Financial Fitness Performance Review

She and her new husband, Sheldon Sampson, 33, purchased their residence in Plymouth Meeting, Pennsylvania, in a short sale. The couple’s new home appraised for $355,000 and they have a $289,000 mortgage, leaving them with another $66,000 in equity to add to their net worth statement.

THE ADVICE
Sell the condo. She should sell her rental property and use the proceeds to pay off her student loan.

How she responded: Because of poor market conditions, Smith did not sell the condo but decided to refinance it to a lower interest rate and extract $8,000 in equity, which she applied to her highest-interest student loan.

Advice: Keep funding retirement accounts. She would need approximately $33,000 per year to accomplish her financial goals.

How she responded: Smith contributed 11%, or about $11,000, of her income to her 401(k) last year and $2,000 to her IRA. Combined with her company match, these contributions and the market fluctuations accounted for an increase of more than $25,000 last year.

Advice: Continue the healthy savings habit.

How she responded: Smith didn’t save much outside of her 401(k) last year because she contributed with her husband toward their wedding and a 15% down payment on their new home. Smith applied the $2,000 contest winnings to her emergency fund and says that she and her husband have created a new budget that would allow them to contribute approximately $1,300 a month to regular savings and $1,656 a month toward retirement savings.

June 2010  MALCOLM JOHNSON

Photo by Scott Council

When we last visited Malcolm and Joanne Johnson, the couple and their two children, Luke and Kaya, were living on one income. And their vacant rental property contributed to a $4,000 budget shortfall every month. But despite applying $150,000 of their savings to home renovations, the Johnsons have rebounded in the black.

“Right after the story, we set out on a remodeling process and that’s where a lot of that savings drainage went,” says Malcolm, 34, of the couple’s Los Angeles dream home that they completely gutted in 2010. The couple’s savings decreased from $180,000 to $30,000 in just one year.

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