It seemed a sensible precaution. In the summer of 1988, Nancy Houck, a registered nurse who lives in Mesa, Ariz., 15 miles east of Phoenix, decided to have her fallopian tubes tied, a simple hospital procedure that would leave her sterile. Almost 35, she already had a 15-year-old son, Patrick, from her first marriage. And her second husband Phil, 38, a construction engineer to whom she’d been married for seven years, didn’t want a child of his own. “We’d even been to a marriage counselor,” says Nancy, “because I wanted a baby and Phil said no.” Nancy’s pre-surgery checkup turned into shock treatment when her doctor announced, “Forget it, you’re pregnant.”

The news could hardly have come at a worse time for the financially strapped couple. Phil, who had left his $48,000-a-year job with the multinational builder Bechtel four years earlier to attend graduate school, had been unable to find work since getting his master’s degree in business administration from Arizona State University in May 1987. The family was living on Nancy’s $3,300 monthly paychecks and their savings, which had shrunk from $562.600 when Phil started at ASU to $10,000. “It was frustrating, because Phil hadn’t made a penny for four years,” she says. “But it was equally hard watching him suffer when every resume he sent out came back with a letter of regret.”

Then, six months into her pregnancy, premature labor forced Nancy to bed, where she stayed for the rest of her term. With no disability insurance to soften the income loss, Phil sought help from union buddies, who found him a job as a millwright for a conveyor manufacturer in Laguna Hills, Calif. He grossed $19,500 over 14 weeks. “That kept us at water level, but nothing more,” recalls Phil. Finally, on Dec. 13, 1988, Nancy gave birth to six-pound, 15-ounce Andrew, and the family’s financial struggles seemed suddenly insignificant. Says his mother fondly: “Andrew was a fluke, but a cute fluke.” Adds his father: “To my surprise, his impact on my life has been all positive. I get such pleasure just from watching him watch the world in wonder.”

The Houcks had just had what doctors and demographers often call a bonus baby — a child who trails siblings by 10 years or more in age. Such children are rare. Ronald Rindfuss, co-author of First Births in America: Changes in the Timing of Parenthood (University of California, $37.50), estimates that they make up less than 1% of the 3.9 million births in the U.S. each year. Says Rindfuss: “Even though more people are having babies later in life, couples still space their children close together.”

Now Andrew’s parents are concentrating on shoring up their finances — a task made tougher since Nancy, a nurse practitioner in the neonatal unit at St. Joseph’s Hospital in Phoenix, has decided to work only part time until her son starts school. “For now, Nancy wants and needs to be a stay-at-home mother.” says Phil, “and I have no problem with that.” But the drop in her income from $42,000 a year to $21,000 means that the family has been unable to rebuild its savings — even though Phil was rehired by Bechtel in February 1989 as a field engineer at $50,000 a year. Their cash reserves, split between a money-market fund and credit union accounts, stand at a skimpy $7,855, which is not even enough to cover two months of living expenses. Getting their liquid holdings up to at least three months of expenses is financial goal No. 1.

They disagree, though, on their next priorities. Phil wants to build a vacation retreat in the mountains near Flagstaff, while Nancy is anxious to start a catch-up college fund for Patrick, now 17 and a junior at $3,000-a-year Brophy College Prep, a Jesuit school in Phoenix. “I want to begin saving for Andrew too,” she says, “so we won’t be in this bind again.” Noting that she is “determined not to see Patrick’s mind wasted” — he’s an A student who scored a very respectable 1200 on his PSAT — Nancy says, “Phil and I are having a real dispute because I feel that we should put Patrick through college, while Phil thinks it’s not our responsibility.” Counters Phil: “I’d have no trouble giving financial assistance, provided the child — Patrick or Andrew — is contributing too.” Nancy has talked with Patrick’s father, a sprinkler fitter in San Diego, who is remarried with a second son, about assisting with college. “He said he’d help,” she says, “but I couldn’t pin him down on amounts.”

Phil himself completed his education through a relative’s largesse. The son of a computer programmer and a nurse, he grew up in the Phoenix area and put himself through nearby Glendale Community College. An aunt then paid for his final two undergraduate years at Rensselaer Polytechnic Institute in Troy, N.Y. He was working as a piping foreman for U.S. Steel in Provo, Utah when he met Nancy on a blind date during a 1978 trip back to Phoenix. Their courtship became a weekend ritual a few months later when Phil switched to Bechtel in Holbrook, 220 miles northeast of Phoenix.

Nancy had been raised in Phoenix by her mother, a cosmetician who had divorced Nancy’s father, an electronics engineer, in 1958. In 1971, Nancy married Kelly Moody, an Air Force enlisted man stationed in San Antonio. But three years later the couple returned to Phoenix with year-old Patrick, and Moody began divorce proceedings. Because he could afford to pay child support only for a few years, Nancy worked up to three jobs at a time to take care of her son and pay her way through nursing school at Phoenix College. She graduated in 1979.

The Houcks married in 1981. Three years later, Phil signed up for the M.B.A. program at ASU in Tempe. “I thought the degree would broaden my employment potential,” he says. To be near campus, the Houcks bought their three-bedroom Mesa home for $62,500, putting down $20,000 and financing the rest with a 30-year fixed-rate mortgage at 9.5%. Their monthly payments: $410.

After Phil graduated, he began searching for work as a project manager, sending out resumes nationwide. But he got no offers, even from Bechtel. “Construction was still in the doldrums,” he says, “but I never expected to be unemployed for as long as I was.” To raise some extra cash, Phil tried dabbling in the stock market, buying 100 shares of Zapata, the off-shore oil-drilling company that President Bush co-founded in 1953, and 400 shares of National Patent Development, a medical-products firm. But the shares, which he chose for their comparatively low price and seemingly good prospects, went nowhere. His portfolio recently was worth only $3,100 — about $1,100 less than his initial investment.

Although he returned to work at his old job level, overtime stints boosted his pay by $10,625 last year. He’s hoping for a promotion to project manager in due time. In addition to earning more, he explains, “project managers work in regional offices, not out in the middle of nowhere at a building site.” That would be a real plus, since Phil’s commute from Mesa to his current assignment in Palo Verde, where Bechtel is building a nuclear power plant for the Arizona Public Service Co., is a 170-mile, four-hour round trip — usually six days a week. Total cost: $4,800 a year. To ease the strain, the Houcks want to move closer to Phoenix. As a first step, they put their house on the market a year and a half ago, listing it for $69,900. So far, no bidders have surfaced.

Phil has a couple of quarter-acre lots for sale as well, one in Utah and the other in Arizona. Originally intending to build a home on it, he paid $14,000 for the Utah property, near Provo, while he was working there in the late 1970s. He is considering a bid of $14.000. He’s also asking $14,000 for his lot near the recreation area of Show Low in eastern Arizona. But he has yet to get any offers on the land, which he bought as an investment for $8,000 in 1980. He plans to use the proceeds from both sales to buy property for his vacation cabin. Says Nancy with a guilty giggle: “We’ve already got the furniture — I just bought $1,300 worth from a neighbor who moved away.”

In fact, Nancy admits to being a shopaholic who especially loves to hunt for antiques. “The marriage counselor said I had the Scarlett O’Hara syndrome — ‘I’ll worry about it tomorrow’ — where Phil was at the opposite pole,” notes Nancy. But Phil’s usual frugality has been sorely absent over the past year, when the Houcks needed it most. Among their joint purchases: a $19,200 Dodge Caravan, a $2,000 personal computer and a $1,077 camcorder. They also spent a stunning $6.000 for food and other groceries—although Nancy can account for only half that amount. The sole saving grace is that they didn’t resort unduly to credit to finance their spending spree. They raised $7,225 of the $10,000 down payment on the new van by selling investment-grade gold coins that they had owned for five years. They financed the balance with a 9.9% loan, which they are paying off at $500 a month, rather than the $200 minimum required.

The Houcks also have taken pains to sock away money for their golden years. Their Individual Retirement Accounts, now worth $20.000, are invested in the T. Rowe Price Prime Reserve money fund, recently yielding 7.9%. Nancy has $3,300 in St. Joseph’s noncontributory defined-benefit plan, and Phil’s retirement account at Bechtel holds $65.000. He also deposits a hefty 13% of his earnings into the plan, split between a stock fund and an asset-allocation fund. “Phil didn’t want to change the amount he puts in despite having Andrew,” says his wife. ‘‘It’s been a shock to him to find that we have to buy a little something  diapers or whatnot — for the baby almost every day.”

Lately Nancy has been considering tapping the retirement savings to seed a college fund for Patrick. She also is urging him to get a summer job and look for scholarships. Momentarily losing her perky manner, she frets, “I should have thought about all this earlier.” Responds Phil consolingly: “You’re like 99% of us — life happens and we react.”

“I’m going to reduce my retirement contributions to 5% of my salary and put the other 7% in money funds, “said Phil a few days later. He and Nancy had made a pact to watch their spending. He also seemed willing to put off building a cabin. “A lot of times Nancy and I get hot to trot about something ” he said. “Then other pressures make us forget about it.”

THE ADVICE

THE PROBLEMS:

Boosting cash reserves, starting a quick-fix college fund and saving for a vacation home

THE SOLUTIONS:

Cut spending and retirement saving to free up cash; invest in money funds; put the vacation home on hold.

Mosey asked Phoenix-certified financial planner Philip Johnson to counsel the Houcks. His chief points:

• Cash reserves. To raise the extra $4,000 the Houcks need to get their emergency fund up to an acceptable level. Phil could cut his annual retirement-plan contribution from $6,900 to $2,500. Noted Johnson: “Your need for cash is too critical to keep large sums tied up over the long term.”
• College funding. Johnson thought (he Houcks could save $3,300 more a year by trimming their $6,000 annual grocery bill and by avoiding extravagant purchases. If the couple deposit the full $3,300 this year and next in a money fund that pays 7,5%. they could afford the first year of a state school for Patrick, who enters college in 1991. But the couple will have to pay the bulk of their elder son’s costs from current income — meaning continued cutbacks on spending and retirement saving. The planner also suggested that the Houcks soon start a college fund for baby Andrew. Johnson recommends investing $800 a year in a growth mutual fund such as New Perspective (5.75% load; 800-421-0180). an international stock fund up an average 17.9% annually over the past 10 years.
• Vacation home. Given the Houcks’ cash crunch. Johnson nixed the idea of building a cabin. “Stick with rentals,” he said, “until you beef up your emergency fund and see to Patrick’s schooling.”