José “J.M.” and Tara Evans have learned the hard way to live within their means. The couple admits to being big spenders, taking trips to Belize, Puerto Rico, Cancun, and the Bahamas, as well as buying pricey clothes, gourmet food, and expensive furnishings.
Debt is certainly a four-letter word in the Evans household. When the couple married three years ago, they owed a combined $40,000 in credit card debt; they now owe about $17,000. In addition to credit cards, the couple makes hefty payments on their college loans — about $160,000 combined. “A lot of our expense was debt we ran up while we were in college,” says J.M., a 33-year-old pharmaceuticals sales representative.
Then there are the mortgages: their primary residence, a four-bedroom, two-and-a-half bath house, has a $175,000 mortgage. The condo Tara owned before they married (which the couple rents out), has a $92,000 mortgage. To top it all off, they owe $15,000 on their 2001 Mitsubishi Montero.
J.M. has two sons, Tayshaun, a toddler, and Malcolm, 16, from previous relationships and he and Tara plan to have a child next year.
Even with such a heavy load, the couple has good reason to be optimistic. J.M. started a new job last year and increased his salary from $60,000 to $70,000. He also qualifies for several company perks: He can purchase his company’s stock at a 15% discount and drive a company-owned vehicle, which allows him to save money on gas and wear and tear on the family car. Tara, 28, works as a project manager with the Indianapolis Private Industry Council earning $52,000.
Looking to boost their savings and investments, the Evanses recently started placing $650 monthly into a money-market account that has about $2,600. The couple is also taking steps to increase the $10,000 in their checking and savings accounts. “We’re getting serious about saving,” says J.M, who has more than $12,000 in an IRA and $10,000 in a 401(k) with his former employer. Tara has about $4,000 in her company 401(k).
Recently, J.M. began using Intuit’s Quicken software program to track family expenses and to determine how they are spending their discretionary funds. The chief culprit: fine dining in restaurants.
The family has made an effort to tighten expenses. “We’re doing better at sticking closer to our budget,” says J.M. “We’re on the right track now.”
The Advice
BLACK ENTERPRISE tapped Michael Smith, a certified financial planner with ProFocus in Phoenix, to review the Evanses financial situation. “They’re in the wealth-accumulation stage of their lives, but they also have a lot of changes on the horizon. The challenge will be for them to pay down debt, while increasing their liquidity and their savings,” Smith explains.
Smith outlined a path to help the Evans family reach their goals:
Make debt a priority. Student loan debt of more than $160,000 won’t go away overnight. “They will have to be patient and keep paying it down consistently,” says Smith. With an increase in income, the Evanses can increase their monthly payments from $900 to $1,200. Doing so would allow