Reaching for financial success: our 2002 financial fitness contest winners are achieving their goals with sound advice and a little moxie.

SOMETIMES, ALL IT TAKES IS SOMEONE TO SHOW YOU THE WAY. There's nothing like good advice and a game plan to give you the gumption to take action. And, when it comes to your finances, courage is often needed to admit mistakes and begin mopping up a financial mess. Then, you'll need discipline to break bad habits and develop healthy new ones.

That's what BE's 2002 Financial Fitness Contest winners did. Taking advice from financial planners, they have made significant changes in their financial lives. It wasn't easy. They had to make these adjustments in the face of a tough economy, job losses and a bear market. But despite the inhospitable climate, many adopted the 10 principles of our Declaration of Financial Empowerment (DOFE).

Here's a look at what happened to four of our winners.

* JANUARY WINNERS:

ALEAS AND DAVIS HAMMETT, UPPER, MALBORO, MARYLAND

It took the Hammetts seven years to rack up $70,000 in debt, and some $10,000 on credit cards. When we last featured Aleas, 36, a petty officer second class in the Navy Reserves, and David, 42, a full-time senior master sergeant in the Air Force, the couple had arranged a debt consolidation loan through the Navy Federal Credit Union so they could make one payment instead of separately handling their two car notes and Aleas' school loans. Despite the strategy, they were drowning. Now, more than a year later, they can breathe again.

They have whittled down the $70,000 debt to about $45,000 and their credit card bill to $5,500. How did they do it? For one, they changed their spending habits and applied $7,000 from their tax refund toward debt. Following the advice of financial planner Walt Clark, president and CEO of Columbia, Maryland-based Clark Capital Financial, they refinanced their mortgage early this year, dropping their 7.5% fixed rate to 6%, saving roughly $840 a year, Also, they refinanced the debt consolidation loan from nearly 13% to 11%, but kept the same level of payments to pay it off quicker.

Since debt, was the Hammetts' No.1 priority, they have not made any changes suggested by Clark regarding the children's college education. (The couple has two sons, Julian, 9, and Alexander, 4. David has three sons from a previous marriage: David Jr., 24, Maurice, 18, and Brandon, 14.) And even though she wasn't able to commit to contributing 15% of her salary to her 401 (k) as recommended by the planner. Aleas increased her contribution from 6% to 10%. David, on the other hand, started a regular savings account and has amassed more than $2,000. "I am so over the credit card thing. Credit cards can be the biggest hindrance to your financial success. We cut up all but one card," says Aleas. "We're not counting on credit cards for emergencies anymore."

As instructed, they converted their two traditional IRAs into Roth IRAs, which will allow them tax-free growth potential and tax-free withdrawal of earnings--and divvied their $2,000 in contest winnings between the two separate accounts.

Currently, Aleas is looking for a better-paying job. She is encouraged by their accomplishments, but says they are far from finished. "We have to continue on the path we are on in reducing debt, begin to increase our, savings, and then focus on the children's college fund."

She and David have taken steps to teach their children the value of money management. For instance, they started giving their 9-year-old an allowance this year, requiring that 10% go to tithes, 10% in savings, and the rest where he wants. Says Aleas: "We want our children to have smart financial management skills before they get credit cards."

* MAY WINNERS:

MARY AND CARLTON WARNER, WASHINGTON, D.C.

When we covered the Warners in our May 2002 issue, the couple was feeling "the squeeze." Carlton, 43, a postal worker, and Mary, 49, who works part time processing print order contracts, were trying to finance their children's college education, prepare for expenses associated with their aging parents, and save for a comfortable retirement. At the same time, they were trying to eliminate some $22,000 in short-term debt.

Today, things are also looking up for the Warners. "We aren't living paycheck to paycheck anymore," says Mary. "We've gotten some debt off our plates, and by the end of 2004 things are going to be even better."

The Warners took some of the advice of financial planner Walt Clark. For example, they used their home equity line of credit to reduce debt payments, taking advantage of the low 7% rate and gaining tax savings since the interest is deductible. By doing so, they retired $3,000 in credit card debt. As for the remaining $2,800 on their Visa card, they renegotiated the rate with the issuer and reduced it from 11% to 6.9%.

A major priority for the Warners has been education. They used $11,000 of the credit line for the college tuition of their 20-year-old daughter, Carla. Although she received $5,000 in financial assistance, Carla still needed her parents' help. In fact, the couple chose to finance Carla's education instead of paying off the $13,000 car loan as suggested by the planner. They also spent $1,000 of their contest winnings on tuition costs. (They split the remainder of the winnings as follows: $500 in a savings account and the rest on dinner and a couple of gifts.) Carla's lack of college funding is part of the inspiration for their focus on savings. To avoid the same drama when it's time for Caryn, 11, to attend college, Mary and Carlton are exploring alternative funding options.

By May 2004, however, the Warners will gain more breathing room when Carla graduates from college and they will be finished paying off the car. Free from those major expenses, they will double up on mortgage payments, possibly paying it off sooner than 2010. They have yet to decide when they will buy out the ownership stake of her brother, who co-owns the home with Mary as part of their inheritance from their father.

The 40-something couple is also paying closer attention to their own retirement. David upped his contributions to his Thrift Savings Plan from 6% to 7%. However, he changed his asset allocation to a more conservative position, contrary to the adviser's advice. He put 75% of his assets in a government bond fund instead of 75% into growth mutual funds. But, he is rethinking that strategy given the more promising stock market. As for Mary's retirement account: her company hasn't started offering the 3% match nor has she been able to increase her contributions just yet.

The biggest change in the Warners' financial life is their renewed commitment to saving. "Savings is a learned thing. I wish I had grasped the concept when I was single and throwing money away. I'm trying to teach my daughters so they won't make the same mistakes," says Mary. "Just a little bit of money makes more money if you do it all the time. Pay yourself first."

* JUNE WINNER:

ALTON MOSS, MILWAUKEE

For Alton Moss Jr., reaching one's goal is a matter of planning and determination.

He embodies that principle. When we last talked with him, he planned to get his M.B.A. and within the first year to change from his engineering career to a more lucrative position with a target salary of $73,000. The 24-year-old graduated as planned in May. By August he had secured a new position, leaving Iowa City, Iowa, for a consumer products company in Milwaukee. Moss also moved up the ladder: he's site leader in operations management, earning a base pay of $75,000. With bonuses, he will exceed his former salary of $63,000 by some 30%.

In a little over a year, he was able to retire $5,500 in credit card debt. and hasn't accumulated any new credit card debt. What's his secret? "I repriorized things. I stopped spending so much on things like entertainment and food," he says.

Since he was already making the maximum contributions to his IRA, Moss used his $2,000 contest winnings to pay down $5,000 in school loans. He has also maxed out his 401(k) contributions--15% of his salary--following the advice of Mark A. Mitchell, a registered financial representative with AXA Advisors in San Juan Capistrano, California.

One of his major concerns was the finances of his fiancee, Catherine Charles. 29. They plan to marry at the end of 2004 and he wanted them to be on the same financial page. These days, he's not as concerned about her debt and money management skills. She received her master's degree in school counseling in May. She now works full time and earns a salary of $37,000--a substantial boost from the $12,000 she made on a part-time basis. She's cut her debt 50%--from $6,000 to $3,000--and seeks to eliminate the remainder in short order. She's also committed to putting 15% of her annual income in her retirement plan when she's eligible to join.

With debt under control, Moss believes that they "don't have any real financial issues anymore. With my promotion and her working full time now, we're ready to focus on saving for retirement."

He walked away with $16,000 in profit from the sale of his home in Iowa, and used it for a down payment on a four-bedroom, $205,000 home in Milwaukee, even though he believes he's on the fast track and in less than two years will likely be promoted and need to relocate. "The good thing is that. Catherine's jobs skills will be in demand anywhere, so it shouldn't pose a problem," says the optimistic Moss.

In addition, after taking some courses with Maxxis, a Tucker, Georgia-based marketing company, the couple has started a home-based business, teaching others money management, financial literacy, and entrepreneurship.

Change hasn't been easy. But, Moss says, "You can't let anyone or anything get in your way. Stay focused on your dreams and they'll happen."

* SEPTEMBER WINNER:

EDWIN BEALE NEWARK, DELAWARE

Things haven't gone according to plan for Edwin Beale. But that's not necessarily a bad thing.

The 31 year-old thought he would start a part- or full-time M.B.A. program this fall, but he's put off making a final decision until the end of this year. What's the hold up? Beale's been bit by the entrepreneurial bug. He's helped two friends as well as his sister start their own businesses, and he's in consultation with lawyers about a couple of ideas of his own.

Beale is in the process of sorting out his dilemma. If he goes to school part time and his employer pays, he'll feel obligated to stay at the company. However, if he goes to school full time--while financing his education and his other obligations will be an issue--he would have more time to spend on his entrepreneurial ideas. Moreover, if he got an M.B.A., he'd be interested in developing his talent in the financial services industry, not at Avecia Biotechnology Inc., the chemical manufacturing firm where he currently works. Even for a young, single man, the rigors of traveling 75% of the time, here and abroad, as a sales and marketing representative have become tiresome. "It's hard to have a life," he laments.

His other goal was to purchase a larger house, primarily for tax relief That didn't happen either. He discovered the home he planned to buy had a second lien and would be a risky investment. He's since changed strategies and is looking for a smaller house and will rent his existing house. "I'm never home anyway, and the upkeep is difficult. I'm thinking of buying a condo, which is as expensive as a house. If I get a condo for $100,000 or $150,000, the tax savings will be more than my low mortgage now," he says.

One big improvement Beale made was in his spending habits. Watching friends lose jobs and helping nascent businesses get off the ground sobered him. Gone are the $300-$500 monthly shopping sprees and $400 on dinners. "I'm doing better with my food fetish. I eat healthier and cheaper, about $200 a month. I order the steak dinner when I'm on my expense account for work. I've only spent about $300 in six months on clothes," he says proudly.

He followed financial planner Walt Clark's advice and put the $2.000 prize money in his Both IRA. He's also putting $250 a month into a small-cap fund, heeding the adviser's suggestions to diversify his large-cap fund holdings.

Says Beale, "A lot has happened in the last year or so. I'm still battling my urge to be aggressive, to say I want a Mercedes now, not when I'm 80 and retired. But lye seen friends lose jobs. I've learned you have to be prepared for anything." BE

Aleas & David Hammett

THE ADVICE                                THE FOLLOW-THROUGH:

Refinance the mortgage

Refinance the mortgage from a 7%       The Hammetts refinanced earlier
fixed rate to 5.75%, saving $153       this year getting a new rate of
a month.                               6%.

Renegotiate debt consolidation loan

Renegotiate the 12.75% interest loan   They secured a new 11%
to 9% or lower, and include the        rate and have reduced
$10,000 credit card debt in the        this debt by $25,000.
consolidation.                         The credit card debt
                                       is down to $5,500.

Set up college savings funds

Stop investing in Series E savings     They have not made any of
bonds and a 3% interest savings        the suggested
account and put that money into        changes regarding the children's
a 529 College Savings Plan instead.    college educations.

Contribute more to employee plans

Increase contibution to Aleas' 401(k)  Aleas increased her 401(k)
from 6% to 15%.                        contribution
                                       from 6% to 10%.

Invest contest winnings in Roth IRAs

Convert two traditional IRAs, and      They converted both
invest $1,000 from the contest         traditional IRAs into
Roth IRAs, and split the               contest winnings
winnings in each account.              between the two.

Mary & Carlton Warner

THE ADVICE                                 THE FOLLOW-THROUGH:

Reduce debt payments

Use home equity credit                 The Warners used
line to pay                            their credit line to
off $13,000 car loan. Use the          eliminate $3,000 in
savings, along with money              credit card debt
set aside                              but chose not to use it
in credit union,                       to repay the
debt.                                  to pay off remaining  car loan.

Finance tuition costs

Have daughter Carla                    They used an additional $11,000
seek financial                         from the credit
assistance, and prepare for daughter   line to pay for Carla's tuition,
Caryn's college costs by investing     supplementing the $5,000
$75 a month in a 529 College Savings   she received in
Plan instead of a savings account.     financial assistance.

Maximize employee savings plans

Contribute the maximum                 Mary hasn't increased
to Mary's                              her contribution
401(k) and shift                       and Carlton went more
assets in Carlton's                    conservative with his assets,
plan to a more aggressive              putting 75% into
portfolio                              a government
of 75% growth funds and 25% balanced   bond fund.
funds.

Invest contest winnings

Invest prize money in Mary's           Half the money went to
existing Roth IRA,                     Carla's tuition and
keeping the                            $500 was put in a savings
account's allocation of growth         account. The rest
mutual funds.                          was spent on dinner and gifts.

Protect home with insurance

Purchase enough term and accidental    Each had an existing term
death and disability                   life policy, but
insurance to                           they haven't purchased
cover liabilities,                     additional insurance.
including the
home equity loan.

Alton Moss

THE ADVICE                               THE FOLLOW-THROUGH:

Commit to the same goals

Develop a coordinated                  Charles has cut her
approach to                            debt by $3,000 and
managing money with girlfriend         committed to saving for
Catherine Charles.                     retirement.

Start contributing again to 401(k)

Resume contributing the maximum        Moss is again
amount to 401(k) plan.                 contributing 15% of his
                                       salary to his company's 401(k)
                                       plan.

Invest in growth mutual funds

Invest contest winnings                Moss had maxed out
in his Roth                            his Roth IRA, so he
IRA, seeking a diversified             put the money toward
portfolio                              his $5,000 student
of aggressive growth and fixed-income  loan debt.
funds.

Use home equity line to pay off debt

Apply for a home                       Moss transferred
equity line of                         his car loan to a
credit and transfer                    home equity credit line.
credit card and                        He separately
car loan debt since the interest       paid off $5,500
would be tax deductible.               in credit card debt.

Edwin Beale

THE ADVICE                         THE FOLLOW-THROUGH:

Keep the day job

Stay with the company              Beale is still with his
and attend                         company and hasn't
school part time to                decided whether he'll
reap the benefits                  start a part- or
of tuition reimbursement and the   full-time M.B.A. program.
company car.

Buy, then rent

Buy a more expensive               He is now looking for
home with a                        a smaller home with a
larger mortgage to                 parable mortgage,
increase out                       but still plans to rent
deductions and rent out existing   the existing property.
property.

Save and invest

Reduce dining and                  Beale reduced his
clothing expenses,                 spending but chose to
saving $600-$700 a                 invest the savings
month for cash                     rather than
reserves and                       improve his
debt reduction.                    cash position or debt load.

Think small

Shift investments to               Beale did put the prize
small- and                         money in his Roth IRA,
mid-cap funds, including           and he's also putting
the contest                        $250 a month into a
winnings, which should             to small-cap fund.
be added
his Roth IRA.