04-02-2014 01:03 PM
Doñya Smith-Gay plans to adjust to civilian life and a big pay cut.
By Andrea Downing Peck
After spending nearly eight years on active duty as a mobilized reservist, Doñya Smith-Gay will return to full-time civilian life on a more secure financial footing but with a less certain financial future.
Smith-Gay, 44, is assigned to duty in Florida and will return in June to her Houston home to live with her mother and 13-year-old daughter, Shaunna. But returning to civilian life as a middle school assistant principal at half of her military take-home pay will be a major jolt to Smith-Gay’s bank account.
“I want to make sure I’ve set myself up for the long term as far as retirement goes,” she says. “I’m also in the ‘sandwich generation.’ Eventually, I may have both my parents under my roof and will be responsible for their care.”
While a return to the civilian world will require adjustments, Scott Halliwell, a CERTIFIED FINANCIAL PLANNER™ with USAA, told Smith-Gay her well-earned fiscal discipline and previous sound decisions have set her up well.
“From a healthy habits perspective, financially you’ve got it figured out,” Halliwell says. “This is not a case of let’s get the train back on track. The train is already moving.”
Putting Her House in Order
Encouraged by her pastor and following guidance in USAA Magazine, Smith-Gay began to put her financial house in order before being deployed and after a divorce. “I started focusing on one big bill at a time, getting that out from under me and not creating additional bills,” she says.
Since being on active duty, she has socked away more than $70,000 in personal retirement accounts, $80,000 in the Thrift Savings Plan, built an emergency fund totaling $50,000 and saved enough funds to one day buy Shaunna a car and cover other expenses.
In addition, she has locked down Shaunna’s college education by transferring her Post-9/11 GI Bill benefits to her daughter, as well as contributing to a Texas Tomorrow prepaid tuition plan and setting aside $5,000 in a college savings plan. Smith-Gay also has purchased two duplexes in Florida, living in one of them and renting out the other, which nets her a $700 monthly profit. Her plan is to keep the duplexes as investment properties, potentially pocketing as much as $16,800 a year.
Making Specific Goals
Because Smith-Gay has not previously made investment decisions based on well-defined goals, Halliwell wants her to be more “intentional” with her spending and investments.
“From a financial planning perspective, let’s figure out what the ultimate goal is,” Halliwell says. She will be living with less income, and she’ll still want to keep working her plan for retirement, he says.
Halliwell suggests Smith-Gay begin tracking her expenses, separating the Tampa properties, her Houston household and her Tampa living expenses into three buckets. When she returns to the “land of much less money” in June, Halliwell says she will know how much she can continue to save or the lifestyle adjustments she needs to make.
Next, he suggests Smith-Gay work with a financial advisor to calculate whether she will be on track for retirement when her TSP, IRA and brokerage accounts are combined with her military retirement and Texas teacher’s retirement.
Finally, Halliwell suggests Smith-Gay not let her emotional attachment to the duplexes determine whether she should become a long-distance landlord. “Maybe that will turn out to be a good move; maybe it won’t,” he says. “To the extent you can, you want to put as much math and as little emotion behind these decisions as possible.”
Photography by Wyatt McSpadden
The information contained is provided for informational purposes only and is not intended to substitute for obtaining professional financial advice. Please thoroughly research and seek professional advice before acting on any information you may have found in this article. This article in no way attempts to provide financial advice that relates to all personal circumstances.
Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP® and CERTIFIED FINANCIAL PLANNER™ in the United States, which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.
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