Kicking Bad Money Habits

While on their honeymoon 12 years ago, Tamela and Omar Martin mapped out their lives together. They talked openly about their goals, just as they had done as college sweethearts while attending Chicago’s Loyola University. “On our honeymoon we talked about what we both saw for the future,” recalls Tamela. After years of marriage, however, the Martins aren’t seeing eye-to-eye when it comes to their finances.

These days, the Martins (whose family has grown to include three children, Nathaniel, 9; Tariel, 7; and, Tyler, 4), sit down twice a month to discuss bills, payments, and future plans, but they are butting heads more than usual “like what we spend the money on,” the two agree. There also is an issue concerning paying bills. Tamela is strict about paying on time, while Omar is a little more carefree. When it comes to spending money, Tamela accuses Omar of frivolous buying. Meanwhile, Omar says the same about Tamela. A quick tally of the Martins’ savings and debt suggests they’re both right.

The Martins’ money habits have weakened the family’s financial health. They have high levels of debt and low savings. Between the two, there is $1,000 in their bank accounts. They are saddled with about $45,000 in credit card balances, student loans, and other unsecured consumer debt. ($23,000 of that belongs to Tamela and $22,000 to Omar). The Martins explain that a portion of these debts are the result of home repairs and medical costs for their daughter Tariel, who is a special needs child. In addition, they have two properties with mortgages totaling $282,640.

On paper the Martins, who are both 38, appear to have sufficient income to cover all of their debts and living expenses. Tamela is a manager for a government agency. Omar is a quality assurance auditor at a pharmaceutical company. Their total household income, including revenue from their rental property is $161,800. The Martins’ main issue: monthly debt payments of $5,618 are eating away 67% of their $8,370 net income. Factor in food costs and other household expenses, and it’s easy to see how they are living beyond their means.

To be fair, the Martins are not unlike many married couples struggling with enormous debt and learning to manage their finances as a cohesive unit. More than 40% of U.S. families spend more than they earn. According to the Federal Reserve, U.S. household debt, including mortgages and credit-card balances, stands at $11.7 trillion.

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