Taking Steps Toward Financial Independence

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

in a better position to save for an emergency.

THE ADVICE: Revisit life insurance policy. Eric should eliminate the $50 a month he pays on a $150,000 variable life insurance policy. Instead, Kim should get $250,000 in term insurance.
THE FOLLOW-THROUGH:
They have not made any changes to their insurance yet. Eric says he’s not sure what he wants to purchase, but will make a decision soon. With the wedding, grad school, two jobs, remodeling, and a baby on the way, they’ve been preoccupied.

OCTOBER WINNERS Michael & Regina Haney
Michael Haney isn’t letting go of his dream of being debt free at 40, having half a million dollars by age 50, and $1 million by 60. And why should he? He’s willing to take action. In February of this year, he landed a new job as treasury manager for a company that manufactures, develops, and sells specialty healthcare products. His salary jumped from $40,000 to $60,000. With wife Regina’s salary of $35,000, their household income is fast approaching six figures.

That extra income has given them the wherewithal to make positive changes. The couple has been able to dramatically cut their spending for big-ticket items, now that much of their house is furnished. The Haneys took out a home equity line of credit and used the money to pay off Michael’s 1996 Lexus. They got an interest rate of just over 4% and the interest is tax deductible. Though they still have $7,000 in credit card debt between them, with Michael’s salary increase, they’ve been attacking it aggressively.

Their savings have improved too. He is putting 10% of his $60,000 salary into his 401(k). Regina has increased contributions to her 401(k) from $80 a month to $220. The couple not only opened a second 529, plan to which they are contributing $80 a month, but they’ve increased contributions to the first 529 plan from $100 to $200 a month.

“I don’t think all of this would have been possible without the extra income,” says Michael.

As for keeping their finances separate, they still have separate accounts, but now dual signatures are required, and each of them knows the ins and outs of the other’s accounts. “We know what we’re responsible for. There’s accountability. I don’t think we need more than that,” says Michael.

For now, they are concentrating on paying off credit card debt and saving, saving, saving.

Says Michael, “We have a plan; it’s feasible. All I need now is the cooperation of the financial markets.”

THE ADVICE: Make lifestyle changes. Cut back on expenses. Reconsider spending strategies, such as Regina’s choice to lease cars. Each time she leases a new car it costs $1,000 to make the swap.
THE FOLLOW-THROUGH: The Haney’s have furnished much of their house, so they’ve stopped shelling out big bucks for household items. Regina still has four years to go on her lease, so she can’t make a change just yet.

THE ADVICE: Pay off debt. Consolidate the $6,000 car loan, credit card debt, and student loan.
THE FOLLOW-THROUGH: They took out a $20,000 home equity

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