Financial worries linger even with a six-figure net worth

This is the latest in a series of monthly "financial makeovers."

Going to college paid off for Mike Wong, even though he's still paying off his student loans.

After seven years of education, the 32-year-old Seattle resident earned a degree and license in pharmacy.

He's been a pharmacist for seven years with a steadily increasing annual pay check — starting at $75,000 when he worked for a nonprofit clinic, jumping to $95,000 with a position at a hospital pharmacy, and likely topping $105,000 in the next few years. Wong is single with no dependents. He lives in a Northgate-area town house he describes as "pretty spacious" and has a net worth of $112,000. That's far above the median net worth for someone his age, which the U.S. Census Bureau estimates is $2,125.

By most standards Wong is doing well. So, why does he need financial advice?

What he wants

"My mortgage worries me the most," Wong said. "I think I got suckered into a bad deal."

He wants to refinance and get out of his 5/1 adjustable-rate, interest-only mortgage. He also took out a home-equity loan, which he used for the down payment on his house. That $50,000 loan has a variable interest rate that started at 8.6 percent and could go up to 18 percent.

The balance on his student loan is $24,000, but with a low interest rate it isn't much of a monthly burden.

But he has doubts about whether he's living within his means and saving enough for the future.

"I don't max out my credit cards. On the other hand, I like to go to sporting events and buy somewhat expensive camera equipment," said Wong, who's an amateur photographer. "The money goes somewhere. I know, I know, I should have a budget."

He'd like to have a better idea of how he spends his income so he can reduce monthly expenses and save for a trip to Italy or Mexico next year.

A more immediate goal is to establish an emergency fund — having three to six months of living expenses in savings.

"A lot of my friends tell me: 'You don't need an emergency fund, just use credit cards.' But I'm not comfortable with that," he added.

What he has

Unlike many of his peers, Wong said he has a "cautious attitude" about credit. He makes sure his credit-card balance at the end of the month is zero.

That approach to credit could be considered a plus, as is his chosen career field. The U.S. Department of Labor predicts employment opportunities and salaries for pharmacists will grow faster than most occupations through 2014.

"It's an exciting career because of the cutting-edge drugs that are available. That also makes it demanding because we have to keep up with the latest information," he said. "The best part for me is interacting with patients and helping them understand what's been prescribed for them."

Wong's more tangible assets are his stock portfolio, 401(k), and mutual funds. When combined with the value of his house, the assets amount to $437,000.

What he needs

Rachele Cawaring, owner of Cawaring Financial Planning based in Bellevue, analyzed Wong's situation. Her financial prescription for the pharmacist included lowering his 401(k) contribution, selling his stocks and refinancing his mortgage.

"I hate recommending someone reduce their 401(k) because it's a wonderful tool for investments," Cawaring said. "At his age he needs an emergency fund more than he needs a retirement fund."

She recommended decreasing the 401(k) pay deduction from the current 10 percent rate to about 6 percent. The difference should go to an ING Direct Orange Savings Account until he's put away six months of living expenses, which for him is about $20,000. Then he can bump up the 401(k) contribution again.

Another suggestion that might be extreme in another case, yet fits Wong's needs, is to "dump all his stocks." Wong has invested in seven large companies — primarily telecom stocks — that aren't performing well. Cawaring said he'd be better off putting that money into mutual funds. She advised him to invest in a Vanguard "fund of funds."

"People who own individual stocks have a greater responsibility to watch those companies. Mike doesn't want to do that," she said. "By investing in mutual funds he's basically leaving the buy-and-sell decisions to professionals who are looking at the companies regularly."

When refinancing his mortgage, Cawaring said Wong should find a broker who will lump his home-equity and home loans together.

His monthly mortgage payment will go up by as much as $400 once he starts paying principal on the home-equity loan. All the more reason to save receipts and track his spending, she said, so he knows where his discretionary dollars go.

What he thinks

Wong immediately applied Cawaring's suggestions. He's already reduced his 401(k) contribution to establish an emergency fund in an ING Orange Savings Account. He also plans to sell some of his stock this year and more in January to spread the taxes over two different years.

Wong hasn't figured out where his "extra money" is going. He plans to use Quicken or Microsoft Money to list expenses, keep track of spending and create a monthly budget.

The financial issue that "worried" Wong is now the area that confuses him the most — refinancing his mortgage.

"I'm uncomfortable with the different types of mortgages because the rates change so much," he said. "I have mortgage lenders calling every day wanting to lock me in and my answer is still, 'Uh, I don't know.' It's confusing, but I'll figure it out."