Taking Steps Toward Financial Independence

Our 2003 financial fitness contest winners are reaching their goals with solid fiscal planning

What a difference a year makes.
Anyone who is seriously committed to getting his or her financial act together can make significant strides by taking advantage of the wisdom of a financial adviser. A brighter financial future is on the horizon for anyone willing to seize the opportunity.

BLACK ENTERPRISE’s 2003 Financial Fitness Contest winners have improved their prospects for building wealth in a relatively short time. They’ve designed a well-crafted plan, received encouragement from their adviser, and started to make smart money moves. Here’s a look at what happened to four of our winners from last year.

The Jacksons are emerging from a very complicated financial situation in fine fashion. For starters, thanks to raises, bonuses, and Kim’s overtime, the couple has bolstered their household income from $85,000 to $106,700.

They refinanced their home this summer, going from an 8% adjustable-rate mortgage with prepayment penalty to a 7.5% fixed-rate mortgage with no prepayment penalty. With the new mortgage, their payments have increased from $928 a month to $1,012 because they took out cash to put toward the down payment for a new home they are building, which will be finished in February or March of next year. When that happens, they are planning to rent their current home and refinance it to an interest-only mortgage.

The Jacksons also refinanced the home equity loan they had taken out to renovate a third house they inherited from Jacqueline’s father. The renovation caused a $12,000 shortfall, which they’ve rectified by using savings and their $2,000 contest winnings to trim some of the debt before they increased the loan amount from $39,000 to $77,000. The Jacksons also went from a 9.5% ARM to a 4.9% Option ARM, which gives them four different payment options to select from each time they make a payment. The Option ARM will help them in the event it takes awhile to find a renter, because it gives them the option of making a lower payment.

By refinancing their debt, the Jacksons have gained about $330 more a month to work with, which they are putting toward the down payment of the home they are building. While they are proud to soon be the landlords of two properties, the Jacksons still have challenges. The family has been affected emotionally, as Jacqueline’s father passed away this year, and the new house will cost double their current $139,000 home. They’ve also bought a $24,000 car and a time share in Orlando, Florida, for which they pay $169 a month and have a $7,500 balance.

But the couple is optimistic. “We feel as though we’re on the right track,” says Jacqueline.

MARCH WINNERS Jacqueline & Kim Jackson
THE ADVICE: Obtain an interest-only mortgage. Interest-only mortgages allow borrowers to pay interest, but no principal, throughout the life of the loan, which is usually 15 years. The result is lower monthly payments. The downside? If the property loses value the Jacksons would have to make up the loss against the original mortgage if they want to sell the property (but they would

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