Robert and Tajuana Callaway admit that there were times when their financial beliefs collided and nearly derailed their hopes of making their dreams come true.
The Callaways, who both hold administrative jobs at educational institutions, found that the differences in their approaches to saving and investing became more noticeable after Robert finished his doctorate degree in higher education administration and the couple moved to Elyria, Ohio.
“We had different philosophies about money,” Robert, 42, explains. “Mine was basically to save for the future, and Tajuana’s was to save a little but also spend now. We decided not to let the tensions fester underneath. So we sought the advice of a financial adviser, who we found through American Express.”
Having a mediator who could help them itemize their expenses and advise them on how to channel their income for greater long-term gains was the first step toward developing a household strategy to manage their finances. In the beginning, Tajuana, 42, had her doubts about taking advice because she felt no one could tell her where her money should go or how to spend it. Their adviser changed her mind.
“We were told to log every penny we spent for three months, even down to the amount we spend on toothpaste. The report showed that we were wasting around $800 every month on everything from interest on credit cards to dinners at restaurants and the constant, unnecessary shopping,” says Tajuana. “I realized things had to change.”
With that realization, the Callaways began turning their financial situation around by committing themselves to Declaration of Financial Empowerment principle No. 3: to commit to a program of retirement planning and investing.
The couple meets with their financial adviser, Patty Quinonez of Ameriprise Financial Services Inc., twice a year, with additional consultations, if needed, to discuss any major decisions. The Callaways have a total annual household income of $125,000, and they faithfully put 10% of their salary toward saving and investing. They currently have accumulated $40,000 in their IRA accounts, while Tajuana has $58,000 in her 401(k) account and Robert has $52,000 in his. They hope the plan they’ve implemented will enable them to retire comfortably at age 65.
In 1999, they used a $10,000 deposit to purchase a three-bedroom home for $148,000. Today the property’s market value is about $180,000. The Callaways took out a home equity line of credit for $15,000 in 2001 and used it to pay off $4,000 in credit card debts and make home improvements. In 2003, they refinanced their mortgage, lowering the interest rate from 6.75% to 6.2% and decreasing their monthly mortgage payment by $300. Refinancing also allowed them to pay off the home equity line of credit.
Although they’ve done a good job of setting up a foundation to build future wealth, the Callaways know they still have things to work on. For example, credit card debt they hoped to erase in 2004 has instead increased to $3,000 because as their children have aged and family has expanded, costs have increased.
As the Callaways continue to save, they are determined to be more proactive in teaching their children about investing — an education they lacked in their childhood. “Our
parents talked about basic things like having a bank account and a savings account, but I think for many parents of that generation, the concept of a sophisticated financial plan was not there,” Tajuana observes.To make sure the message of good money management gets through to the next generation, the couple deposits $75 a month into savings accounts for their two eldest children, Ashley, 5, and Robert, 3, while Chris
topher, not yet a year old, gets $50. “It’s imperative that we save money for them for the future. The accounts are in our names, and will go toward either college expenses or a down payment on a house,” says Robert.Looking back, Robert says that he wishes he had started saving sooner. “I look at our neighbors and they are younger than we are, and they are on their second or third homes,” he says. “They started saving earlier in their lives and that has made the difference.”
Set mutual goals and establish targets to build wealth. The Callaways believe it’s especially important for married couples to be on the same page when it comes to family finances. “When you are coming together as a couple, you need to look at your finances as a joint venture, not an individual endeavor,” says Tajuana. “I’ve found that it helps the marriage along, by building unity and consensus over an issue that can be divisive and contentious.”
Consult a financial adviser. “It’s good to have a mediator, someone who can give you direction, guide you into adopting a different mindset, and help you achieve better wealth-building strategies,” says Tajuana. Robert adds that even if you don’t have financial troubles in your marriage, you should still consult an adviser, who can provide a professional, outside perspective with candor.
Look for opportunities to use your money to accomplish your financial goals. “We missed an opportunity when we got married because we received a lot of gifts, but if we could have done it differently we would have asked for cash and put that money toward the down payment on a house,” says Robert.