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Originally published Saturday, June 11, 2011 at 10:01 PM

Money Makeover

Financial makeover: Teacher gets a lesson in cutting debt

This spring, Paula Roberts became single again. But in setting out on a new life for herself, she's found that she still has obstacles to surmount that followed her from her previous life.

Special to The Seattle Times

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quotes The article needed a lot more information. She has about $4000/mo income (how much... Read more
quotes "She turns 43 this summer." I realize that 43 is not "old." I'm... Read more
quotes Side note highlighted here: the financial advisor says she should take on more debt by... Read more

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This spring, Paula Roberts became single again. But in setting out on a new life for herself, she's found that she still has obstacles to surmount that followed her from her previous life.

Namely: debt. And a lot of it.

Roberts' biggest debt is her student loans: $52,000 for her bachelor's from the University of Washington and master's from City University. She turns 43 this summer.

That's just a little bit more than her $50,000 annual salary as a high-school English teacher. Although it's down significantly than the original $72,000 price tag of her education.

She's also still raising two teenage sons who split their time between Roberts and her ex-husband. The oldest turns 18 this month, but that also means that the child-support payments from her ex-husband drop to $180 per month from $280.

With a new chapter of her life opening before her and unsure of what to do, the Duvall woman filled out an online survey to participate in a free financial makeover, explaining that she needed to learn how to live within her means and support her children.

Over the long term, Roberts said, she wants to buy another house, would like to help pay for her sons' college education, and may eventually need to get a new car. But she also needs to put money aside for retirement.

"I will retire when I financially am able," she said. "Which at this point will be when I'm 80."

She met with Laurie Klein, a certified financial planner and a member of the Financial Planning Association's Puget Sound chapter, and principal at Bellevue-based Kaizen Financial Advisors.

One of the first things Klein did was advise Roberts against buying a house.

"I said, 'Absolutely no way,' " Klein said. "Her living expenses were already greater than her income."

Roberts' finances aren't that complex. She used the proceeds from the sale of their house to pay down a lot of debt and now rents a two-bedroom apartment for $1,100 a month.

Her 2002 Volkswagen Passat is paid off. She estimates her monthly utility bills at $200, with another $100 for the Internet and phone service, and $150 per week for groceries.

She also owes about $2,000 on a credit card issued through her credit union, owes her mother another $2,000 (payable whenever she can), and is still calculating what will likely amount up to $5,500 in attorney's fees.

On the plus side, she also received about $28,000 from her ex-husband's retirement as part of the divorce settlement, now parked in an IRA. She's also making the maximum contributions to her retirement plan, the terms of the divorce require her ex to pay her student loans for the next 4 ½ years, and she still has a little left in savings from her house sale.

"I'm down to my last eight grand, and I'd really like to figure out what to do with it before it's gone," Roberts said.

But the simplicity of Roberts' financial situation is also its drawback. She doesn't have a lot of options to get her debts under control other than to start making more money — no mean feat on a teacher's salary.

And Roberts isn't ready to leave teaching. She's only been a teacher for five years, having come from a background in technical editing and administrative work (neither of which paid more than her current teaching job), and wants to continue in teaching at least until her youngest graduates. He will be a sophomore this fall.

After that, she said, she might consider looking at working in another school district which has better pay packages.

In the meantime, however, Klein and Roberts agree that the quickest way to an improved earning power is to forego summer teaching this year and instead enroll in training courses that will give Roberts enough credits to move into a higher pay grade, boosting her gross salary by about $4,000 per year.

Then in subsequent years she can pick up summer hours for about $3,000 more a year.

Robert's next-highest priority is to pay off her credit-card debt, which Klein called "financial cancer."

The third major step Roberts is taking is learning how to budget, and trying to find areas in her spending where she can cut back.

It isn't easy, but at Klein's suggestion Roberts started tracking her income and outgo on Mint.com, a free online-budgeting tool made by Intuit.

"That's been really helpful, as far as being able to track my spending," Roberts said.

"It's one of those skills that parents are supposed to teach their kids and it was never imported upon me," she said. "And my ex wasn't any better."

She's fine with not being able to buy a house yet.

"I'd rather be able to pay a low rent and increase my salary and work on paying off some debts before I invest in a house," Roberts said.

With her oldest enrolling in Cascadia Community College this fall, she won't be able to contribute much other than a place to live. Money from his paternal grandparents will help pay for the tuition.

Knowing she has a number of lean years ahead of her, she's putting her best face forward.

"Now is the time to stop spending because I'm taking a turn in the road for the next part of my life," she said.

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