Boston Gal's Open Wallet

A human resources manager for a uniform company in Burbank, Diehl makes close to $90,000 a year. She also picks up $6,600 a year renting out a room in her Camarillo house. Her only debt is the $92,000 mortgage balance on the three-bedroom home, valued at $400,000.

She has about $422,500 in savings and retirement accounts.

Those savings, however, will have to carry her well into old age. Diehl has longevity in her genes. Her 85-year-old mother still works as an extra in movies -- often as a grieving grandmother in funeral scenes -- and plays golf every weekend.

Diehl's vision of retirement isn't lavish. She dreams of hanging out with her three grown children, all living in Southern California.

A crossword puzzle whiz and self-professed game show diva, she said it would be fun to land an appearance on a television game show.

But most of all, she wants to know whether she'll be financially secure.

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The resulting numbers weren't pretty. Granted, the couple was contributing $1,000 each month toward pension and other retirement plans, but they were also exceeding their income. One aggravating factor: the rising cost of gasoline. While the couple lives in Plymouth, Sterling commutes to Hopkinton and Colleen works in Medford. They've seen their monthly gasoline purchases jump to $600 from just $200, gobbling up $400 that they can ill afford to spend.

"I knew that we were living paycheck to paycheck, and this proves it," Colleen said.

The good news was that the couple had not only avoided credit card debt, but was steadily chipping away at both their mortgage and $53,000 of school loan debt that financed Colleen's doctorate degree. "We work really hard not to take on bad debt," Sterling said, noting that they are very aware of the importance of paying off their credit card balances every month.

But there are some planning areas that haven't gotten enough attention. They don't have wills, an emergency fund, or sufficient insurance, Chan said. To address those issues, he said, the Worrells need to come up with some money in their already tight budget. "There are only two ways to do that - increase income or decrease expenses."

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Now, Ventura's mortgage payments are double what they were in the past, at $1,340 a month. Ventura is also preparing to pay $5,000 in property taxes as the first-year anniversary since purchasing her three-bedroom home, valued at $458,000, approaches this summer.

Although the $50,000 annual salary that Ventura receives as a library assistant has been sufficient to cover her mortgage and living expenses to this point, the addition of the property tax payment, as well as paying down her $15,000 credit card debt, has left her cash flow a little tighter than she's used to.

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Here's a snapshot of what the Seftons owe:
$59,000 on their mortgage
$4,500 on a second mortgage
$12,500 on their car
More than $13,000 on their credit cards
Total Debt: about $89,000

With less than $2,000 cash in the bank, the family can't count on their savings, either.

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But going green, the couple are now discovering, can quickly land you in the red. Seth, 37, and HyoJung, 34, thought the job would take three months and cost $70,000, with them shouldering some of the work. Six months in, they now estimate it will cost twice that much in money and elbow grease.

Seth says he was "shocked" by the cost of some green upgrades. "I found a more efficient tank-less hot-water system for $1,500, but the contractor told me it would cost $6,000 to install it." They're working late into the night laying bathroom tile themselves to save money.

Meanwhile, they have drained most of their savings and can't afford to keep living in HyoJung's condo in Gallery Place and paying the mortgage on the new house too. They've even got a third place: a house Seth bought in nearby Silver Spring, Md. years ago that is now rented out.

All told, the couple hold three adjustable-rate mortgages that add up to more than $1 million on a combined salary of just under $120,000 - and in a real estate market that's only headed lower.

Plus, they're underfunded for retirement, with a mere $75,000 in tax-deferred accounts. "Their situation is very worrisome, absolutely," says Chuck Bender of the Financial Consulate in Lutherville, Md., who reviewed the couple's finances at Money's request. "They have very little margin for error."

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Matthew and Kristin max out both their Thrift Savings Plans (TSPs), the government-employee version of a 401(k), for $1,239 per pay check, and they contribute the maximum to their Roth IRAs with $833 per month. Currently, they have a total of $87,500 in retirement funds.

They also invest $500 a month in mutual funds, which now total nearly $44,000.

Since they’re stationed so far from one another, they’ll have to wait until November to see each other again. That also means they do not yet own a home and have to pay two sets of rent and bills. They plan on buying a home and starting a family in the near future.

It helps that $26,000 of their salary is not taxed, because the Army gives them a basic allowance for housing. And in 2022, when they retire from the Army, they will both receive 50% of their base pay and full medical benefits for life, which they expect to amount to a little over $100,000 per year in today’s dollars.

When they retire from the Army, they both would like to continue to work. “We look forward to the day where getting up for work is an option,” said Matthew. “We would much rather sit at home drinking coffee together with our two basset hounds then sitting in rush hour traffic.”

For now, they keep their living expenses relatively low – a combined $1000 per month on rent, and about $460 for utilities. They also spend about $600 a month on groceries and $500 on gas and maintenance costs for their two cars. They bought a Nissan Xterra in 2005 and then an Acura TL in 2006 – both new. The Shifrins paid off both cars when they returned from service in Iraq in November 2007.

And just because they haven’t yet started a family doesn’t mean they aren’t saving for one. While deployed in Iraq, the Shifrins socked away their entire paychecks except investments, car payments and $160 a month for life insurance. Since the Army took care of their food and lodging, Matthew and Kristen were able to save $50,000 in a high-yield savings account earning about 3.75% interest. They’ll eventually use that for a down payment on a home and education costs for their future children.

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Fortunately, this couple took retirement savings seriously and started socking away money decades ago. On their combined annual income of around $120,000, Tim, an engineer for a safety-equipment company, and Jana, who runs her own small law practice, have accumulated $1.2 million.

With no kids, these world-class savers are socking away some $45,000 a year - more than a third of their income - by maxing out their 401(k)s and IRAs and saving additionally in a sprawling collection of taxable investments and variable annuities.

Tim is also vested in pensions through his current and a former employer. What's more, they have around $550,000 in equity in their Lakewood, Colo. home and a nearby condo they own and rent out to Jana's sister Pam.

Still, it's a challenge to keep up this savings pace. In 2006, Jana was diagnosed with chronic fatigue syndrome. The illness forced her to scale back her work and added $16,000 in annual unreimbursed medical expenses.

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At present, the couple has $44,000 in retirement savings. Both contribute double-digit percentages to their 401(k) accounts and both receive 3% matching funds from their employers. Additionally, they put $200 a month in a Roth IRA account.

They have about $16,500 in a traditional bank savings account that earns 0.3%. In case of emergency, they keep about $4,000 in Ameriprise Cash Reserve Certificates.

The Wisneskis recently set up a 529 savings account for Ashyln’s college costs but they do not plan on funding her education entirely. While they have saved a modest amount for her college tuition, they also feel it is important that Ashyln contribute to her own education costs.

“We want to have as much money as possible to retire comfortably and as soon as possible. We want to maintain our lifestyles through retirement and not be restricted by money and bills,” Nate says.

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Scott, 31, and Razije, 30, save about 22% of Scott's take-home pay of $54,000 a year. They have no credit card debt — just a 30-year mortgage on which they owe $136,000.

They have built up more than $145,000 in mutual funds, stocks and bank accounts. Once he retires, Scott will also benefit from a military pension, guaranteeing him monthly income for life.

What's dragging down their finances is the modest return they're getting on investments: They've pocketed a meager $2,000 profit in seven years on more than $100,000 invested in the stock market.

"I've heard that anything you can put in the market is better than nothing," Scott says. "But in the last seven years, I've seen a small return on my money. I wonder sometimes if the financial market has changed so much that old rules might not apply."

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Some in the class of '98 saw their lives turned inside out in the past five years in ways that they never imagined. Consider Carrie and Jeff Doyle. They married soon after they both graduated from Olin in 1998, and when USA TODAY contacted them in 2003, they were both working at Smurfit-Stone Container in Chicago and about to start a family. Five years later, the Doyles have parented four children, including first-born Grace, who died in 2003 of a heart defect when she was 2 days old.

"It changed everything in terms of my career ambitions. When I got pregnant again later that year, I quit my job and have not returned to work since," says Carrie, 33. Today, she stays home with Brian, 4, Elise, 2, and Jason, 1. Jeff, 35, went to work in 1998 as a management trainee with Smurfit-Stone. He's had three recent promotions, and after relocating to Cincinnati in 2006, the Doyles are back in the Chicago area, where Jeff is director of supply and inventory management.

The housing market made the relocations ill-timed. Hoping to cash in on seemingly endless appreciation, the Doyles rented out their home near Chicago and bought one in Cincinnati. They put the Cincinnati house on the market in June 2007 and received an offer for the list price on the first day. But that fell through over financing issues. Then came the daily barrage of news about subprime mortgages and the bursting of the real estate bubble. By the time the house sold five months later, the Doyles' $12,000 profit had become an $18,000 loss.

Corrugated containers, one of Smurfit-Stone's main products, are a good gauge of the economy, and Smurfit-Stone stock is down 60% since October. "The economy is a concern, but I don't spend a lot of time worrying about it," Jeff says. "I control what I can control," and having lost a baby, "there isn't anything that we couldn't go through together."

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Cynthia, who's single with no children, struggled to keep up while caring for her parents before they died and borrowed heavily to make ends meet.

Yet all along, three of the apartments - their broken walls and floors gradually crumbling - remained vacant. With ballooning home maintenance, oil and other bills, Chamble, who earns $71,000 a year, has barely held on.

"My job was to save the family's home," she said. "It has drained my finances for so long."

Three years ago, Chamble took out a $150,000 home-equity loan at 7.75% on top of her 30-year $282,000 mortgage at 5.36%. She also has $10,000 in credit card debt and college loans of $10,000.

She spent $80,000 of the home-equity loan to fix some of the walls, rewire the electric and replace three bathrooms. She used $55,000 to pay bills and put the remaining $15,000 in the bank.

After years of living alone, she was finally getting close to turning it into a money-maker. Recently she began renting one apartment, to a nephew, for $1,250 a month. Another $15,000 worth of repairs are needed before the other two can be rented.

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The former Peace Corps volunteer dreams of returning to teach in the tiny African country of Lesotho for a few years. The old hut, made of dung and adobe, where he lived in his 20s is empty and waiting for him.

But last year he made a serious misstep. He walked into his local Wells Fargo branch and asked for a safe investment for some of his savings.

Unknown to him, the fund the bank sold him was filled with sub-prime loans. Even worse, it contained a clause that might prevent him from selling all of his shares at once to halt his mounting losses.

Less than a year after he invested $100,000 in the fund, the balance stands at $84,000. The fund is charging him 3.01% -- roughly $3,000 a year at the start -- in expenses.

"I was naive," Bowne said. "So much for trusting your bank."

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To get a bit more mileage from their investments and build a more comfortable cushion, however, Boynton recommended some diversification and consolidation. "Your portfolio is conservative, but I would venture to say that it is a bit too conservative," she said. The couple now has 39 percent of their portfolio in equities and 61 percent in fixed income, with certificates of deposit accounting for nearly half of their fixed-income investments.

Once those CDs mature, Boynton suggested moving a chunk of that money to other investments, including an international bond fund, a commodities mutual fund, a large cap stock fund, and a short-term bond fund. "They add a little bit of growth without adding a lot of risk," she said.

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A sinking economy has forced many to make amends for spending sins of the past. But for Robinson, her husband, Todd, an electrical engineer, and countless other kindred spirits, frugality is a way of life, pretty much hardwired from childhood. Their thriftiness comes in a wide variety of intensities - just Google "frugal" and count the 7.2 million ways - but most of them seem to possess a passion for doing more with less.

Salem State College marketing professor Joseph Aiyeku calls the phenomenon "voluntary simplicity," a term coined by American philosopher Richard Gregg to describe the "sincerity and honesty within, as well as avoidance of exterior clutter" he observed while traveling in India in the 1920s.

[...]

"I went years without calls, and all of a sudden I am getting calls again," said Amy Dacyczyn, 52, a mother from Maine who launched a monthly newsletter, The Tightwad Gazette, during the 1990 recession. Full of penny-pinching essays and quirky tips - how to create hammocks and volleyball nets from plastic six-pack rings was a favorite - the publication attracted legions of followers. Six years, three books, and more than 60,000 subscribers later, Dacyczyn decided she'd said everything she wanted to, and retired to spend more time with her children.

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He also explained the importance of asset location to help the Fleischmans get the most out of their money and to minimize taxes.

As a general rule of thumb, Buchan told them to own the most tax-efficient holdings (large-cap U.S. and international stocks) in taxable accounts; holdings that spin off interest income (CDs, bonds, real estate and commodities) in tax-deferred accounts; and holdings with the most potential for growth and the most turnover (emerging markets, U.S. small caps) in tax-free accounts.

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The single mom and city employee closed this month on the purchase of a one-bedroom, $160,000 garden apartment in Kew Gardens Hills — the culmination of a journey that started a year ago when a wealthy New York businessman read Vega's Money Makeover in the Daily News. It described Vega as a hard-working, frugal person of modest means devoted to her now 15-year-old son, Gabriel.

The businessman was so impressed he decided to help Vega out. After a private investigator he hired did a background check, he offered her $20,000 as a down payment on a home. Like the TV "Millionaire," his identity remains a secret, except to the investigator.

This month, Vega became a homeowner, years before she ever imagined she would be. "I'm still in shock," Vega said at the closing. "Homeownership is so many people's dream," she continued, holding back tears. "He made it possible."

Vega's dream house in the Georgetown Mews co-op complex is hardly a palace, but it fit her wish list. Her monthly maintenance, mortgage and private mortgage insurance payments will total $1,624 — $374 more than she was paying to rent in Howard Beach.

Unlike her former basement-level home, her co-op gets plenty of light. Another plus: the 60-acre complex is close to Gabriel's high school.

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Today, they're trying to get by on his unemployment benefits of about $450 a week, which covers only about an eighth of the basic payments they owe every month.

Only $1,800 to cover $10,000 in bills

Their home equity line, mortgage, health and life insurance premiums alone cost about $10,000 a month. Still, they are trying to hang onto what they call their dream home with a view of the Pacific Ocean where they live with Mysti's 11-year old son.

Kent estimates the mountainside home in San Clemente, Calif., which they bought in 2005, is worth 20% less than it was a year ago. And in the current market, he said he's not sure he could sell it for even that amount.

"We've used up most of our reserves, cashed in her 401K," said Kent. "We're going Mach 1 into a wall. When we run into it, then we've got to decide what to do next."

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Not only was Danckert tucking 10 percent of his $50,000 a year salary into his 401(k) plan, but his employer's match was adding an additional $1,960 to his plan each year as well. He housed those funds to craft a well-diversified portfolio that was performing well. Levit awarded him an A+ on both counts.

[...]

The first step, she said, was for Danckert to build up his regular savings account (the balance was just $700) until it equaled 10 percent of his gross income, or $5,000. And she recommended using a high-interest account to increase returns. Online banks such as ING Direct typically offer higher rates than brick-and-mortar banks' savings accounts, she said. The current rate is now about 3 percent.

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Judy and Steve Haibach had never dreamed they'd wind up as middle-class millionaires. Now they don't know what to do with the $1.7 million they've squirreled away for their retirement.

Since the high school sweethearts married 35 years ago, they have lived a life of frugality -- sharing one car, taking thrifty camping vacations and eating countless brown-bag lunches.

"Whatever was the cheapest thing we could do, we did," said Steve, 56, a Southern California Gas Co. technician. Judy, 55, is a nurse.

The Haibachs want to retire early, perhaps next fall. But they are faced with the unusual challenge of how to spend their hard-earned money.

"These guys are ridiculously secure. Even if the Great Depression comes tomorrow, they'll be fine," said Brent Kessel, president of Abacus Wealth Partners in Pacific Palisades and author of "It's Not About the Money."

"Their problem is that they're going to die with too much money," said Kessel, a certified financial planner who considers the psychological and financial aspects of money.

The Haibachs need to live it up a bit more and help those who are less fortunate than they, he said. As extreme savers, they can balance their thrift through more volunteering, charity and pleasure-seeking, he said.

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