Kimberlee Phelan, a partner in the tax department of accounting firm Withum, Smith & Brown, entered Wellesley College with the idea of being a teacher and majoring in computer science. But quickly, she says, “I discovered it was not where I wanted to be.” Instead she was enamored with the approach to problem solving she encountered in her economics class: testing one thing at a time while holding everything else constant. So she decided to major in economics and international relations.
Her first job after graduating in 1987 was in investment banking on Wall Street with Prudential Basche, where she spent three years — “as a peon” — in the infancy of mortgage repackaging. This was in the wake of the collapse of the mutual savings and loan banks, and the banks figured out a creative way to get the capital they needed to make more loans. They decided to repackage mortgages and sell these collateralized loans to investors who would earn money from the interest payments.
Phelan’s job was to review individual loans to decide whether their ratios met the bank’s criteria for inclusion in the collateralized pool. “We only took a mortgage we thought would perform,” she says. “If we had a question, we wouldn’t do it.” In fact, they were looking only at the primest of prime loans.
Phelan will lead a roundtable discussion on “Smart Money Moves,” at the Middlesex County Regional Chamber of Commerce’s Women’s Leadership Summit on Thursday, April 17, at 8 a.m. at the Pines Manor Hotel in Edison. Cost: $125. To register, go to www.mcrcc.org.
A breakfast panel, “Finding Your Passion,” includes Pamela Pruitt, vice president for business development at WIMG/Morris Broadcasting in Trenton; Katherine Kish, president of Market Entry, Priscilla Nelson, provost and senior vice president for academic affairs at the New Jersey Institute of Technology; and Meredith Compton, proprietor of Peaceful Valley Orchards. Other roundtables will cover networking; marketing yourself; potency of people skills; leadership: critical success factors; business finance and entrepreneurship; and growing a small business. The keynote speaker is Lena Matthews, president and chief executive officer of Financial Resources Federal Credit Union.
Ratios weren’t the only things the bank looked at. Phelan remembers once looking at loan applications of people who wanted to buy apartment buildings. One of the loans had a number of problems raised in the credit report, and Phelan threw out the loan based on the buyer’s response to the credit report. But she wasn’t looking at the content of the response as much as its presentation. “Her credit report response was written on a napkin,” says. And it might actually have been written with a crayon.
Based on her own experience in the business world and at past roundtables, Phelan offers a number of pragmatic suggestions for women who want to be smart with their money:
Pay off credit card debt. Despite what one might think, says Phelan, there are still many well-off people who don’t pay up each month.
Contribute to a 401k or employer-sponsored retirement plan. This allows women to put away money before taxes, and most corporations will match these contributions. Women who are self-employed should go to a bank or brokerage and request a simplified employee pension (SEP) or Keogh plan, which allow for a yearly contribution of up to 25 percent of net income. To count for the current tax year, the contributions must be made before taxes are filed.
Plan ahead for developments in your personal financial life. Phelan advises, “Get yourself in the discipline of putting away money for your children’s education.” She learned this bit of wisdom from watching her mother put $100 away every pay period — and still need a loan when college came around.
For older women, it’s important to be aware of your options in the face of an inheritance. Sometimes people jump to use the windfall to pay off a home mortgage, but that often does not make sense. If a person’s investment portfolio is performing at a higher percentage return than the after-tax cost of the mortgage interest, then she should compare both the income from investment and the cost of a mortgage on an after-tax basis. She could be better off keeping the mortgage and putting the extra money into the alternative investment.
Make a budget. Having a budget, says Phelan, does not mean putting all your pay into necessities and then saving the rest. “People don’t want to budget because they feel they will have to save everything,” she says. She recommends rather that people spend in moderation. “With a budget you will know how much you can spend without feeling guilty.”
Phelan is a little concerned that the government is encouraging people to go out and spend the current tax rebates. “They are promoting a consumer society — spend, spend, spend,” she says. “People say the next crisis is a credit card crisis, where people are totally outspending their income.”
She once heard television financial guru Suze Orman offer a challenge to women: Go through your house and take out all the stuff you don’t need and don’t use. Throw it all into a big pile in your driveway. Then she says, “That represents your credit card debt.” Phelan is hopeful, though, that the current recession might do a lot to change attitudes and moderate out-of-control buying and credit-card abuse.
Although the experience Phelan gained in the investment banking training program was an amazing learning experience, it also required round-the-clock work. The next expected career step for a trainee was a master’s degree, and Phelan earned a master of business administration in accounting and finance at UCLA.
She got married halfway through business school, and because she wanted to have children, she decided not to return to investment banking. And when people said to her in some shock, “You walked away from that much money?” her response was, “Well, yeah.” She now has daughters ages 13 and 14 and sons ages 7 and 8.
Phelan has worked in three public accounting firms. After getting her master’s degree, she worked in the international tax group on mergers and acquisitions at Price Waterhouse in Los Angeles. Then she and her husband decided to move to New Jersey, and she transfered to the Price Waterhouse office in New York, where she also worked in international tax.
After three years there she got pregnant and wanted to be closer to home, so she moved to Coopers and Lybrand in Princeton. Four years later the firm moved to Parsippany, and Phelan found a position at Withum, where she does international tax planning and executive compensation planning.
What Phelan is most proud of professionally is the women’s leadership development group that she started at Withum. Citing the source of this venture as some combination of her Wellesley and graduate educations, she wanted to help women succeed.
And Withum has come a long way, she says. In 1997, when she arrived, there were no female partners and today 8 out of about 60 partners are female and there are many female senior managers. “We’ve made it a great place for women, with flexible time schedules,” she says. “We work with women to make sure they succeed here no matter what their situation.”