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Sunday, February 25, 2007 - Page updated at 12:00 AM

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Your Money

Wilhelm and Hagopian | Charting income, moving forward with goal

Special to The Seattle Times

Top priorities


1

Create a budget

2

Prioritize goals

3

Start saving regularly

Sarah Wilhelm, training specialist at a Seattle AIDS charity, and Jesse Hagopian, West Seattle middle-school teacher. Both 27 and soon to be married, Wilhelm and Hagopian are recent college graduates. Now that they have a decent combined income, they wonder whether they can buy a house in high-priced Seattle.

What they have

With combined annual income of nearly $90,000, the couple have $6,000 in the bank between them. A couple of small 401(k) accounts they each have will likely be cashed out to help pay for the wedding. They rent a small Capitol Hill apartment.

They have nearly $79,000 in student loans between them. They owe $6,000 on their car and more than $12,000 on credit cards, but the card debt is at a relatively low 7.9 percent interest.

What they want

To buy a house in Seattle. They don't want a condo. Ideally, Sarah doesn't want to give up walking to work near the University of Washington, which would mean buying another car and incurring more expenses.

"It's a typical middle-class dream," Hagopian says. "We just want to have a couple of kids and buy a house."

What they need

Know where the money goes: Certified financial planner Steve Sant of Sant, McMahon & Sparks in Lynnwood, doesn't like the word "budget." But whatever they call it, Wilhelm and Hagopian need to chart their income and expenses to move forward with their goal.

Identify priorities: Wilhelm and Hagopian want to buy a house and would like to have two children. Sant found that once the three of them sorted through the couple's finances, the home-buying goal ranked behind having kids. They hope to have one child before they buy a house.

Start saving: Now that they're bringing home regular paychecks, Wilhelm and Hagopian need a cash cushion of three months' expenses in case they hit any bumps in the road. If they can control their spending, Sant figures they could put away almost $800 a month.

One savings-reserve strategy Sant recommends that's low-risk, has a decent yield and offers some access to cash is the "laddering" of certificates of deposit. By buying a series of one-year, two-year, three-year and four-year CDs at the same time and then annually exchanging the CDs for new four-year CDs as they mature, Wilhelm and Hagopian could end up with the higher rates of four-year CDs. But one CD would mature each year, handy if they need cash.

Eliminate risk: To avoid losing what they're just starting to accumulate, Sant would like to see the couple boost their property and casualty insurance. They also need disability and life insurance.

Buy smart: After scrutinizing their finances, Sant concluded that Wilhelm and Hagopian should be able to buy a house in a few years — but not in Seattle, unless they change some of their other priorities. He figures they can afford a house that costs $248,000, a price they won't find in the city unless the house has major issues. They could rent longer in Seattle or buy a starter house in a cheaper suburb and then move back into the city later.

What they shouldn't do is buy too much house.

"Many young families today are stretching too far to buy that perfect home," Sant says. "If you have no discretionary cash flow, you lose sleep, and you end up feeling like a slave to your house."

What they think

Unsurprisingly, Wilhelm and Hagopian were disappointed to hear they're probably shut out of the Seattle market, at least for their first house.

"I don't feel like the house is feasible," Wilhelm says. "I was not convinced. But it was really good for us to identify our financial goals."

Copyright © The Seattle Times Company

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