Investigating a New Approach to Spending

For Brent Dyrness, crime pays--or at least keeps him steadily employed in a time of economic uncertainty.

Dyrness is a detective with the Burbank Police Department, and with the entire country in a heightened state of alert as the war on terrorism is waged overseas, he isn’t worried about where his next paycheck is coming from.

“There has always been overtime or additional work available for a police officer, but now, after the [terrorist attacks of Sept. 11], there are a lot more opportunities out there. I don’t know how permanent this situation is, but the [Burbank] airport alone is hiring about nine people a day.

“I have a job, and I always will have a job. That’s one thing I’m not going to have to worry about.”

But something Dyrness has had more than a few restless nights over is the sometimes haphazard manner in which he’s handled his money.

“For most of my life I’ve been in debt or have just gone from paycheck to paycheck,” the 36-year-old said. “My spending habits are very spontaneous. I never knew that much about finances, never read the business section of the newspaper except for the Money Make-Overs. I just went by trial and error.

“But I did know that I wanted to better myself and be more financially successful. I just wasn’t sure how to go about doing that.”

Certainly, Dyrness has made his share of financial missteps.

The detective, who is divorced and has a 10-year-old daughter from another relationship who lives with her mother, recently sold the home he had been living in and moved in with a friend in Burbank, rent-free. Because he had taken out a home equity loan to pay off a mountain of credit card bills, the net proceeds from the sale of his house amounted to just $5,000.

His only other savings is $5,000 in a passbook account, and he wants to use that and the $5,000 from the house sale to buy furnishings for the house he plans to buy next year.

The new house, and a goal to retire at 50 with no reduction in lifestyle, are at the top of his wish list. But despite his steady income, he worries that he will not be able to achieve those goals.

A tough case to crack perhaps, but San Luis Obispo-based financial planner Judith Martindale said it can be solved with a liberal application of financial discipline.

Martindale said Dyrness’ relative youth, his $85,000-a-year salary and hefty state retirement plan could enable him to achieve what he wants--provided he keeps his spending in line.

Dyrness has exhibited financial self-restraint in some regards. He faithfully puts $600 a month into a deferred compensation account that eventually will help supplement his CalPERS retirement package. The state retirement plan will pay the equivalent of 84% of his salary annually when he retires, which he can do as early as age 50.

Dyrness estimates the cost of a new house at $375,000 to $400,000. He plans to finance it with a loan through CalPERS, making no down payment.

Martindale, however, warned that he could be getting off on the wrong foot with that game plan.

“That house is too expensive for him with zero down,” she said of his projected monthly payments, which could run in excess of $2,500 a month. “He needs to be shopping for something about $100,000 less.”

If Dyrness has his heart set on a house in the higher price range, Martindale said, he should use the $10,000 he has earmarked for furniture purchases to begin an aggressive savings plan aimed at generating a sizeable down payment.

Dyrness remains convinced he can handle the payments on a 100% loan out of the $5,500 he takes home after taxes each month, particularly if he takes on overtime assignments.

Dyrness has few other debts. With his credit cards paid off and no housing costs for the time being, his only real obligation is $300 in monthly child support payments. He owns his 2000 Chevy Silverado pickup truck.

“I’m finally out of debt and have some money,” he said, “and I’m starting to feel better about myself financially and physically.”

His says his biggest spending vices are golf, dining out (“Hey, I’m a bachelor”) and buying vitamin supplements as part of his rigorous training regimen.

This year, around the same time he was beginning to think about putting his financial house in order, Dyrness enrolled in a Monday-through-Friday fitness boot camp that meets from 5:30 to 6:30 each morning. In a little more than five months, he chiseled 50 pounds off his 5-foot-11 frame, getting him down to his current 195 pounds.

“I was always active in sports, but this made me a lot more disciplined in my exercise. And I’m eating better now and just taking better care of myself,” he said. He’s confident he can show the same discipline in managing his money.

Although Dyrness may be reluctant to formalize that discipline by creating a working budget for himself and sticking to it, Martindale said it would be a solid first step toward finding out where he needs to cut back.

“His spending habits still worry me,” she said. “He’s debt-free now, but I can’t help but wonder if he’s going to be able to stay away from credit card spending. It’s kind of like when you see a person who has lost a lot of weight. You wonder if they’re going to be able to keep it off.”

Dyrness said his daughter’s college savings are being handled by other family members, but Martindale pointed out that he could invest in a no-commission fund such as the 100% equity option in California’s Golden State Scholar Share program if the situation should change.

The $64,000 in Dyrness’ deferred compensation account is in a split of 88% stocks and 12% fixed-income investments. More than half of the stock portion ($36,000) is in the Maxim Stock Index fund.

“It’s an aggressive portfolio, but if you consider the pension money [which will be fixed at a certain amount], the stock holdings are appropriate,” Martindale said. “I would say he’s on the right track, given his only financial objective is early retirement.

The fact that Dyrness has at least 14 years before he wants to retire should make it easier for him to sleep at night, despite the stock market’s dismal state. Dyrness said the events of the last month have driven home the importance of not obsessing about market fluctuations and their effect on his portfolio.

“Like anything else, you’ve just got to play it out until things get back to normal.’

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This Week’s Make-Over

* Subject: Brent Dyrness, 36

* Gross annual income: $85,000

* Goals: Save enough money to buy a house; retire at 50 with no cutback in lifestyle.

Current Portfolio

* CalPERS retirement account

* Deferred compensation account : $64,000 (55% in Maxim Stock Index mutual fund; 12% in 84-month certificate of deposit; 11% in Great West Portfolio fund; 6% in Maxim T. Rowe Price Mid Cap Growth fund; 6% in Maxim Invesco Small Cap Growth fund; 5% in American Century Ultra fund; 5% in Fidelity Advisor Growth Opportunity fund)

* Savings: $10,000 in passbook account

* Other assets: 2000 Chevy Silverado pickup; $1,500 in collectible hockey cards; $500 savings bond.

* Debts: $300 a month for child support

Recommendations

* Establish a budget and live by it.

* Try to save enough to put 10% down on a home purchase, using the passbook savings as seed money.

* Pay off any credit card charges in full each month to avoid building a balance.

* Continue strong start in putting away a portion of income for retirement.

Meet the Planner

Judith Martindale is a fee-only certified financial planner based in San Luis Obispo. She specializes in planning for middle-income clients.

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