This is the third in a four-part series on the financial planning of Joe and Tanya, a composite couple.

At first glance, Joe and Tanya appear to have a really good life. There will be those who say, right, we wish we were making as much as they are on an annualised basis - $118,596. If they are making that kind of money, they don't need financial planning, right?

In the many years of practising as investment advisor and Certified Financial Planner, I can honestly tell you that I have seen the same patterns in very high income earners, no more in savings than Joe and Tanya on a relative basis. So where is the money going? Ah, sixty-four thousand dollar question? Guess what? People tend to spend right up to the income they make. We become complacent. My job will always be there. I have to buy this now. I can save later. There is plenty of time; after all, I am only 35. Along with the recent strength of the Canadian (and Euro) dollars, inflation erodes the value of the dollar as easily as the sea reclaims our shorelines.

Down to one night of bartending a week, Tanya has essentially lost her part-time job. Will her full-time job soon depart (for greener pastures)? They advertise the apartment; prospective tenants, sensing the economic winds of change, are demanding price concessions. Looks like they may have to accept $1,500 per month, not the $2,000 they used to get and really need.

Looming Cash Crunch: They need $9,500 per month to break even, yet they are running a deficit of $1,100 per month. Interestingly, this is the exact cost of Crystal's private school fees. For now, this shortfall can be made up from their savings, but $27,000 won't go very far.

They are feeling very, very vulnerable. While they may have real expendable income down the road after education costs and mortgage paid off, right now the future looks grim.

Reviewing the Family Financial Profile: No life insurance on Joe. With a $256,000 mortgage the family is incredibly exposed.

No disability insurance on Joe. Machete, chainsaw, and outdoor equipment accidents are highest among construction, farm workers and related industries. Retirement Pension accumulations to date for Joe is minuscule.

Their car, bought second hand, is old and tired, maybe it will last another year, maybe not.

At five to eight percent per year, education costs are increasing faster than inflation. At this rate in today's' dollars, six years of private school for Crystal and nine for George will cost an estimated $127,829. Add university expenses at a modest price of $10,000 today per year and the total bill is staggering.

To advance professionally, Tanya needs to finish college.

They have no will. In true Bermudian fashion, their home is in Joe's name only.

They have no legal guardian for the children.

Investment planning - no diversification and no contingency planning.

Health care - one of their biggest ticket items (and a source of many arguments) is Joe's mother's medical costs at $9,000 per year. While not fair, there are many young people already caring for parents who either would not plan, could not plan, and now it is too late to plan.

l Joe's Business has a reputation for excellence; however, constant stress is working him into an early grave - just like his father before him. Areas of real obvious concern here are:

Job receivables - this is found money, but the longer it takes to collect, the harder it is to collect.

Poor cash flow management - he has no time to build operating projections and anticipate carrying costs of future expenses.

Business concentration risk - losing six of eight customers at once hurt. He must market to a wider variety of individual and business clients.

Inability to delegate. Joe cannot continue to operate alone, yet many small businesspeople struggle for years - failing to understand that without shrewd expansion strategies, they can only contract.

When times get tough, the tough outsell everyone else. Predictably, when faced with declining profit margins, most businesses cut expenses. The really savvy entrepreneur, Warren Buffett who loves falling capital markets, uses leverage to increase both market share and revenues. While not world class, the Smiths have the same potential if they take courage in hand and reach for the brass ring.

Mom Steps up to the Plate, informing them that she can loan them some immediate cash ($50,000). She's been terribly bored lately - after all she is only 65. She will take care of George (the only son of her only child) after school. And wonder of wonders, she has a part-time job - selling ice cream.

They are extremely grateful - and lucky. The pressure lifts, but it is only a temporary stopgap - Joe and Tanya recognise that they must develop a complete change in lifestyle attitude or see the same financial situations happen again and again, with never any respectable alternatives. Many couples never reach resolution during a crisis and the relationship inevitably fails. See ten year timeline chart.

Stay tuned for their Certified Financial Planner comprehensive financial plan recommendations next week.

Sorry, readers, I lied and could not complete the composite case in three episodes. Too much to say and too little space to display it!

Last week we listed the Smiths' Personal Net Worth and Cash Flow statements (these are not archived with the article). If you want to reference them, please contact me via email and I will send you the charts. For those who may have missed the first two articles on the Smith couple, go to www.theroyalgazette.com. Type Martha Myron in the search window and look for July 19 and July 26 articles.

Martha Harris Myron CPA CFPr is a Bermudian, a Certified Financial Planner™(US license) practitioner and VP, Personal Financial Services at Bank of Bermuda and a member of the Bank of Bermuda's Global Investment Policy Committee. She holds an NASD Series 7 licence. Confidential e-mail can be directed to marthamyronnorthrock.bm

The financial planning case composite described above does not represent any living individual or family. Any resemblance to any real person is purely coincidental, and does not imply endorsement of any particular lifestyle, culture, religion, or ethnic background.