Financial BLACK Fitness ENTERPRISE Contest Winner #5 Phillip & Jamie Lomax

Black Enterprise, May, 2000 by Ivan Cintron

PHILLIP AND JAMIE LOMAX ARE ON A MISSION TO establish a budget, eliminate extraneous spending and reduce debt. They know it's going to be a tough job, though, since their total debt, including their mortgage and credit cards, totals more than $94,800.

"We need a better way to budget," says Phillip, 29, a petty officer first class and aviation electronics technician in the U.S. Navy stationed at Point Mugu in Oxnard, California. "We tried to do it for several months, but we're both so busy and things are so hectic. I'm only home on weekends, so it becomes so much more difficult."

Phillip and Jamie, 28, know they have to achieve those three objectives if they want to fulfill their plans in 10 years, which include socking away money for daughter Chyanne, seven, and son Trey, five, to go to college. Right now, the Lomaxes send their kids to City Tree Christian School, a private religious elementary school (tuition is $777 per month), but plan to send them to public high schools so they can save more money for college.

Jamie works as a project support analyst for Sempra Energy Information Services, a unit of utility firm Sempra Energy that handles marketing and record-keeping operations for other utilities across the country. She lives in Lakeside, California, their primary residence, and takes care of the kids.

In addition to funding their children's education, Jamie, who worked in the hotel industry for 10 years, wants to start a bed-and-breakfast, and Phillip hopes to start a second career as a high school teacher when he retires from the military. The Navy is already helping him complete his associate's degree in education--he's two classes shy--and he plans on getting his B.A. in the field.

In the past year, the Lomaxes have gotten their feet wet with investments. Phillip started the Millennium Investment Club with about a dozen of his fellow enlisted and civilian colleagues on the base. They bought 25 shares of Cott Industries (Nasdaq: COTT) and 16 shares of Philip Morris Cos. (NYSE: MO). He contributes $50 a month toward the club.

As for their other investments, Jamie has managed to put away $3,000 in her 401(k) plan, while Phillip bought stock in Home Depot (NYSE: HD) through a DRIP (dividend reinvestment plan); they also invest in a Legg Mason equity growth fund, plunking down $100 a month on a regular basis.

THE ADVICE

To get the Lomaxes on the right path toward better managing their budget, credit and taxes, BLACK ENTERPRISE arranged for them to have an initial consultation with Mark Mitchell, a financial planner with AXA Advisors in San Juan Capistrano, California.

* Establish a realistic spending plan. "When people say they can't figure out where their money is going, what I always get people to do is look at their cash flows and outflows, identify necessary and discretionary spending. It's finding that missing money" that's crucial to setting up a realistic and successful spending plan or budget, says Mitchell.

For instance, Phillip likes to buy new electronic gadgets, but didn't know exactly how much he was spending there, Mitchell says. And Jamie tends to pay for certain expenses with their credit card, like dinner and entertainment. Eliminating those two expenses will enable the Lomaxes to direct their leftover cash into their retirement plans.

* Max out her retirement plan. Mitchell says that while Jamie and Phillip have taken their first steps toward investing by starting an investment club, buying a mutual fund and purchasing a stock through a DRIP, she should "max out" her qualified retirement plan.

Since Phillip is in the armed forces, he doesn't have a defined-contribution plan like a 401(k), although there is legislation in the works to change that for military personnel. Instead, he has a defined benefit plan that will pay him 50% of his base pay after 20 years of service. Jamie, however, does have a 401(k) plan, so she should contribute the maximum amount--currently $10,500 a year. The Lomaxes should also consider opening up IRAs--they recently closed one--and contribute the maximum $2,000 apiece to build up their nest egg.

* Plan their finances together. Mitchell doesn't recommend that Phillip be solely responsible for his and Jamie's finances, even though she seems to agree with the arrangement. "When it comes to financial decisions, both players should have access to the deck of cards," he says. That means Jamie should be an active partner in the family's finances.

DECLARATION OF FINANCIAL EMPOWERMENT

From this day forward, I declare my vigilant and lifelong commitment to financial empowerment. I pledge the following:

1 To save and invest 10% to 15% of my after-tax income

2 To be a proactive and informed investor

3 To be a disciplined and knowledgeable consumer

4 To measure my personal wealth by net worth, not income

5 To engage in sound budget, credit and tax management practices

6 To teach business and financial principles to my children

7 To use a portion of my personal wealth to strengthen my community