A life makeover: Leslie Henderson plans to retire from her job to pursue her 'reel' passion.

LESLIE HENDERSON HAS HOLLYWOOD on her mind. At 41, she's a 20-year veteran looking forward to retiring from the Houston Police Department within the next 10 years, Single and free-spirited, she is counting down the time until she can fulfill her true passion--screenwriting.

In the meantime, Henderson knows there is a lot of financial preparation to be done. She earns $70,000 as a police officer working in the Houston bike patrol administration and training unit. At the end of last year, her pension was valued at more than $64,000. She also earns at least $6,000 a year from a part-time job riding a bike patrol in inner-city neighborhoods. "I use that money to travel to Los Angeles for screenwriting workshops," she says.

Two years ago, Henderson won $13,000 in a contest by writing a powerful testimony about the benefits of BC Powder, a pain reliever from GlaxoSmithKline. She enters writing contests to generate income as she moves toward retirement.

That $13,000 went toward the downpayment for her $184,000, four-bedroom home in League City, Texas. She also tapped $22,000 from a stock portfolio and a $5,000 closing costs bonus from her real estate agent to put up about $40,000 for the house. While she is happy to have her home, she says she's settled, but not set.

Henderson has good financial habits. She places $800 a month into her savings account, totaling nearly $41,000, and contributes $200 monthly to her deferred compensation plan, valued at $42,000. She has also paid off her 2002 Chrysler Sebring. Henderson has little debt other than $1,500 in credit card balances.

"I'm frugal," Henderson says proudly. "I'm not into designer this or that. I use coupons; friends call me cheap." One hurdle she'll have to climb to reach her goals is her skittish attitude toward investing. In 2000, she put $25,000 into a mutual fund brokerage account, which sank to about $5,000, then rose to $22,000 by the time she liquidated the fund last year. "I was disenchanted with the market. It was one reason I decided to buy a home, which is a good investment."

Henderson is optimistic. "I got bad advice from a financial adviser in the past," she explains, but now admits, "I need an investing strategy."

THE ADVICE

To give Henderson direction, we paired her with Jocelyn Wright, a certified financial planner with Wealth Development Strategies in Houston.

Wright says Henderson is "an excellent example of someone who lives within, but also below, her means." Wright applauds Henderson for having more than six months of salary in her savings and about $50,000 in equity in her home. She says Henderson is in good shape but is capable of quite more.

Expand investments. Currently, all of Henderson's investments are with her employer. "I want to see her begin to accumulate assets in outside accounts," Wright says. Since Henderson has more than six months of emergency funds in a savings account earning 2%, Wright says she should invest the $6,000 surplus in growth mutual funds that will give her an opportunity to outpace inflation. She should find a qualified financial professional who can help her determine which investments are appropriate for her, given her age and time frame.

Wright also recommends that Henderson review the current asset allocation of her deferred-compensation plan. Wright suggests the following portfolio allocation: 24% large-growth; 24% large-value; 6% each in mid-growth, mid-value, and small-value; 14% international; 7.5% each in a short-term government bond and an intermediate-term government bond; and 5% in high-yield bond funds.

Plan for the unexpected. While Henderson's parents are not dependent on her, she should talk to them about their financial situation and determine their ability to handle a long-term illness or death. Wright says it might make sense for Henderson to obtain long-term care insurance for her parents.

Henderson should also have a will and other documents, such as living wills and durable powers of attorney, drafted and executed for her par ants--and herself. She will need to have a will in place to direct the distribution of her assets that are outside of her work benefits. Additional life insurance may also make sense, as the benefits offered by the city of Houston are minimal.

Rethink business structure. Right now, Henderson has set up a sole proprietorship to handle her screenwriting business. Wright recommends that she consult with a business attorney regarding the appropriate business structure.

Determine retirement income. "Up to now, Leslie hadn't given much thought to the type of lifestyle she envisions for her retirement," Wright points out. "We assumed a monthly retirement income of approximately 60% of Leslie's pre-retirement income, or $3,500 a month." The good news? "Leslie is on target to reach her retirement goal if she were to leave the Houston Police Department [in 10 years] at age 51, but also at age 46,"' says Wright.

If Henderson were to retire today, she would receive 55% of her average monthly salary, or more than $3,300 per month. This amount increases each year by a cost-of-living-adjustment based on the previous year's change in the Consumer Price Index. Overall, Wright says Henderson is well positioned to reach her financial goals.

Financial Snapshot:
Leslie Henderson

HOUSEHOLD INCOME

Gross Income        $70,000

ASSETS

Checking             $2,200
Savings              41,000
Stocks               44,000
Pension              64,754
Value of Home       202,000
Value of Car         12,080
Total              $366,034

LIABILITIES

Mortgage           $146,865
Credit Card Debt      1,500
Total              $148,365

NET WORTH          $217,669

*ACCORDING TO KELLEY BLUE BOOK.