Getting the family investment plan in gear.

Ask David Fowler how it feels to be a new father, financially speaking, and he will give an answer many new parents will immediately recognize. "We feel a little squeezed."

Still, David, a 35-year-old employee of Apple Computer, and his wife, Colisa McFadden, 33, a self-employed accountant are ready to take the plunge into the investment world, with a view to building a fund for daughter Mariah's education. Before doing so, however, they need to take a hard look at their current budget and start to build an emergency nest egg.

Right now, the Richmond, Calif., couple is spending more than they make. Before Mariah's birth in March, Colisa worked full-time as a self-employed accountant She had five employees and personally netted about $40,000 last year. After Mariah was born, Colisa stopped working altogether for a while, then returned to a three-day work week. As a result of her reduced work schedule, her income has dropped 10,000.

David has been with Apple for four years. He is a support analyst, an internal trouble-shooter who helps others in the company who are having computer problems. His annual salary is $50,000, though he's hoping for a 10% bonus. He also receives a profit-sharing check from Apple every quarter, currently if s running about $1,000. There are bonuses, but they're unpredictable in frequency and amount.

Excluding the quarterly profit-sharing and bonuses, and averaging out Colisa's income, the couple's take-home pay totals $4,200 per month. David and Colisa have done a good job of eliminating nonessentials. Their fixed expenses, however, are high. The San Francisco Bay area is one of the most expensive in the country, and that's reflected in the couple's monthly mortgage payment of $1,549. David and Colisa, who have been married about a year, bought their three-bedroom $186,000 home in February. Taxes and insurance add another $310 in monthly expenses to their basic housing costs. Other major housing costs are utilities, which run $200 a month, $25 a month for garbage removal and $40 a month for cable. "Cable's a basic expense to me," says David.

The family's two cars also eat up a sizable amount of cash. The note on David's 1988 Acura is $500 monthly. Insurance and gas for the car adds another $300 monthly to their transportation bill. Food for the family of three amounts to $600 per month, and their miscellaneous expenses total $575. Then there's their debt. What with a student loan, and Visa and MasterCard, Colisa and David are spending $460 a month to service their debt. David and Colisa are regularly spending more than they take in, by a shade more than $770 every month. It is obvious why they can't start a savings plan; they don't have the money.

They already have some savings. They have managed to squirrel away $2,000 in a bank paying 5%, a high rate by today's standards. The Fowlers also own 250 shares of AT&T stock and 58 shares of Apple common. Together they're worth about$13,000. (Note: late July prices.) David is also contributing to his retirement by putting 10% of his income into a 401(k) plan. That money, which totals $16,000, is invested in various mutual funds. Colisa, being an accountant is interested in investing further. She wants to build their portfolio quickly. "I am into growth stocks," she says, noting that it may be good to buy more Apple stock--on margin.

Margin purchases are stocks bought on credit, because the buyer is using someone else's money (generally the broker's) for the purchase, the investment is highly leveraged. That means that rises in share prices will result in proportionately greater gains than if the stock were purchased for all cash. But, conversely, potential losses also can be greater.

The Advice

"The problem is that Colisa is now only working part-time, cutting her income substantially," says Cheryl D. Broussard, author of The Black Woman's Guide to Financial Independence. Money Management Strategies for the 1990s and president of Oakland, Calif-based Broussard/Douglas Inc. "In order to avoid financial chaos, Colisa will need to return to work full-time as soon as possible." Because David and Colisa did not have a written budget they could not see how precarious their position was. But even before Broussard's analysis of their situation, Colisa was thinking about returning to full-time work fairly quickly. That would boost the family's income and allow them to do the two most important things they should do before--yes, before--starting an investment program on behalf of baby Mariah: reduce their debt and start an emergency fund.

Their $2,000 is not enough, especially with the responsibility of a newborn, says Broussard. The money should be placed in a money-market account, such as Alger Money Market Portfolio, which yields 3.77%, says Broussard. The goal is to build an emergency nest egg of nine months' salary. That's a lot of money--$45,981, to be exact. But Colisa and David need not set aside every penny of it before starting other investing. But because Colisa is self-employed, her position slightly more precarious, the couple needs more than the typical cushion of three to six months' salary that planners recommend for salaried people. More family income, including David's bonuses when they come, should be used to pay down their credit cards as well.

Now that baby makes three, the other basic need the family should take care of as soon as possible is additional life insurance. Colisa is currently uninsured, so Broussard recommends the purchase of $250,000 in term life insurance. After these needs are met, the investing begins. But Broussard recommends caution: "Their main goal should be to build wealth, not try to get rich quick."

The Fowlers need a disciplined retirement plan. By saving early (with about 30 years until retirement),the couple will benefit significantly from compounded interest David is already participating in what is considered as one of the most attractive retirement programs existing--an employer-sponsored 401(k) plan. Broussard recommends that if David receives his raise, he should increase his contribution to his 401(k) from 10% of his salary to 15%. Colisa should start a Keogh account but be aware that she would have to contribute to her employees' retirement accounts as well.

Broussard favors mutual funds over more stock buys, especially in the volatile computer field. She would steer the Fowlers toward no-load aggressive growth funds, purchased through small weekly purchases. (Sometimes these can be done automatically via checking or savings account deductions.) Instead of saving $250 a month for a vacation, the Fowlers could put that money in mutual funds. Finally, college savings programs are available at some mutual funds that also provide for automatic deductions and are in the child's name with the parent as custodian. Fidelity College Investment Program (800-544-6666) or 20th Century College Savings Plan (800-345-2021) are two of these. The Fowlers must also reconcile their expenses in order to build an education fund for Mariah. College is some 17 years away for Mariah, but the escalating cost of higher education makes it imperative for parents to start a savings program as soon as their child is born, says Broussard

Fidelity Investments is also one of at least three college-building plans that will assist parents in figuring out how much they need to save for college. The other two are the College Savings Bank, Princeton, N.J., (800-888-2723) and Merrill Lynch (call your local office). You simply have to give the age of your child and the school he or she may attend, and you will receive a computer printout of the amount that you need to save annually.

In general, parents must take a hard look at what it is going to cost to educate their children from the first day they enter grade school to the day they graduate from college.

"I am finding that many African-American parents are now sending their children to private school during the primary grade levels," says Broussard. "So it is imperative to factor that in."