Q: I would greatly appreciate your advice on how to truly achieve financial security. I’m a 49-year old single mother of one. My daughter will enter college this fall.

Two years ago, I filed a Chapter 13 bankruptcy in an attempt to save my home from foreclosure.

I filed because of the usual last resort reasons: I couldn’t afford my mortgage and private school tuition bills because the doctors found a benign brain tumor that required surgery, protracted hospital stays, rehabilitation and other medical expenses not covered by insurance. My child support of $1,000 per month suddenly stopped about a year after I purchased the home and I was not prepared for the loss of income.

Ilyce, I know I made many critical mistakes but, one morning last July, I asked God to help me find a way to get this monkey off of my back. I sold my home right away, paid off all of my outstanding medical bills, as well as my daughter’s high school tuition, for the year. I am now debt free with $30,000 in savings.

I earn $65,000 and have started contributing 7% of my salary to my 401(k) plan. My employer does not contribute matching funds. I have been advised by my daughter’s financial aid counselor that I am expected to contribute $7,000 towards her education and can elect to pay that amount in one lump sum or extend it over 9 zero-interest payments.

Because of my recent Chapter 13 bankruptcy filing and my fico score of 643, I was deemed ineligible to finance the parent contribution of my daughter’s college education expenses. So, I’ll have to pay that in cash.

My net pay is approximately $3,600 a month. My rent is $1,200 and my other living expenses come to $1,000 per month.

Now that my daughter is going to college and I know how her tuition will be paid for, I feel like I need to think about myself. I want to own a home again. I want to save for retirement and I want to return to school in the evenings to complete my degree and convert that accomplishment into added earning power. And, if it’s not asking too much, I’d like to take a vacation.

I’m worried that if I don’t act soon I join the ranks of other ill-equipped retirees forced to choose between medications or food. I don’t want to rely on a fixed income of social security supplemented by a small pension. I just don’t want to be bound by those self-imposed chains.

I really don’t know where to start. Please help me help myself. I am in search of a plan. I need a starting point. I will utilize every resource you make available to me.

A: I want to start by congratulating you on all that you have accomplished. You’ve raised a daughter, by yourself, and put her through private school. Now she’s on her way to college.

You’ve survived a benign brain tumor, surgery and all the accompanying recovery issues, including paying all the expenses your employer’s health insurance coverage didn’t pick up. You’ve survived the loss of child support, and kept on going. And, you gave yourself a second chance by selling your home, paying off your debt and living a debt-free life.

These are major accomplishments and I feel like there might not be anyone in your life to give you a well-deserved pat on the back.

At 49, you’re ready to start over again. And, it sounds as though you’ve already got a plan of action. You’re saving $1,400 per month after your expenses. While $7,000 of that each year will have to be used for your daughter’s college education, you’re making a smart decision to help her get her degree.

By my calculations, that leaves you nearly $10,000 per year to use to rebuild your emergency fund, salt away in a Roth IRA for retirement (you can put up to $4,000 away this year), or use as a down payment to buy your house.

If you want to build up your savings more quickly, you can think about taking a second job on the weekends, and dedicating that income solely toward making your long-term financial dreams come true.

Over the next year, you should start adding to your savings and start rebuilding your credit. Pay all of your bills on time and get some time between you and your Chapter 13 filing.

Once you own a home, you may find your parental contribution toward your daughter’s education will go down. You may also find that you’ll be saving money at tax time as well. She should think about getting a part-time job either during the school year or during the summer that could help take some of the burden off of you. I worked through all of my college summers as well as during the school year and I earned a few thousand dollars, which helped out a lot with college expenses.

Here’s the plan as I see it: Take six months to a year to rebuild your credit history and raise your credit score and save up some money for a down payment. Once your credit score hits 680 or higher, start shopping around for a mortgage. In the meantime, you should think about where you’d like to live and perhaps even visit some open houses.

Interest rates are still low and with your solid income, you should be able to spend around $200,000 on a house. While that may not buy the house of your dreams, it’s more important to be realistic about what you can afford so you don’t have to live on the edge. I get the feeling that you’re interested in building financial security, not living on the edge.

The dreams you have will take time to realize. But remember, you’ve climbed steeper hills before and you’re already on the other side. All you have to do now is keep the finish line in sight: owning another home of your own. Finally even if it takes a couple of years for you to be able to buy a new home, you will be building for your retirement and solidifying your financial future.

Published: May 6, 2005