Financial Lessons From the Class of '83 Young adults struggling to live as well as their parents did a generation ago can pick up valuable strategies from MONEY's study of the graduates of one representative school.

(MONEY Magazine) – "MAKING MEGABUCKS," SAY HELLO TO "MANIPULATING PEOple for large profits." "Living in paradise with a gorgeous guy," meet "Broadcasting sporting events live." "Unemployed pro bicycle racer," shake hands with "President of AT&T." Welcome to the 10th-year reunion of the class of 1983, Palisades High School, Pacific Palisades, Calif. On a bulletin board next to the bar at the Santa Monica Holiday Inn are these and other predictions that people made a decade ago about what they'd be doing now. Victor Hithe expected he'd be "playing pro baseball in Dodger stadium." After seven years in the minor leagues, he's now a supervisor at California Fresh Foods Co. Karen Farberow thought she'd be "running her own restaurant and married to a nice Jewish boy." Today she's managing someone else's restaurant and still single. Like any other group of naive but hopeful high school grads, the 651 students who departed their idyllic Los Angeles alma mater (located a short walk from the beach) have now made the difficult adjustment to the "real world," where they've endured more than their share of financial and career hurdles. These Pali grads are products of a school that 18 years ago was the focus of a best-selling book, What Really Happened to the Class of '65?, and a Time magazine cover story that heralded the members of that class as "Today's Teenagers: On the Fringe of a Golden Era." Now, compared with their parents, these post-boomers from the class of '83 are turning 30 and finding themselves hapless pioneers of the New Reality. According to Sandra Shaber, a consumer economist at the WEFA Group, an economic consulting firm in Bala Cynwyd, Pa.: "The 28-year-olds starting out in the mid-'60s had a lot more reason to be optimistic about their prospects. Today's kids are facing a harsher reality." The fact that most of these young adults from Pali are children of the upper middle class and well educated makes their predicament all the more compelling. As one put it, "If we're having trouble, what does that mean for the rest of the people?" Of course, the class does have its share of successes and high earners like basketball millionaire Steve Kerr, a guard with the Chicago Bulls, and & inventor Marshall Rockwell, who collects more than $50,000 a year in royalties for his patents on computer accessories. But there is a wide disparity in income between even the college graduates and also between the grads who are married and those who aren't. (Those who got hitched have more to spend and save.) Less than half of the class of '83 are married, a fact that reflects an important cultural change that has occurred since the parents of these young adults were in their late twenties. In 1964, fully 85% of 25- to 29-year-olds were married, vs. only 53% today. Overall, the state of the class members' personal finances is not good. A majority of the 50 grads MONEY interviewed were either in debt, tenuously employed, or struggling to pay their bills. Fewer than 20% said they were able to save money. Fewer than 10% owned their own homes. Although no formal studies have compared the welfare of the under-30 generation with the situation their parents faced during the mid-'60s, economists say today's young adults have it harder. "Thirty years ago there were more jobs available for people starting out, more job security and higher real wages -- especially for college-educated males," observes Gary Burtless, a senior fellow at the Brookings Institution. Indeed, where the inflation- adjusted average wage for a college graduate's first job was $24,955 in 1967, it was only $21,481 when most of these Pali grads entered the job market in 1987. In addition, says Burtless, "housing was less expensive in real terms (62% less, according to the Census Bureau) and mortgage interest rates were lower (by 2 1/2 percentage points)."

So the majority of the Pali High kids who were raised with great expectations now find themselves coping instead of coasting. "I don't think I'll ever be able to afford to live the way my family did when I was growing up," laments Samara Bergen, a $30,000-a-year psychotherapist who is the daughter of two successful lawyers. The affluent town of Pacific Palisades (pop. 25,000) where Bergen went to high school was and remains a picturesque suburban refuge at the end of the L.A. rainbow where Sunset Boulevard meets the Pacific. Three-bedroom houses typically sell for $600,000 to $900,000 and residents commute to $150,000-a- year jobs. Although the population is 97% white, a voluntary busing program brought more than 650 minority students to Pali High 11 years ago. Thirty percent of the '83 grads were black, the majority from relatively well-off + black neighborhoods in Los Angeles such as Baldwin Hills and Baldwin Vista. Whether a student came to school by bus or his own BMW, the common expectation on the part of parents was, "You're going to college." Ninety-six per cent of the grads did. Even with their education, however, the uncertainty of the job market and the high cost of housing has forced many of the Pali class of '83 to rely on their parents for support, often living under the same roof. "It's hard to leave home when it's four bedrooms and an ocean view," says Samara Bergen, who says she knows of at least a dozen classmates living with Mom and Dad. What's more, many in the class never learned how to handle money; the wealthy kids, especially, assumed there would always be enough, so it was hard for them to learn how to manage what comparatively little they ended up having. "What we needed in school was a life-skills class," says Richard Espy, who went on a credit-card spending splurge in the '80s that drove him to declare personal bankruptcy. After climbing back to solvency as a manager of a computer software company, Espy says, "Now I know how to save: Eat salads and find a roommate." Struggling to succeed in a world they never anticipated, Pali's 1983 graduates have learned many financial lessons that not only offer insights into the economic realities confronting their generation but are of value to anyone preparing for the future. The experiences of the four class members profiled below seemed especially instructive, so MONEY asked Victoria Felton- Collins, a certified financial planner in Irvine, Calif. and author of Couples and MONEY (Bantam, $4.99), for advice that would apply to them and to others in their generation. Among the lessons:

DON'T LET TOO MUCH DEBT DERAIL YOUR FINANCIAL GOALS BY THE STANDARDS OF HIS PROFESSION, Mike Silver is a grade-A success. Despite the shrinking job base in print journalism, he has his own award-winning sports column in the Santa Rosa Press Democrat. Nevertheless, he says, "Even though I'm grossing more than $50,000 a year, my wife and I are just getting by. You have to have two paychecks to maintain the lifestyle your parents had on one." In Silver's case, one paycheck is all he's got. His wife Leslie, 29, is a graduate student at the California School of Professional Psychology working for her Ph.D. Her education amounts to a $15,000 annual investment in her future that the couple are financing with student loans. To keep from getting in even deeper, Mike hustles freelance assignments and hopes to launch a syndicated radio talk show about sports. "Ultimately Leslie will be making over $50,000 too, and then we'll be doing better," says Silver. "But with saving for our kids' education and our own retirement, we won't necessarily be well-off." Certainly not as well off as his family was when he was growing up. Silver's parents were both lawyers, but like many educated women of her era, his mother stayed home to raise him and his sister until they reached their teens. They lived in a three-bedroom house the parents bought in 1972 for $59,000; it's now worth $1 million. By contrast, Mike and Leslie have a two-bedroom house in Oakland they purchased with the elder Silvers in 1993 for $232,500. THE ADVICE: "The Silvers should do everything they can to generate income while Leslie is finishing her degree," says Felton-Collins. "Even if Mike lands a second job, his wife should also try to get a position as a teaching assistant." They also might consider a debt-consolidation loan from their parents, a mutually beneficial arrangement that should be sealed with a promissory note. Mike and Leslie would use the money from the loan to pay all of their outstanding debts, then repay their parents at a reasonable interest rate, say 7%, that's lower than the 9% that the couple pay on some of their student loans yet higher than the 4% their parents could earn on a certificate of deposit.

KEEP ACQUIRING THE SKILLS THAT EMPLOYERS DEMAND GAIL MCNAMEE BOLDEN DIDN'T REALIZE how lucky she was when she landed a position with Exxon after getting her B.S. in 1987. As a graduate of Atlanta's well-regarded Spelman College with a degree in computer science, Bolden was hired as a $28,800-a-year programmer. She says: "I didn't realize how hard it was for some people to find a job doing what they wanted to do." Her Pali classmates found their employment search more daunting. At the 10th-year reunion, stories were told about the USC economics major whose first job was delivering pizza, and the Pali grad with a marketing degree who hoped to become a travel industry sales manager and wound up as a bellboy. The common complaint was, "A B.A. is what a high school diploma used to be." Gail Bolden had at least focused on a field in college that held some promise of employment. And after graduating, she was able to consistently move to better jobs because she continued to learn software applications that ) prospective employers wanted. She now earns more than $50,000 a year designing information management systems for a law firm. Last July she and her husband Ron, 28, a manager in a company that sells dental insurance plans, purchased a three-bedroom, $250,000 house in Baldwin Hills, near where Gail grew up with her mother, a teacher, and late father, an architect. The Boldens' combined $140,000 income has also allowed them to invest $120,000 in two Florida rental houses. "A lot of my friends are feeling unfulfilled," says Bolden. "What they expected from their first job after college is not what they found." Because she has tailored her training to the job market, what she wanted is what she got. THE ADVICE: "The Boldens did the right thing buying a home when interest rates were low," says Felton-Collins. But she cautions them not to put more of their savings into real estate. Reason: "The tax advantages will diminish as their salaries increase, while their Florida rentals will probably appreciate only at the rate of inflation." Instead, they should start investing in stock and bond mutual funds that stand to earn 8% to 12% a year over time.

YOU'VE GOT TO BE AGGRESSIVE TO MOVE UP AT WORK "I THOUGHT BY NOW I'D BE BETTER OFF," confesses Troy Banks, a star football player at Pali who attended San Jose State and is now a $22,000-a-year materials handling clerk at Coherent Medical Corp. in Silicon Valley. Banks is a marketing graduate who yearns for the day when he will be dealing with customers instead of shipping invoices. Still, he's cleared too many hurdles to feel sorry for himself. Like other Pali "transfer" students, Banks spent two hours a day on the bus, commuting from South Central L.A. He lived in a rougher neighborhood than most, and his mother suffered a debilitating stroke when he was in 10th grade. But he had a father at home who provided a firm hand. "I was the first person in my family to go to college," says Banks. "And the guys who joked about my tough-loving dad are now in jail." His parents' enduring relationship is now mirrored in his own happy marriage and his doting treatment of his two sons, Aaron, 8, and Ryan, 5. But Banks' professional life is not without obstacles. He blames half of his present frustration on the sluggish California economy. Twenty per cent, he figures, is his fault for not putting out feelers every day for a salesman's job. The remaining 30% he assigns to his employers for stereotyping him as a "shipping department kind of guy." Says he: "I'm six-foot-two, 240 pounds. Sometimes I feel like I've got a sign that says laborer on my head." He feels that to get ahead he will have to finish graduate school. "I tried getting an M.B.A. at night," he says, "but it was too much, having a family and working." Still, he says, things could be a lot worse. He and his wife Robin, 27, who works as a receptionist, have a joint income of $40,000, two cars, a 401(k) plan for Troy, the beginnings of a fund to buy a house -- and absolutely no debt. Says Banks: "I refuse to even get a credit card." THE ADVICE: According to Felton-Collins, "Banks deserves accolades for avoiding his generation's bugaboo: too much debt. He's got his finances under control." Now, she says, he must get the additional education that will give him another leg up at work. Completing the M.B.A. he started would be ideal. He must also make it clear to his bosses that he has the ambition -- and the willingness to do whatever it takes -- to get into sales.

BE PREPARED TO SWITCH CAREERS FOR A HIGHER SALARY JUNE GESSFORD LOUKS HAD BEEN WORKing as an architect for three years when she realized that "if I was going to live the way my parents did -- own a nice house, travel and raise a family without scrimping -- I was going to have to earn a lot more." Her project supervisor -- a man 20 years her senior -- was making just $15,000 more than her $25,000 salary. So, Louks figured, "The only way I was ever going to do better financially was to make a big change." She did: Five years later, she's now a $75,000-a-year Mary Kay Cosmetics senior sales director. It was a major turnabout, but among Louks' classmates, career changes seem to be the rule, not the exception. Gina Nemo went from acting on TV to owning a vegetarian restaurant to working as a photographer and producing records. Nancy Robinson sold pharmaceuticals; now she's enrolled in graduate school to become a veterinarian. Louks' career change paid off handsomely. She can afford to say to her 31- year-old commercial real estate broker husband Jeffrey, "Honey, let's go to Thailand next week." With his more than $100,000-a-year salary, the couple was able to buy a $510,000, four-bedroom house in Pacific Palisades last April. "Instead of feeling stuck at 29," says June Louks, "it feels like the sky really is the limit." THE ADVICE: "June certainly illustrates that you should do what you love, and the money will follow," observes Felton-Collins. "Finding work that you are passionate about is a lot more productive than taking a run-of-the-mill B.A. into today's job market and hitting your head against the wall." Though Louks doesn't need much financial advice, Felton-Collins notes that since she is self-employed, she should annually invest the maximum amount possible in a profit-sharing Keogh plan ($30,000 or 15% of her income, whichever is less) for retirement.

June Louks and Gail Bolden are two of the exceptions from their graduating class. They're married, have high-paying jobs that they find fulfilling and enjoy the same comfortable lifestyle as their parents. Many of their less successful classmates may eventually inherit enough from their parents to secure a measure of their elevated expectations. But for now, there are no easy paths to financial security. "You can't fall back on your degrees," says another Pali grad, M.B.A. turned filmmaker Kim Greene. "The only sure way to make it these days is to live like a renegade and keep believing in yourself."