Filling The Right Prescription For Wealth Building

Black Enterprise, Nov, 2000 by Carolyn M. Brown

B.E. gives this year's Financial Fitness Contest winners a check-up

PROVIDING REMEDIES FOR THE FINANCIAL PROBLEMS OF African Americans has been one of the thrusts of our magazine for three decades. As we entered the 21st century, BLACK ENTERPRISE expanded this mission, and challenged our readers to realize their full financial potential through the Black Wealth Initiative, our comprehensive wealth-building campaign. The centerpiece of this financial education and empowerment program is 10 principles about disciplined saving and investing, known as the Declaration of Financial Empowerment (DOFE).

As a means of having readers like you, embrace DOFE, BE developed a Financial Fitness Contest. Since January, we have identified 10 individuals and their families who needed to get their finances whipped into shape. We provided them with an initial one-hour consultation with a financial planner or investment consultant and $2,000 to apply to an investment account.

On the following pages, we share with you the journeys of the first six winners--just how far they have come and how far they have to go.

JANUARY WINNERS: NICOLE AND KEVIN SIMPKINS

As with any best-laid plan, training begins at home. Our first contest winner was BE employee Nicole Simpkins. For the 29-year-old account executive, one New Year's resolution was to develop a sound savings and investment plan, which underscores DOFE principle No. 1: to save and invest 10% to 15% of your after-tax dollars.

Winning the contest has made a big difference in her life. "I am definitely saving more now than before the contest. I am getting closer to my goal--to save $10,000 by the end of this year." She had $3,500 on reserve as of September. Simpkins is paying herself first, by depositing $500 each month into her credit union savings account.

Simpkins, who landed a promotion and a 10% pay increase (including commissions), started her investment program with aggressive-growth stocks and mutual funds. But as she grows older, she wants to develop a more balanced portfolio.

The Gen-X investor has also adhered to the advice of David P. Gardner, vice president of investments, with PaineWebber in New York. For starters, she paid off $3,000 of short-term debt using half of her cash prize. "As much as I could pay off, I did. Instead of being satisfied with making the minimum payments due, I wanted to totally pay off my bills," says Simpkins, who has slashed her credit card debt in half.

She also bought shares in Dell (Nasdaq: DEL) and CitiCorp. (NYSE: CITI). She already owned shares in Disney (NYSE: DIS), a gift from her mother. Also, she invested the other half of the $2,000 in contest winnings in Goldman Sachs Internet Toll mutual fund.

NICOLE AND KEVIN SIMPKINS FINANCIAL SNAPSHOT:

* Paid off $3,000 in credit card debt

* Created emergency fund, current value = $3,500

* Bought shares in CitiCorp. and Dell Computers

* Started investment program in growth and aggressive--growth mutual funds

FEBRUARY WINNER: JENNIFER JONES

Ten months ago, frequent spending sprees at the local mall were Jennifer Jones' No. 1 pastime. Today, she is a reformed "shopaholic" (although she used $459 out of her $2,000 winnings to purchase a home computer). But Jones has put DOFE principle No. 2 into action: to become a proactive and informed investor.

"I wish I had sat down with a financial planner 10 years ago," says Jones, referring to her consultation with Les Netter, a financial consultant with SolomonSmithBarney in Atlanta. "He broke it down for me that if I don't [structure an aggressive stock and mutual fund portfolio], I won't be able to retire [in 12 years]." Jones will need to save $4,000 a year to have at least a balance of $100,000 by 2011 (assuming a 12% rate of return, the Standard & Poor's 500 average).

Since winning the contest, Jones has been reading about the stock market. She has also crafted a systematic investment strategy. She now invests on a regular basis. About $25 is automatically deducted from each paycheck and deposited into a money market account. Another $30 each pay period is designated for her 401(k) retirement plan, and $75 a month is invested in three mutual funds ($25 each), and an IRA account that Jones opened through American Express Financial Services.

The 44-year-old designer of data circuits at AT&T in Lithonia, Georgia, took advantage of stock options in AT&T Wireless (NYSE: TW). Employees could purchase a minimum of 100 shares (at $29 a share). She used $1,500 of the contest winnings (plus additional funds) to invest in the stock She also owns 24 shares of AT&T Corp. (NYSE: T).

Following Netter's advice, Jones readjusted the holdings within her retirement plan. She invests 20% of her portfolio in AT&T stock, 40% in a Fidelity growth fund, and 40% in a Janus growth fund.

Jones has paid off one credit card and is working diligently to pay more on two remaining cards. She hasn't taken on any new debt since March and has made some major spending cutbacks, including taking her lunch to work. She recently enrolled in a real estate course. Eventually, "I want to invest in residential property. I want to buy homes, remodel them, and sell them," Jones says.