Money Matters

Determine Your Own Fate with Financial Planning

Don’t leave your future to fate! To see what financial planning can mean to you, look at our real-life examples. In just one year, these salon professionals have reduced their debts, increased their income, and gained control over their financial future.

Editor’s note: This is part 3 of a 3-part series. In part 1 (“Plan Your Financial Fitness,” September 1993), financial planner Nancy Abrams evaluated the financial situations of three typical nail care professionals and developed individualized programs to help each one reduce her debts, increase her savings, secure necessary insurances, and plan for a comfortable retirement. In part 2 (Financial Fitness Requires Long-Range Planning,” April 1994), Abrams evaluated each professional’s progress, answered her questions, and advised her on how to continue working toward her goals.

There’s so much in life that you can’t control - sudden illness and natural disasters (not to mention taxes) - that it seems foolish not to control what aspects of your life that you can. But so many of us are slaves to our finances, allowing them to determine what we can, and can’t, do. Too often we say, “I wish I could buy a house” or “I don’t know how I’ll survive when I retire,” not accepting that we are in control of our destiny. But, says Los Angeles-based financial planner Nancy Abrams, with time and discipline, taking control of your financial destiny is possible. To prove the point, NAILS made arrangements with Abrams to help a salon owner, a nail technician employee, and an independent contractor get their financial lives in order. The employee has since left the nail industry, but the salon owner and the independent contractor, ages 37 and 34 respectively, are committed to a career in nails. They are not rich, in fact, when we met them they had no savings and were lacking such basics as medical insurance. Just one year later, both have reduced their debts, started saving each month, and have covered some of the basics. In short, says Abrams, they’ve taken control of their finances, which has given them greater say in their destiny.



When we met Kathy, a salon owner in Amarillo, Texas, a year ago, her primary financial goals were to secure medical insurance for her family, purchase a home, and increase her salon’s revenues. Then, Abrams says, she didn’t see how Kathy could accomplish these goals given her financial situation. Now she appears able to meet these goals and can even consider saving for retirement.

A year ago, Kathy and her husband had just declared bankruptcy and were paying $100 a month toward medical bills. The family of four had no medical insurance and no savings for an emergency. Six months later, Kathy had paid off her family’s medical bills, remodeled and expanded her salon, and opened a savings account. While she hadn’t saved much money, she had taken steps to increase her income by expanding her salon from four to six stations. A risky move, said Abrams at the time, but one that apparently worked for Kathy, who reports that her family’s net income has risen about $500 per month. In fact, Kathy recently added two more stations to her salon, for a total of eight.

Kathy is currently talking to an insurance agent who thinks he can get her and her children health coverage with monthly premiums of $125-$200 per month, depending on the type of policy (her husband is excluded from coverage because of ongoing medical problems). According to Abrams, Kathy will probably have to choose a higher yearly deductible to get the lowest premiums if she chooses an 80/20 indemnity plan. If Kathy chooses an HMO, however, she may have higher monthly premiums but she won’t have any out-of-pocket medical expenses.

Another goal of Kathy’s was to someday own her own home. Kathy is actively working with a mortgage broker who has found a community program for first –time home buyers that will loan Kathy 70% of the required down payment; Kathy must pay the 30% difference. Although the broker says Kathy can afford to spend about $55,000 for a house, Kathy has decided that in order to keep her bills manageable she can’t spend more than $40,000. Kathy’s 10% down payment for a $40,000 home would be $1,200 (with an additional $2,800 coming from the community program loan.) So far she’s saved $600.

How has Kathy come so far? She realized that her expertise lies in doing nails and running her salon, not in balancing the books. Kathy has bartered with one of her clients to help her with her taxes and bookkeeping in exchange for free nail services. The client is also providing Kathy with a profit and loss statement each month. Abrams encourages Kathy to study the statement so that she can track her salon’s profits. Abrams says her experience shows that individuals often don’t understand the figures that their bookkeepers present, causing them to sometimes make unwise business decisions.

 Another member of Kathy’s financial team is her banker. At Abrams’ recommendation, Kathy met with her banker almost a year ago to finance a car loan. This helped Kathy begin to repair her credit. Since then, the banker has helped Kathy secure a credit report, and consolidate her other debts on one credit card. Consequently, says Abrams, Kathy’s credit record is now clear of all old and bad debts. Abrams is confident that Kathy is well on her way to achieving her goals. Kathy has a team of individuals working on her behalf. She has established relationships with her insurance agent, banker, and she has clearly defined her needs to them. Consequently, they should be able to tailor their services to meet her goals.

Kathy says Abrams advice was helpful to her over the past year. “On top of the encouragement she gave me, she also helped keep me on track toward reaching my goals. “What did she learn? “Don’t wait too long to protect yourself. You need that nest egg to cover emergencies, and you need the protection of insurance, whatever the cost. Life is gamble and you can’t afford to take chances without protection,” she advises.



This time last year, Kris, and independent contractor in Georgia, needed to reduce her expenses or increase her income quickly. Recently divorced, Kris owned her own home but had no medical insurance, and her expenses exceeded her income. Like Kathy, Kris’ goals were lofty: to double her income, obtain medical insurance, pay her quarterly taxes on time, and buy a new car. Again like Kathy, she has made great strides toward not only reaching those goals, but surpassing some of them. Kris has increased her income approximately $1,000 per month, she has sold her expenses, and she has obtained medical insurance at a reasonable cost.

When we spoke to Kris six months ago, she was planning to join her fiancé in Oklahoma City, Okla., as soon as she sold her house and salon business. Now she’s revised her plans and says she will join him in a few months, after he has established his own business and after she has tied up loose ends in Georgia (including paying off old debts and selling her salon business). She has already sold her house and is living with her parents (rent-free).

Since April, Kris has sold her old car and purchased a new Saturn. She made a $1,500 down payment with money she had saved while living with her parents. This almost doubles her car payment, from $168 to $303 per month, but she’s using the money she earns each month as a manufacturer’s educator to make the payments. Kris and her fiancé plan to rent a house when she joins him in Oklahoma while they save for a down payment on a piece of land on which they will build their own home. They figure it will take them a few years to save what they need because each will be establishing a new business in a new state. Kris will be ready to work as soon as she arrives in Oklahoma because she has already applied for, and received, her Oklahoma nail Technician’s license.

When she applied for a car loan, Kris was surprised to find several items on her credit report that reflected her ex-husband’s credit debts. She was able to secure financing anyway and has been working to clear things up. For reasons such as this, Abrams recommends that anyone financing an automobile or home or applying for a credit card arrange to see a copy of their credit report first. This gives you an opportunity to clear up any mistakes before you are turned down for a loan. According to Abrams, the Consumer Credit Counseling Service (800-388-2227) offers information about rebuilding credit and responsible spending.

In our first installment in September 1993, Abrams recommended that Kris quit working as a manufacturer’s educator, citing the wear and tear on Kris’ car and the fact that she earned almost three times as much working in the salon. Since then, however, the company has hired more educators, which has reduced Kris’ need to drive and the amount of time she spends away from the salon. Presently, Kris works as an educator 1-1 ½ days a week, supplementing her salon income $400-$1,000 month.

Kris income overall has risen in the past year from $1,629 to between $2,025 and $2,625 a month. She credits this to spending less time on the road educating and more hours in the salon, especially in the evening hours. Living with her parents has also allowed her to pay off her credit card bill in record time. Kris says she hopes to start saving $150 a week, $50 of which is earmarked for taxes.

When Kris moves she plans to sell her client list, salon space lease, and product inventory. Her asking price is $5,000, but she has yet to find a buyer in the competitive environment.

If Kris meets her goal of saving $100 per week, Abrams speculates that she should have enough money saved in a few months to start over in Oklahoma, even if she can’t sell her business. Even with her moving expenses and the expenses of setting up a new household and business in a new state, Abrams hopes Kris starts a retirement savings program by April 15, 1995 (which can be used as tax deduction for 1994). If she can start her retirement savings with $500 and add $500 each year for 35 years, her savings will be $118,000 in 35 years, assuming she earns 9% interest that is reinvested in the program. According to Abrams, a mutual fund such as Neuberger & Berman Guardian growth and income fund (800-877-9700) will help her achieve this goal. Abrams reports that the average total return for this fund during a one-three-, and five-year period is 14.2%, 17.07%, and 15.13%, respectively.

Kris says she was working to get her finances under control before she met Abrams, but that Abrams’ advice gave her some needed confidence because it matched some of the things she was already doing. “I did pay attention to what she said about concentrating on my salon business instead of spending so much time on the road. I found my increase in income came from focusing more on my salon business.” Now, Kris’ new goals (after she moves) are to save for buying some land and for her retirement.

By just increasing their awareness of how they spent their money each month, deciding what they wanted to achieve in the short-and long-term, and focusing on changing their spending habits to achieve those goals, these two professionals have made great strides toward achieving what they want in life. Of course, they’re not done yet, and they never will be if they’re smart, Abrams adds. Financial planning is an ongoing, fluid process that requires constant attention and adjustments to follow the curves in the road of a person’s life. But without any special training, and just some guidance from Abrams, Kris and Kathy have found that taking control of their finances has given them greater control over their life. Isn’t that what we’re all looking for?


MONTHLY                                     SEPTEMBER                 NOVEMBER

HOUSEHOLD BUDGET                    1993                                       1994

Family Income                                   $2,233                      $2,350-2,700                                  


Rent                                                      350                                      400               

Household Bills                                 200                                      200                          

Auto Insurance                                 200                                      106           

1985 Ford Pickup                              303                                         0            

Second car                                          160                                         338         

Household Furniture                      135                                         0                

Medical Bill                                         100                                         0                    

Medication                                         200                                         125  

Savings for Taxes                             0                                              200                

Medical Insurance                           0                                              100-200*

Savings/Emergency fund              0                                              100    

Children’s Needs                             0                                              $60      

Miscellaneous                                   0                                              200        

Total                                                      1,1548                                   1,829-1,929       

Extra Income                                     585                                         421-871

*New category the family should include in its budget



MONTHLY HOUSEHOLD BUDGER                 SEPTEMBER 1993 (REVISED)                NOVEMBER 1994   

Income                                                                 $ 1,629                                                  2,025-2,625

Expenses Mortgage                                                        674                                                         0

Household Expense                                                        125                                         420

Car Payment                                                      260                                         303

Telephone/Utilities                                        179                                                         60

Cable                                                                     30                                                           0

Life Insurance/Retirement                                          100                                        17

Medical Insurance                                                           0                                                              89

Car Insurance                                                                    50                                           95

Property Taxes                                                                 50                                          0

Credit Card Bill                                                                   0                                              0

Savings                                                                                 0                                               400

Savings for Taxes                                                             0                                              200  

Miscellaneous/Travel                                                     0                                              500

Total                                                                      1,646                                                     2,084

Extra Income                                                                     (17)                                                        (59)-541

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