|
Flygirl's finances take off
|
 |
August 28, 2000: 8:36 a.m. ET
An Air Force intelligence officer scopes out the alternatives for her pay
By Staff Writer Alex Frew McMillan
|
NEW YORK (CNNfn) - At first, Linda Muzquiz fought her calling. She was born at Fort Bragg, N.C., and her dad was in the Army for 30 years.
But she studied psychology at Pembroke State University. Then, dreaming of becoming a psychologist, she went to Appalachian State in the North Carolina mountains to get her masters degree.
 She's ABT, "all but thesis." It was while she was studying in Boone, N.C., that the "grim reality" of being a psychologist hit her.
"I was going to be dependent on insurance companies the rest of my life. And I couldn't stand that," she remembers. "I went ahead and said, 'What am I doing? I can't be a civilian.' I like seeing the world, the uniform, all that stuff."
After growing up around the United States, and beyond - including Panama and Germany - and serving in the Army reserves, she realized what was going to happen to her.
"I faced my fate, which was to be a military officer, like my dad," she said.
A job as a combat targeteer hits the spot
Muzquiz, now 32, joined the Air Force in 1994. She says no one in the Army seemed particularly interested in helping her become an officer.
 She's now a captain in Air Force intelligence, with the 609s at Shaw Air Force Base. She lives in Sumter, S.C. Intelligence has to know as much as possible about any enemy's capabilities.
"You just have to be smart, to answer the commander's questions," she said. If a situation develops in the Middle East, for instance, her team needs to know what an enemy's next move will be. Then they help the Air Force react.
Specifically, she is a combat targeteer. "My job within intelligence is to put the right weapon on the right target at the right time," she said.
She had a stint in Saudi Arabia from June to October last year. She expects to go back, too. But for now she's in the Palmetto State.
Checks & Balances runs weekly. People with questions about financial planning are invited to write in explaining their financial goals. See the bottom of this article for specifics.
"Sumter has grown a lot, from what I hear, but it still has a lot of growing to do to suit my tastes. I'm not a big-town girl, I'm a small-town girl. But not this small," she said. So she plays a lot of golf and tennis.
She likes the South Atlantic, though, and would like to retire there, maybe in Asheville, N.C. She will transfer with the Air Force in a year anyway. She can request certain postings but doesn't know for sure where she'll end up.
A career in the Air Force ahead of her
She'd prefer to stay on the East Coast, or perhaps move back to Europe. Because she has already spent some time in Germany working with an F-15 fighter squadron, that could mean a move to Ramstein Air Base in Germany, headquarters of the U.S. Air Forces in Europe.
 She's a career flygirl. She thinks she has a shot at lieutenant colonel or even colonel if she sticks around for 20 years of service. At that point, she'll be 46, and she'd get 50 percent of her base pay as a pension.
The base is $67,000 for a lieutenant colonel this year, $78,600 for a colonel. Muzquiz might also be working in retirement, she said, in civilian government or as a defense consultant.
Then again, maybe she'll stick with the Air Force. The military has a way of hooking you, she pointed out. You have to work a few years at a rank before you qualify for that pension.
"At that point, they say, 'Congratulations, you made that rank, we'll promote you,'" she joked. "I might say, 'Great, I'll stay.'"
A car, and a similar-size home
With her future unclear, she focuses on her current plans. She wants to buy a new Audi Quattro in two to three years to replace the '93 Toyota Camry she drives.
She also wants to get a similar-sized house, wherever she moves. Two years back she bought her first home, a three-bedroom that cost $100,000. Her mortgage runs $720 a month, though she has been paying more to cut the debt down.
She makes a little over $44,000 base pay as a captain with six years of service. But with her living allowances and tax adjustments, she nets just over $52,000.
She'd make even more if she had language skills, but she doesn't speak Spanish. Her dad was born in Mexico and moved to the United States when he was 13, and her mom is from El Paso, Texas.
But her folks worried she'd end up speaking two languages and neither very well. What with the military kids she went to school with, Muzquiz just learned English, she said.
How to prepare?
She wants to find out more about investments. She wants to build a nice nest  egg to retire on, and she might have kids sometime, she says. She wants to travel the world, too. "Would like to retire at around 50 years and play golf!!" she writes.
She has around $11,000 in the USAA Growth Strategy fund (USGSX) in her Roth IRA and another $11,000 in other accounts, some of it in the same fund.
Mainly she has growth-oriented holdings or broad index funds through USAA, which specializes in financial products for military personnel. She has saved a little less than $35,000 with them, too, in an indexed money-market account.
"I've been investing for several years now," she said. "I want someone who isn't looking out for their own interests, somebody to say 'Hey, you're in the right direction.' "
What the planners say:
Jim Barnash, a certified financial planner with Lincoln Financial Advisors in Chicago, commends Muzquiz for her discipline and for setting goals.
She should keep saving toward them and investing, Barnash said, even though some goals are unclear. A good rule of thumb is to set aside at least 6 percent to 10 percent of your gross income, he said. That includes nonretirement and retirement savings.
"It is especially important to do so while you are single, without any dependents and young," he wrote. "The more you can do now, the greater flexibility you will have if and when those dependents come along."
Set up for a sizable income down the line
Janet Tyler Johnson, a certified financial planner with SVA Planners in Madison, Wis., stated that "Linda is doing so many things right, it's hard to imagine her not reaching her goals."
 She's spending far less than she earns, for instance. If Muzquiz can set aside $20,000 a year through age 50, she will have more than $100,000 per year in retirement until age 100, Johnson calculated. Johnson is assuming Muzquiz generates an average 12 percent a year from her investments and inflation stays a benign three percent.
Of course, Muzquiz will likely have half her military pay as a pension as well.
Barnash is pleased the captain owns a home. It means she'll be itemizing on her taxes, and it should lower her tax bill, he said. That, and the fact that she has no consumer debt, gives her a firm foundation, Barnash said.
Barnash has a somewhat unusual strategy for Muzquiz when it comes to buying her next home.
Click this link to read last week's Checks & Balances column.
Click the following link to read last week's Portfolio Rx, a column that runs every Tuesday in CNNfn's Retirement section. Each article reviews an investor's long-term portfolio, using financial experts to offer advice.
Because she is probably going to be transferred repeatedly, and she isn't likely to stay in any home very long, he recommended that she put down as little as possible.
That works for her because she's eligible for VA loans, for military personnel and veterans. With those she doesn't have to pay private mortgage insurance or make a down payment. Barnash would advise her not to keep making more than the minimum mortgage payment per month, either.
"The reason for this is that a mortgage is leverage," he said. The more Muzquiz puts down, the less she has to invest in mutual funds. And though her investment returns are far from certain, Barnash said there's a good case for earning maybe 10 percent more with funds above appreciation on a house.
Mutual funds are liquid. They move with you. And Muzquiz can deduct the interest from her mortgage. "If you were going to own the home for many years, this would not necessarily be a good strategy," he said.
Too much in one basket
Both planners say she needs to change her investment allocation.
"As it stands now, she has 'all of her eggs in one basket,' so to speak," according to Johnson. She has too much large-cap growth exposure. She should also get some international and small-cap exposure, the planner says.
Barnash said the USAA Growth Strategy fund (USGSX) seems to lack focus. It is loaded with technology stocks, but it is also over 17 percent in bonds. In the past three years, he said, it has trailed the S&P 500.
Instead, Barnash likes the USAA S&P 500 index fund (USSPX), which Muzquiz also has part of her money in. Its very-low expenses and turnover lend to efficiency and better returns, Barnash said.
He said Muzquiz could consider putting half her investment contributions there. If she wants more technology exposure, she could take a look at the USAA Aggressive Growth fund (USAUX) or the USAA Science & Technology fund (USSCX).
A wireless world would suit her
Johnson said the Air Force life and frequent moving makes Muzquiz a perfect candidate for a discount online broker. She would then be able to access her accounts and trade from anywhere in the world.
If Muzquiz is out of the United States for a substantial period, she might want to hire a financial planner to do the spadework, according to Johnson, who is of course a planner herself.
When it comes to buying the Quattro, Barnash recommended that Muzquiz pay as much of the cost as she can. That could come out of her savings and any surplus equity she has from the sale of her house. Or she could just invest any proceeds from the home.
Johnson suggested that Muzquiz take out a home-equity loan to cover whatever portion of the car cost she has to finance. That way, the interest will be tax-deductible, unlike a regular personal loan.
Too much in savings sitting around
Muzquiz likes keeping the balance in her savings high. But Johnson said most people leave too much money just lying around, in case of emergencies.
Even the standard line is that you should keep three-to-six months of expenses in an emergency fund, and Muzquiz has more than three times that in her money-market account.
Mutual funds expose her to more risk, Johnson admitted, but if an emergency came up, the money would still normally be available in a day. So Johnson advises investing the money more aggressively.
"My experience in the last 20 years with clients has been that most emergencies never happen, and the opportunity cost for that 'emergency fund' not being invested can be very high," Johnson said.
Otherwise, "continue to be prudent in your spending and aggressive in your savings, and you should do just fine," Johnson said. "Good luck!"
* Disclaimer
Got questions about financial planning? Need some advice? CNNfn.com has organized a panel of outside experts to answer your questions. If you want to be considered for the "Checks & Balances" column, where professional planners suggest ways you can manage your money, send us an e-mail at checksandbalances@cnnfn.com. For those selected, financial planners will review the details and suggest ways to meet those goals.
Include information about your age, occupation, income, assets and monthly expenses -- imagine you're providing a full income statement and balance sheet. Also, share with us any short-term and long-term financial goals you may have. And don't forget to leave your phone number. 
|
|
|
|
|
 |
|
