Black Enterprise drafted a blueprint to help the family get on the right track and balance their finances with two people (father and son) in college come this fall.
â€˘ Reduce monthly obligations. For starters, they must get their negative cash flow down to a reasonable level immediately. â€śThey can use money from their checking and savings accounts to reduce about $15,853 in credit card debt,â€ť says Joseph C. Ellis II, senior vice president, wealth management for Wells Fargo & Co. in Minneapolis.Â Â â€śThis will reduce their monthly obligations by about $785 per month, bringing their monthly cash flow to a negative $1,592.â€ť Moreover, the couple should look to reduce living expenses by taking advantage of a family share plan to reduce landline and cellular phone costsâ€”currently $450 total monthlyâ€”and combine their auto and homeowners insurance with one carrier to get a multiple policy discount rate. They can use the savings to go toward reducing their negative cash flow.
â€˘ Rent the second home. They own three homes: a primary residence (valued at $65,000 with a $107,000 mortgage and $964 monthly payment); the first home they ever purchased together, which is empty (valued at $50,000 with a $70,000 mortgage and monthly payment of about $625); and a rental property in their Alabama hometown (valued at $61,000 they owe $38,000 on the home and a $120 monthly payment). The couple is meeting their tax obligations, mortgage payments, and insurance on all three properties, but they arenâ€™t netting any additional income and since they are also underwater,Â Ellis suggests renting the vacant home. If a tenant can cover the mortgage payment, that would further reduce their negative cash flow to $967 per month.
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