Budgeting for a future: DeShawn James hopes a carefully crafted financial plan will play big dividends to her family.

FOR DESHAWN JAMES, RAISING TWO TEENAGE DAUGHters as a single mother is more than a notion. Their needs and wants never go away. "They are money pits," she says lovingly. Her own issues with sticking to a budget sometimes make matters worse.

"I can be an impulsive spender. If I see something I want, I usually get it," says the 37-year-old James.

When you earn $25,000 in a full-time administrative position, such spending habits can be costly. Fast food lunches during the week add up, as do monthly family dinners at nice restaurants. "I know there's some cutting to be done," says James. "If I had myself on a strict budget, I think I could do more. We make do, but t don't want [to struggle] any more."

Much to her credit, James used most of her life savings and borrowed from her annuity to buy a three-bedroom house in Detroit two years ago. But she's done little to prepare for her retirement and there's no college fund for her daughters Skyra, 16, and Brittany, 15. She's ready for change because she wants more for her family.

Recently, James started a part-time job that should add $10,000 in annual income to her salary at Cafcomp Systems, an employee benefits services firm in Detroit. Twelve years ago, when she started at the company as a receptionist, the job was a godsend. It ended her dependence on public assistance and allowed her to telecommute as she raised her children. James' income has been bolstered by $363 a month in Social Security benefits for Skyra (her father was murdered by robbers in 1992), and $348 a month in child support payments for Brittany.

Eternally optimistic, James believes that her future may lie in a career as a registered nurse. She qualifies for grants that enable her to take a couple of classes each semester. James hopes to graduate from the two-year nursing program at Oakland Community College in Southfield, Michigan, by the time she's 40.

Although she hasn't saved much money, James hasn't created much debt either. She has less than $2,500 in debt other than her $99,600 mortgage. Her goals include saving for retirement and traveling for fun--something to do often. James is also determined to send her daughters to college, "There's nothing saved, but those girls are going," she vows.

THE ADVICE

We helped James plan for her financial future by turning to Gaff Perry-Mason, first vice president of Financial Services at Fahnestock and Co., in Grosse Pointe Farms, Michigan.

* GET DISABILITY INSURANCE

"I think it's tough to raise two teen girls alone no matter how much make, so she's really done an excellent job with what she has," says Perry-Mason. She lauds James most for purchasing a home, given her income. However, Perry-Mason's concern is that james hasn't done enough to protect her income. She has no disability insurance. She is the sole breadwinner, so if anything happened to prevent her from working, the financial impact could be devastating. If James' employer doesn't offer sufficient disability coverage, she should explore getting supplemental disability insurance on her own.

* REDUCE COSTS

James must begin tracking her monthly spending so that she can account for each penny. Once she has a record of expenses, she will know what she can cut. She should look for ways to create money in her budget, such as raising the deductible on her car insurance, cutting costs on cable by eliminating premium channels, and switching to a cheaper service for her cellular and home phones. Such changes will add up, possibly as much as $300 a month, or $3,600 a year, estimates Perry- Mason.

Furthermore, Perry-Mason says James should consider refinancing her mortgage. "The rates are still great, and if she considers paying bi-monthly, the extra house payment paid per year will build up her equity and pay off her home early," she says.

* GENERATE MORE INCOME

James' part-time job is a good start James she should look at other cash producing opportunities. She and her daughters could sell any unwanted or out of season clothing to a consignment shop. They could also have a yard sale. Beyond those quick hits,James as well as her daughters should consider becoming focus group participants. "Basically, you give your opinion about a topic and they pay you $50-$100 an hour," says Perry-Mason. Becoming a mystery shopper is another lucrative alternative. A retailer will pay you to shop in its stores and fill out a survey, mostly about its customer service. The pay can be $35-$50 an hour. You may also get free merchandise or eat for free if the retailer is a restaurant. Information about mystery shopping is available at www.secret shopnet.com and www.best mark.com.

* START SAVING

James has less than $2,000 in her savings account. She needs a minimum of three to six months of expenses in case of an emergency. Perry-Mason suggests each family member begin putting spare change into a family savings jar. "They'll be surprised how that money will add up," she says.

Once James consistently cuts back on spending and creates additional sources of income, she'll be able to enroll in the 401(k) at work, even if she can only save a small percentage of her salary. Perry-Mason asserts: "She's got a lot of catching up to do, but it's never too late."

Perry-Mason says the girls should begin applying for scholarships now. Furthermore, James should use the child support and Social Security to put $25 monthly into a 529 College Savings Plan for Skyra and Brittany.

* USE CONTEST WINNINGS WISELY

The $2,000 contest winnings can go a long way toward getting James started on her financial goals. Perry-Mason advises her to place $500 in a Roth IRA, and $100 in a 529 Plan for the girls. James should reserve $500 to pay off her Capital One credit card, $400 toward her emergency fund and $500 for a vacation fund.

Perry-Mason says James is an inspiration to other single parents. "[James] is not settling for excuses." She's taking steps that will create wealth.

Financial Snapshot:
DeShawn James

                   HOUSEHOLD INCOME

Gross Income                              $35,000

                        ASSETS

Market Value of Home                     $150,000
1998 El Dorado                             15,000
1998 Ford Contour                           8,000
Cash Value of Life Insurance                6,800
Social Security Benefits                    4,356
  for eldest daughter ($363 a month)
Child Support                               4,176
  for youngest daughter ($348 a month)
Bonds--EE Bonds                             2,500
Savings                                     1,700
Checking                                    1,000
Total                                    $193,532

                        LIABILITIES

Mortgage                                  $99,600
Visa                                       $1,000
Loan from Annuity ($72.22 a month)            867
Capital One Credit Card                       500
Total                                    $101,967
Net Worth                                 $91,565