Roamin’ Type

Linda Boyd loves a good adventure.

An avid world traveler, she has picked a different country each year, then set off by herself to explore it. The itineraries for these monthlong excursions have included Indonesia, Turkey, Morocco, Greece, Singapore and Thailand, to name a few.

Three years ago, with nearly 40 countries to her credit, she ventured in a different direction. Boyd, at 43, became a single mother.

“Nobody could prepare you” for how motherhood changes your life, “or the joy it can bring you,”said Boyd, who is rearing her daughter, Taylor, now 3, without any support from the biological father. “It changes your entire world.”

But with years of hard work and saving, she felt that she could comfortably take on single motherhood.

Not surprisingly, this same sense of adventure steered Boyd onto a more challenging financial path.

Indeed, she is within reach of her long-term financial goals, according to Sharon Rich, a fee-only certified financial planner based in Belmont, Mass. Boyd, 46, a program manager with Orange County who makes $74,000 a year, includes among her ambitions retiring early, providing a college education for Taylor and eventually getting back on the road.

“It really sticks out as a success,” Rich said of her client. “I think her goals are very realistic.”

At the core of Boyd’s portfolio is $156,000 in mutual funds she accumulated over many years by consistently working, saving, reinvesting her returns and educating herself in order to make wise investment decisions.

Boyd took her first job right out of high school. She was 17 years old and made $1.97 an hour as a clerk for Orange County. She figured she would work for the county about a year, but she’s still there.

As she advanced through the ranks, she put herself through college, going at night for 10 years to earn a bachelor’s degree in business administration. During this time, most raises went directly into her deferred-compensation account--a tax-deferred pretax savings plan offered by her employer. In all, she tucked away upward of $625 a month in the account; it now has about $87,000 in it.

Some people must struggle to save even the smallest amount, but financial self-control comes naturally to her, Boyd said.

“I was a good saver as a child,” she said. “It was never anything my parents did. I was just always willing to save my money and spend somebody else’s.”

She has accumulated an additional $45,000 in individual retirement accounts and $34,000 in other investments. She also has $5,000 in a bank savings account and $4,650 earmarked for Taylor’s college education.

Boyd has chosen to put nearly all the money she’s set aside, no matter the account or purpose, into no-load growth-stock mutual funds. That’s a somewhat risky strategy, but over the last few years in particular, she has reaped the benefits of the booming stock market, bringing in annual returns of as much as 30% in some cases. For example, she has contributed only $46,000 to her deferred-compensation account--the rest reflects in large part increases in value in the mutual funds her contributions have been invested in.

Boyd’s knowledge comes from classes at local community colleges and from reading financial periodicals.

“I look for a company that has solid management, a good performance record, is well-regarded by other experts and their prospectus is easy for me to understand,” Boyd said. Once she narrows down the field of choices, she looks at which have had the best returns.

“I am willing to take more risks than some people--it is just my personality. Plus I am not too old to lose some.”

Rich agreed with Boyd’s strategy but said there are a few gaps that need closing, most notably a lack of foreign and small-company mutual funds. Rich suggested that to achieve better diversity, Boyd put $28,000 of her assets into international funds and $3,000 into small-cap funds.

“The U.S. has done well recently, but if you look over a long period of time there are many times in history when international funds have done better,” Rich said. “That is why we are trying to split the bet.”

To get the $28,000, Rich advised Boyd to take $10,000 out of Fidelity Equity-Income and $5,000 out of Fidelity Contrafund, two of the largest account holdings in her deferred-compensation plan; and $11,000 out of Neuberger & Berman Partners and $2,000 from Selected American Shares, both IRA investments. Boyd would remain invested in those funds, but they would no longer make up such a high percentage of her overall portfolio.

Rich suggested the money could go into some combination of Janus Overseas (less than 5 years old), Vanguard International Growth (five-year average annual return: 14.1%), USAA International (five-year average annual return: 13.9%) and Templeton Foreign Class I (five-year average annual return: 11.8%).

The Templeton fund, which Rich said has ranked among the top third of performers in its class in the last decade, is available in Boyd’s workplace deferred-compensation plan; any or all of the others could be added in her IRAs.

Rich suggested taking the money out of Fidelity Contrafund and Neuberger in part because these started as mid-cap company funds but are now more like large-cap funds, plus Boyd has even more large-cap exposure in Selected American Shares.

For a small-company investment, then, Rich suggested Boyd move $3,000 more out of Selected American Shares and put it into Baron Asset (five-year average annual return: 21.9%) or Managers Special Equity (five-year average annual returns: 18.2%) or Schroder U.S. Smaller Companies (less than five years old).

Boyd’s ability to save is helped by the fact that she has kept her expenses low, even with the addition of Taylor.

Her main obligations include the $1,200 monthly payment on the $168,000 mortgage on her Anaheim Hills home, currently valued at about $275,000; a $475 monthly preschool tuition fee for her daughter; and a $387 monthly car payment. She uses credit cards, but is careful to pay them off each month. She didn’t have a car payment for nearly 10 years, until she bought a $16,000 Toyota RAV 4 not long ago.

Another important piece of Boyd’s financial picture is her employer’s pension plan. Because she has been with the county for so many years, she could choose to retire at age 55 and receive 66% of her monthly gross income, now $6,136. If she waits until age 62, she will get 100% of her gross monthly income.

Although it would be preferable for her to wait until she could get the maximum pension, Boyd could certainly expect to retire comfortably at 55. Her IRA investments alone, assuming that they continue to grow at an average rate of 8% a year, would be worth close to $250,000 by the time she is 55. And if she keeps stashing away the maximum allowable amount in her deferred-compensation plan and keeps her expenses where they are, she should be able to maintain her current standard of living.

Rich had a few housekeeping suggestions for Boyd as well. Because her net worth is more than $300,000, she should consider umbrella liability insurance, which would protect her personal assets from any claims. Boyd also should set up a trust for Taylor to ensure that Boyd’s assets will be handled as Boyd would wish should she die unexpectedly.

As far as providing for Taylor’s education, Boyd is on the right track but needs to double her monthly savings, to $250. Further, Boyd should stop putting the investments in her daughter’s name. This change will give Boyd control of the money and also put Taylor in a better position to receive financial aid when she starts college. Rich also suggested that Boyd beef up her emergency fund by an additional $5,000.

Finally, Rich told Boyd that when she gets within five years of retirement, she should re-balance her stock-heavy portfolio, putting a significant portion of her money in bonds or other fixed-income vehicles to reduce her risk and put her in a position to start relying on her assets for living expenses when she’ll need to do that.

Until then, however, Rich said, Boyd should stick to her current approach to her finances and keep preparing Taylor for the road.

“She is becoming a good traveler herself--she even carries her own backpack,” Boyd said about Taylor’s early excursions, adding that although the girl hasn’t traveled out of the country yet, she has been to Hawaii, Oregon and Idaho. “I want her to have those experiences I did, to be exposed to the different cultures of the world.”

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This Week’s Make-Over

* Investor: Linda Boyd

* Age: 46

* Occupation: Manager of a county medical program

* Gross annual income: $74,000

* Financial goals: Retire between age 55 and 62; pay for college education of daughter, Taylor, now 3; travel.

*

Current Portfolio

* $45,000 in individual retirement accounts. Of that, $21,000 is in Neuberger & Berman Partners (five-year average annual return: 19.8%) and $22,000 is in Selected American Shares (five-year average annual return: 18%).

* $87,000 in employer’s deferred-compensation plan. Of that, $24,000 is in Fidelity Equity-Income (five-year average annual return: 18.5%) and $28,000 is in Fidelity Contrafund (five-year average annual return: 18.5%). Fidelity OTC Portfolio (five-year average annual return: 18.4%) is also a major holding.

* $34,000 in non-retirement investments, including the mutual funds Selected American Shares, American Century Income and Growth (five-year average annual return: 20.7%) and Vanguard Special Health (five-year average annual return: 23.9%)

* $4,650 in daughter’s college fund, consisting of $4,000 in Fidelity Growth and Income (five-year average annual return: 20.8%) and $650 in bonds

* $5,000 in bank savings

* About $107,000 in equity in home with an estimated value of $275,000

*

Recommendations

* Continue current savings regime and keeping expenses down.

* Achieve a better diversified portfolio by pulling $28,000 out of four mutual funds and putting it into international mutual funds and by taking $3,000 out of Selected American Shares and putting it into small-cap funds.

* Consider umbrella liability insurance to protect personal assets from claims.

* Set up a trust for Taylor to ensure Boyd’s assets are handled as she would wish should she die unexpectedly.

* Increase monthly savings for Taylor’s education fund to $250. The investments for this should be in Linda’s name. That will give Linda control of the money and put Taylor in a better position to receive financial aid.

* Set aside $5,000 more for emergencies and put it in a money market account.

*

Recommended Mutual Fund Purchases

* Baron Asset (800) 992-2766

* Managers Special Equity (800) 835-3879

* Schroder U.S. Smaller Companies (800) 344-8332

* Janus Overseas (800) 525-8983

* Vanguard International Growth (800) 662-7447

* USAA International (800) 382-8722

* Templeton Foreign Class I (800) 292-9293

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Meet the Planner

Sharon Rich, a fee-only certified financial planner, is the founder of Womoney, based in Belmont, Mass. Rich, who has a doctorate in education from Harvard University focusing on women’s psychological development, specializes in financial planning for women and families.

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What You Can Learn From Them This Sunday

For the last nine months, dozens of Southern Californians have agreed to bare their financial souls in the Wall Street, California pages, in exchange for advice on how to handle their money better. Their stories help to underscore some of the fundamental principles of finance. In this Sunday’s Business section, Times columnist Kathy M. Kristof takes a look at some of these key lessons as part of a special group of stories geared to individual investors.