AKAMAI MONEY

By Deborah Adamson
Advertiser Staff Writer

Q. We have owned a small flower business in Hilo for the past 12 years and have been struggling to pay bills. My husband and I gave up our lifestyle and careers in Honolulu to help my family. We have a (business) mortgage of $60,000 remaining and a credit card debt to match.

We are in the process of closing a real estate deal at a $185,000 net (gain) to us. I want to build a home (since we live in a warehouse as part of the business) on the property next to the business. The estimated cost is $75,000 to $85,000.

We are planning to list this business for sale next week at $350,000. Should I consider paying off our credit card debt first and invest the rest? We are both in our 50s and at our wits end.

— Marilee Nansato, Hilo.

A. Self-sacrifice is a noble gesture, especially if it means helping out the family. But such sentiments also can have serious financial repercussions. While it's too late to undo past choices, make sure you approach your future more practically.

"You want to save a person who's drowning, but you end up drowning yourself. I see that way too much," said Chad Adams, a financial adviser at American Express Financial Advisors in Honolulu. "You have to take care of yourself first before you can take care of your family."

To get out of financial distress, you have to face the truth about your situation and be willing to make tough choices.

A business that's not making money won't get top dollar, said Mel Hertz, a certified financial planner with Derand Capital Management in Hono-lulu and chairman of the Financial Planning Association of Hawaii.

The property on which the business sits could be worth more, but for homebuyers to bite, there has to be a house on the land. At least, it must be zoned for residential use, Hertz said.

Find a business broker to appraise and sell your business, he said. Ads in the paper would attract mainly locals but a broker would tap a wider audience, such as out-of-state buyers.

There are plenty of people on the Mainland who have always wanted to live in Hawai'i, Hertz said.

Use part of your $185,000 windfall to pay off your credit card debt. But think twice about paying off your mortgage, since your interest payments are tax deductible. Consider refinancing if you haven't done it yet since mortgage rates remain near half-century lows.

Save and invest the remaining $125,000, plus whatever you get for your business. If invested at a 7 percent average annual return, you would double your money in 10 years, Adams said.

To reach a 7 percent return, consider putting 65 percent in stocks and 35 percent in bonds, he said.

But even if you do get $350,000 for the business, it might not be enough to live on for the next 30 years. While you could live frugally, other costs are beyond your control. Healthcare premiums could set you back $500 a month or $6,000 a year, Hertz said. While Medicare kicks in at 62, you still have to save for long-term care.

As such, one or both of you will have to get a job, Hertz said.

That means considering the possibility of leaving Hilo for areas with better job opportunities, such as Kona or Honolulu. If so, you might wish to put off building your house in Hilo.

"Why build a house in a market where you don't have a job?" Hertz said. "Do you want a job or cheap living with no income? Say goodbye to Hilo and go somewhere else."

But it's not a bad idea to build a house for resale. However, take into account that home prices have been slower to rise in Hilo than in town on other islands, he added.

Got a personal finance or consumer question? Contact Deborah Adamson at dadamson@honoluluadvertiser.com or 525-8088.