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He may be a genius, but this law school graduate has to pay back his debts like everyone else

By Ronald D. White

Los Angeles Times (MCT)

Published: Monday, Sept. 30 2013 3:18 p.m. MDT

After depriving himself of some of the common perks of a successful 20-something, Lamb said, Post could reach too quickly for those freedoms “and severely limit his ability to strive for success in several financial areas. Having multiple goals is very important.”

Lamb added, “He needs to pare down his debt, but he also needs to build up an emergency fund, repair his credit, get on a budget and begin contributing to his retirement by embracing his company’s matching 401(k) plan.”

For many of her clients, Lamb advises setting up several bank accounts to aid in budgeting.

One main account collects all of Post’s income. Regularly scheduled transfers go to smaller accounts dedicated to paying his debt and other regular bills, building up emergency cash reserves equal to three months of expenses, holding funds for discretionary spending and salting away something for infrequent bills.

Making these transfers automatic means Post doesn’t have to think about them as often, Lamb said, “but he still needs to acquire the discipline to accept that when those spending limits have been reached, he can’t spend more on those things until the next deposit arrives.”

Another key recommendation concerns Post’s living situation. Because he gets along well with his mother, who is a physics professor, and his father, who is a former aerospace engineer, Post should remain at home for as long as that feels comfortable, Lamb said.

The reason is that immense minimum student loan payment of $2,756 a month.

Avoiding the typically high cost of leasing an apartment in Los Angeles, plus potential move-in costs such as a security deposit and first and last month’s rent, will enable Post to build an emergency fund in just one year, Lamb said.

Then, in Year Two, Post can take the $1,045 a month that went into his emergency cash fund in the first year and add it to his debt payments.

Post, who has student loans from seven sources with interest rates ranging from 4.5 percent to 8.5 percent, should apply the extra payments to the most expensive loans, she said.

If Post sticks to the plan and remains at home with his parents, Lamb said, “his debt could be paid off in less than six years.”

“For many young people, staying at home wouldn’t be something they would want to do,” she said. “But given his willingness to do that, and his desire to pay off that debt quickly, this will give him a big head start.”

Lamb did have one warning. She is concerned that the large amount of student debt Post faces could drive him to push too hard, “devoting so much of his current income to debt repayment that he doesn’t reward himself at all for the success he has begun to achieve.”

Lamb described it as being similar to a person so intent on losing a large amount of weight quickly that he diets to excess and ultimately risks failing. Lamb wants to make sure that Post includes regular and reasonable perks, such as continuing to devote resources to his love of drawing.

Post has described himself as a very frugal traveler in the few vacations he has taken.

“He should spend money on areas that he values, such as his art hobby, socializing with friends and travel, so that he can stick to the budget without being driven to binge-spend,” Lamb said.

Post said he found his new road map almost overwhelming after months of wondering “whether I could ever have good credit.”

“It’s hard to imagine feeling better right now,” Post said. “It feels like I have a future, a good future.”

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©2013 Los Angeles Times

Visit the Los Angeles Times at www.latimes.com

Distributed by MCT Information Services

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PHOTO (from MCT Photo Service, 202-383-6099): PFP-DEBTPLAN

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