then save just under $789,000 by age 65.
Delessert said she has a number of options available to make up the discrepancy between the $789,000 she will have saved and the $928,440 she needs. She could work an extra two years, to age 67. She could invest her retirement money in a more-aggressive mix of mutual funds that produce returns of 12 percent to 14 percent a year. Or she could sell her art.
"Helen has done a phenomenal job in saving as much as she does. She has some challenges ahead, and needs to be patient with her purchases. But she is on the way to meeting her goals," Delessert concluded. "The ability to meet her goals relates directly to her discipline level."
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. 
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