When it comes to money, Susan and Paul Sumile have been doing the right thing for years: They spend wisely and try to save.
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| Simone Markva, left, chats while Susan Sumile, right, packs with daughter Kayla, 9. The Sumile family is moving to North Carolina
Andrew Shimabuku • The Honolulu Advertiser
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But no matter how hard they try, they can't seem to save much.
Their combined income of $65,000 is just enough to cover monthly bills for the family of five in Wahiawa. They rarely eat out, their children wear discounted clothing from Ross and they clip coupons. They seldom travel.
Seeking a solution to their problem, the Sumiles participated in an Advertiser Money Makeover, which pairs readers with financial planners, in November 2002. Today the Sumiles and two other early participants in the series report on whether the advice they got proved helpful.
The Sumiles' financial planner told the couple that if they wanted to pay for their children's college education, they had to save $235 a month immediately into an investment that returns 9 percent annually.
| Lower-cost life
Family: Susan and Paul Sumile
Problem: The Sumiles earned just enough to support their family of five on a combined salary of $65,000. They wanted to save for their children's college education and boost their retirement savings. If possible, they wanted to travel more as well.
Makeover: In November 2002, they were told to shave spending and put away more for college and retirement.
What they did: The Sumiles refinanced and took their eldest daughter out of private school. Still, the extra cash wasn't enough to meet their goals.
The outcome: They decided to move to Indian Trail, N.C., where living expenses are only half what they are in Honolulu. They are looking to purchase a three-year-old, 1,600-square-foot house for less than $150,000. They don't anticipate difficulty finding jobs in the fast-growing state.
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For retirement, they had to sock away $400 a month and increase the amount gradually to $750, earning 9 percent a year.
The adviser urged them to refinance their home, which they did. To save another $300 a month, Susan Sumile decided to take 9-year-old Kayla out of private school. She is now homeschooled. Bryce, 6, is going to public school. Cameron will turn 2 at the end of the month.
Still, 41-year-old Susan said her efforts to boost their savings were not enough: "I would like some breathing room."
After hearing out the financial planner and doing much soul-searching, the Sumiles decided to embark on a well-worn path traveled by kama'aina looking to improve their financial picture: move to the Mainland.
They've put their home up for sale and gave notice at their jobs. Paul, 46, works as an Orkin exterminator, while Susan is a part-time bookkeeper. After visiting North Carolina last year, they decided to move to Indian Trail, a town near Charlotte. They leave Hawai'i next month.
"It's wonderful and cheap," Susan said. "I did a cost comparison. For someone making $65,000 here, they only need $30,000 there."
They found a 3-year-old, 1,600-square-foot house in North Carolina for less than $150,000. The Sumiles plan to use equity built in their 1,900-square-foot Wahiawa home to put a big down payment on their new home.
The Sumiles don't have jobs yet, but they don't think it'll be difficult to find employment in the fast-growing state. If they can earn $40,000 a year combined, she said, they'll be all right.
Susan Sumile is aglow with the possibilities of extra money in the budget.
"We're going to sock a lot of money into our retirement," she said. "We'd really like to travel," such as taking road trips to Washington, D.C.
They're also excited about the public schools in Indian Trail, which include magnet and charter schools.
Susan's family is in Ohio, but her mother might move to North Carolina to be near them. Paul has always lived in Hawai'i, but is game about trying a new state. His family is sad to see him go, but they know what it's like to have relatives living far away: One's in Las Vegas, another in Cleveland.
The Sumiles hope they'll adjust well to life in North Carolina, and have a backup plan to move back if it doesn't work out.
"Hawai'i is beautiful. I love it," Susan Sumile said. "If only we could make it here."
Diverse investments
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| Glen Hayase is sitting pretty in his Kapolei home now that he has reduced his investment risks. At 28, Hayase earns $70,000 a year, has $230,000 in the bank and owns his home.
Rebecca Breyer • The Honolulu Advertiser
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Glen Hayase has no problem making it in Hawai'i. The 28-year-old bachelor holds two jobs: He's employed full time with the National Guard and as director of nonprofit organization The Asset Building Initiative of Hawaii. When possible, he also volunteers at or gives to other nonprofits.
When Hayase met with a financial planner as part of a Money Makeover in October 2002, he was sitting pretty. He had $230,000 in the bank, which has since grown, and owned a home in Kapolei that has appreciated by $120,000.
He built up his assets by living conservatively and saving much of his $70,000 annual income.
There's just one problem: Hayase's risks weren't spread out enough. Almost all his money was in stocks; he traded them frequently and often bought riskier high-tech issues.
During the bear market, Hayase lost about $40,000. The financial planner told him to diversify more into bonds.
"I have done that — not only holding stocks (longer), but diversifying into different types of bonds," he reported.
| Diversifying helps
Name: Glen Hayase, 28.
Problem: Works two jobs, saves a lot, owns home and has $230,000 in the bank, but his investments weren't diversified. He lost $40,000 during the bear market.
Makeover: In October 2002, he was told to diversify his portfolio to reduce risk.
What he did: Hayase boosted his exposure to bonds from 4 percent to 15 percent of his portfolio, choosing local municipal bonds and corporate bonds. He pared back his tech stock holdings and now holds most stocks for at least a year. The bulk of his retirement money is in an index fund that tracks the S&P 500.
The outcome: Since the market rebounded, Hayase said he has recouped his $40,000 loss and more. He spreads out his investment risks now, which should protect him from volatility. At 28, Hayase wants most of his money in stocks.
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His allocation of 4 percent in bonds is now 15 percent, invested in local municipal bonds as well as corporate bonds. He also invested in a real-estate investment trust, or REIT, a type of company that returns most of its profits to shareholders in return for special tax treatment.
While the planner's recommendation was to put even more into bonds, her advice came when bond prices were high, Hayase said. Bond prices take a hit when interest rates rise. The longer the bond term, the more it is exposed to higher rates.
"I think she kind of went textbook," he said of the financial planner. "I didn't need that money, so I can weigh the ups and downs of the market."
Since the market rebounded in 2003, Hayase said he has earned back the $40,000 he lost. To invest more conservatively, he whittled down his exposure to tech stocks, and now holds 75 percent of his stocks for at least a year. And he invests most of his retirement money in an index fund that tracks the S&P 500.
Hayase learned to save early, taking a lesson in budgeting from his parents, who supported four children on modest salaries. His father was a social worker and his mother was a substitute teacher.
"Most people get caught up in the material things — keeping up with the Joneses. Spending gives them satisfaction," he said. "I get satisfaction in saving money."
That doesn't mean he never splurges. Hayase wants to buy a Harley-Davidson motorcycle in a month, and has budgeted more than $5,000 for it.
"I don't mind spending money," he said. "But to me it has to be worth spending."
Spendthrift to saver
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| Derek and Nani Sakaguchi remodeled and added more than 1,500 square feet to their home, more than doubling their living space and making it easier for the former big spenders to stay home and save.
Gregory Yamamoto • The Honolulu Advertiser
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For Derek Sakaguchi, spending came easy.
The Kailua father was generous to friends and family — so much so that he didn't mind picking up a $1,000 dinner tab for friends or blowing $400 at Hy's Steak House for his 'ohana of five.
Such lavishness came at the expense of his retirement savings. Two years ago, at the age of 48, Sakaguchi owed at least $5,000 on his credit cards. He hoped to retire at age 65 with a comfortable annual income of $75,000 — and the clock was ticking.
"You realize there aren't that many more years to get your finances in order," said Sakaguchi, now vice president of a construction company.
Sakaguchi and his wife, Nani, met with a financial planner to get back on track. Now 50, he said he's a changed man.
"I live a much more conservative life," he said. "We've changed our spending habits. We used to go out all the time to nice restaurants. We don't do that anymore."
| Spending no more
Family: Derek and Nani Sakaguchi
Problem: The Sakaguchis knew how to live it up, picking up a $1,000 dinner tab for friends once, or $400 for a steak dinner. As a result, they had saved only $15,000 and both were nearing retirement. They also had credit-card debt of at least $5,000.
Makeover: In September 2002, they were told to curb spending and invest savings for retirement.
What they did: Derek and Nani cut back sharply on lavish entertainment. Instead, they invite friends over for barbecue at their newly expanded Kailua home. They've learned to be more content staying at home.
The outcome: The couple has been able to put away $100,000 in savings and paid off their credit card debt. Derek Sakaguchi has learned to find satisfaction in seeing his nest egg grow, instead of splurging on expensive dinners.
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By forgoing the extravagant dinners, the Sakaguchis have paid off their credit cards. They cook more and entertain friends at home. "They come over to the house and barbecue, or we go over to their house," he said.
It helps that they expanded their house to 2,500 square feet from about 1,000 square feet — a $150,000 project they had told their financial planner they wanted. They took out a first mortgage to pay for it, which was affordable on their combined income of more than $100,000. Sakaguchi's wife, 46, runs a daycare center at home. Their house, which had been paid off, was a gift from his parents.
The added space gives the six adult residents — the Sakaguchis plus their three kids and a daughter-in-law — much-needed breathing room.
"I'm exceptionally happy with my home," Sakaguchi said. "Before the renovation, my wife would always say, 'Let's go out.' It was a small house, so I understand. Now we stay home. It's very comfortable."
As for his retirement goals, Sakaguchi said their nest egg has grown from $15,000 to more than $100,000, invested in stock and bond mutual funds.
They still have to create a living trust for an orderly distribution of assets to their heirs, to avoid costly probate. But they want to consult with their children first.
They're also starting to look into saving for long-term or nursing home care, Derek Sakaguchi said.
Converted from a spendthrift to a saver through a financial planning presentation at work, Sakaguchi encourages younger co-workers to sign up during open enrollment for the company's 401(k) retirement plan.
At home, he tries to set a good example for his children. He wants to drive home the importance of saving early, instead of waiting until middle age to get started.
"If I had the (financial) knowledge now at 20 years old, I would have been a lot better off," he said.
Living a much more frugal lifestyle today, is he happy?
"I don't miss my high-spending days," Sakaguchi said. "Each month I see my (financial) statements, and it puts a smile on my face. I'm going in the right direction. It feels good."
Reach Deborah Adamson at dadamson@honoluluadvertiser.com or 525-8088.
Correction: A photo caption in a previous version of this story misstated Glen Hayase's annual income.
