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Young career couple advised to wait on big expenses

McClatchy-Tribune Information Services

April 13, 2015


SEATTLE — Sometimes timing really is everything.

That was the case for Caitlin Littlefield and Nick Neverisky, both 30, engaged and earning about $63,000 a year combined.

They are at an age when the future stretches in front of them like a long boulevard. The Seattle couple’s goals include graduate school, rewarding careers, children and a house, to say nothing of a trip to New Zealand and eventual retirement.

But the two were unsure about an affordable sequence of events that would make their dreams come true. Both completed their bachelor’s degrees just before the financial panic of 2008 and the Great Recession, which rattled their confidence in the future.

From the crash they learned, Neverisky said, that "success is not assured."

A local chapter of the Financial Planning Association connected Littlefield and Neverisky with Len Skiena, a certified financial planner.

Skiena helped the couple crystallize their plans for the future and avoid financial potholes by staggering some of their more expensive life events, such as earning advanced degrees, having children and buying a house.

"What we’re planning for is the life they want," Skiena said.

Littlefield said Skiena brought the couple’s financial future into sharp focus. "Everything is much less nebulous now," she said.

Like many young people in Seattle, Littlefield and Neverisky are relative newcomers, having moved from New England. Littlefield is working toward a doctorate in forest ecology at the University of Washington School of Environmental and Forest Sciences. She earns about $20,000 a year as a research assistant supplements her income with occasional catering jobs.

Neverisky earns about $43,000 a year as a project associate with Triangle Associates, a downtown Seattle consulting firm that provides environmental education, mediation and public engagement.

Despite their uncertainty about the big picture, the couple are meticulous when it comes to their day-to-day household finances. They currently have about $14,000 in a checking account and about $6,900 in savings.

Littlefield and Neverisky are already saving for retirement, with about $5,500 in their 401(k) and Roth IRA accounts. Their debts add up to about $28,700. Two-thirds of their liabilities are student loans; the remaining debt is for a car.

After talking with the couple and running financial projections, Skiena was not concerned about their long-term outlook. He saw some red flags, however — not years in advance but within this decade.

"The really good thing is that they found out in time to do something about it."

For example, Neverisky has toyed with the idea of earning an advanced degree. But Skiena’s projections showed the couple’s income and cash flow would suffer if Neverisky enrolled in a graduate program before Littlefield completes her degree and resumes her career.

If Neverisky waited to go back to school until after Littlefield graduates in 2018, the couple could avoid a potential pothole.

"By doing that, it gives her a chance to start making more money before Nick starts making less," Skiena said.

Skiena advised the couple to keep their assets in cash now because they need the money for living expenses. Now is also not the time for the couple to buy securities that could lose value in a Wall Street downdraft.

Skiena also offered Littlefield and Neverisky some emotional support: Money will be tight for a few years, and it will be frustrating at times, he said. He told them to stay focused.

The couple’s first reaction to Skiena’s assessment was relief. "The haze is cleared," Littlefield said. "I’m not that worried anymore."

Since meeting with Skiena, Littlefield and Neverisky are also using a particular phrase far more often: "cash flow." The term helps them think about their current and future finances.

Skiena is not the least bit worried about the couple running out of money, given their financial habits and their commitment to invest in their careers. Their big challenge is to get through the next five years.

"Once they reach the age of 35," Skiena said, "they’ve reached the promised land."

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TIMING THE MARKET — SAY WHAT?

Developing a sound financial plan takes time and thought, but the real work comes later — when you have to stick with the plan.

Too many people stray from their individual financial plans when they are either spooked or seduced by passing market conditions, said Len Skiena, a Seattle-area certified financial planner.

Good financial plans compensate for market volatility, which is another reason to stay the course, Skiena says.

"Stay disciplined to it," he said. "Don’t try to outthink it."

Evidence that individual investors are too often stampeded into making poor decisions is especially abundant in the stock market.

Dalbar, the Boston-based research and auditing firm, has studied individual-investor behavior for 20 years. The findings are sobering: Individual investors consistently earn less than the market averages, as measured by the major indexes.

That’s because too many individual investors try to "time" the market’s peaks and lows, Skiena said. It’s a recipe not for beating the market, but for getting beaten.