Financial makeover: Starting over, with hope and a plan

For Alisa Cox, 2009 has been a year of fresh starts.

In January, she began training at Renton Technical College to become an ophthalmic assistant. The first quarter, she made the dean's list. At the end of the year, she expects to earn her certificate and start looking for a permanent job in the eye-care field.

"I just love it and hope to be able to make around $17 an hour when I finish," Cox said.

It's an income she'll sorely need as she strikes out on her own financially. In the midst of divorce proceedings, Cox now receives $2,000 a month in temporary spousal support as her only source of income. A big chunk of that — nearly $1,400 — is quickly consumed by rent on the house in Seattle that she used to share with her ex.

Previous jobs she had in gardening and the arts were satisfying but didn't pay well or offer benefits. They also left her with a hand disability and no savings.

The $600 a month remaining after Cox pays rent doesn't go far, though her tuition is covered by a scholarship from the state Division of Vocational Rehabilitation, plus a small grant helps with the cost of commuting to school and to her clinical internship.

Although Cox said she wasn't involved in many financial decisions during the eight years of her marriage, she said she now needs to establish credit for herself and plan for retirement.

"I'm starting with a clean slate here and I'd appreciate help getting it right, right from the start," Cox said. "I'm 55 and really want to retire on something other than dog food."

To get pointed in the right direction, Cox met with Gary Arford, the majority shareholder and president of Comprehensive Wealth Management in Lynnwood. Arford, a member of the Financial Planning Association — Puget Sound Chapter, said meeting with someone in Cox's circumstances was eye-opening.

"I was candid with her, because she's just in a world of hurt at the moment," Arford said, citing Cox's lack of income, assets and financial safety net.

With Cox's input, Arford created a pair of budgets for her; one showing her present situation and another based on an estimated monthly salary of $2,944 when she finds employment next year. Her current budget showed a $655 monthly shortfall, pointing to the need for Cox to take action.

Cox has already applied for a student loan, something Arford said she needs to get to keep a roof over her head, but due to a backlog of applications, she's not sure when a loan will come through. In the meantime, she's having difficulty finding a suitable roommate and trying to come to terms with the fact that she'll have to move.

"It takes money to move," Cox said, citing the need for the first and last month's rent and a security deposit, plus the physical cost of transporting her belongings. She'd like to stay put until she lands a job next year and then find a place to live as close to work as possible.

Because she doesn't have a safety net, Arford recommended Cox take the maximum disability coverage available through her future employer. And as her cash flow increases, he suggested she consider long-term care insurance. With this type of policy, you pay an annual premium now for future custodial care such as home-health services, assisted-living facilities or nursing homes.

For the second budget, which would take effect next year after Cox begins working, Arford factored in a lower rent of $950 per month. Even still, the numbers came up about $100 a month short. Arford said in this case, someone in Cox's position needs to continue looking for ways to reduce expenses, such as cutting back on hobbies, recreation and clothing.

A student loan could help with the shortfall, but Arford suggested Cox try to keep aside at least a three-month cash reserve.

Though she says not having an emergency fund causes her to lose sleep, Cox fears she may have to use the loan to replace her aging vehicle.

As for the future, Arford ran three scenarios for Cox: retirement at ages 67, 72 and 75.

"The best thing I could come up with is that she needs to put away 50 percent of every raise that she gets, along with as much money as possible to start with and just keep after it," Arford said.

"I told her that I can never guarantee where you'll be at any point in time, but I can guarantee that if you have a systematic, disciplined, well-thought out process, that you will be better off two years, five years, 20 years from now than if you hadn't done it."

The reality of her retirement prospects is understandably difficult for Cox to digest.

"The gist of all of this is that I will have to work until I drop," Cox said.

Nevertheless, she tries to remain optimistic. She said she's grateful for the clear picture the financial planner painted for her, and for the green light to go into debt to keep going to school.

"It also showed me that if there's something I can do to get a second revenue stream ... that it would be worth pursuing because what I'll make is just not going to take care of me," Cox said. As she gets through the next few months, Cox said she's reminding herself that since she's made up her mind what she wants, she's halfway there.

"I will get by, but any dreams are going to take a miracle," she said.