Broke on $200,000 a year


Your Money

February 27, 2007|By EILEEN AMBROSE

Patrick of North Baltimore is searching for some tough love.

He and his wife earn well over $200,000 a year but live paycheck to paycheck. Their three children go to private school and family members have four cars among them. Patrick has tapped his 401(k) to pay off credit-card debt.

"We need a personal consultant [read: Drill Sergeant] to help us get it together financially," he writes in an e-mail. "We live week to week off our paychecks, which, if not timed right, leaves us broke for a few days between paydays. We don't have an extravagant lifestyle, but have lots of maxed out credit cards. We're tired of this, and don't have a clue."

Patrick searched online for a financial consultant, but he's wary of advisers pitching insurance and mutual funds.

"We're looking for a personal consultant that can work with us to analyze our finances, train us in how to overcome our financial shortcomings, and lay out a road to our financial recovery."

Well, if Patrick doesn't mind a little tough talk ...

The couple in their 50s clearly make a good income. Any drill sergeant worth his or her stripes would dig into where the couple's money is going.

If they are serious about getting their finances in shape - and they will have to be if Patrick has any chance of his goal to retire in a dozen years - they will have to adjust their lifestyle.

"Chances are this guy is living extremely well and is way, way behind" on how much savings he should have given his age, says Jack Waymire, founder of Paladin Registry, a company that links investors to advisers. "He has to reduce his lifestyle and he's really got to push the savings rate."

Because Patrick and his wife unquestionably have a cash flow problem - money pours out faster than it comes in - they should consider hiring an accountant with an expertise in financial planning.

They can find an accountant with a designation of Personal Financial Specialist - sort of a CFP for number crunchers - at the American Institute of Certified Public Accountants' Web site at The fee will be about $150 to $200 an hour.

Richard Nudelman, a CPA, CFP and PFS in Ellicott City, says an accountant would start with a cash flow analysis.

"Where does your money go? Why are you living paycheck to paycheck?" he asks.

This isn't easy for clients, Nudelman says. Some people withdraw $200 from an ATM two or three times a week and have no idea where the cash went, he says.

A cash analysis can identify unnecessary expenses and allow the couple to start attacking credit- card debt and establish a savings regiment, Nudelman says.

Or, Patrick can try other financial advisers who are compensated by fees rather than commissions.

The National Association of Professional Financial Advisors offers referrals for fee-only planners at

Waymire's group at makes referrals for advisers largely compensated by fees.

Waymire says some charge a fee based on a client's assets and others charge a sizable fixed fee for devising a financial plan. Given Patrick's situation and debt, Waymire suggests he look for an adviser who charges an hourly rate, which will be less expensive.

The Garrett Planning Network is a group of planners who are paid by the hour. Referrals are available at Fees range from $150 to $200 a hour, says Eileen Freiburger, a California financial planner who is part of the network.

Freiburger says planners can help families in Patrick's situation, but only if both spouses are on board.

Sometimes one spouse hires a planner because he or she is upset with a mate's spending and expects the planner to solve their squabbles. That's a case for a marriage counselor, not a financial planner, Freiburger says.

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