James and Beverly Parks are coming to terms with a major life change and challenge — a decrease in their monthly household income and an increase in their household debt. James, 36, is a staff sergeant in the Army’s food services division, which prepares meals for troops stationed at Fort Carson in Colorado Springs, Colorado. Beverly, 33, works at the family practice clinic at Evans U.S. Army Hospital. When the couple was stationed in Alaska from 1998 to 2001, they were receiving a living allowance of roughly $700 a month. They also earned additional income from part-time employment. James found work at a local department store and Beverly as a lab technician.
Since moving to Colorado, Beverly has had no luck finding part-time work, and James has been deployed overseas a lot — sometimes up to three months at a time. Moreover, the government has ceased their allowance. The Parkses saw their income drop from roughly $76,000 to $73,000 and their debts (not including a mortgage and car notes) rose to nearly $30,000. To make matters worse, they became indebted to the government for $8,000 because they continued to receive their monthly allowance for several months after leaving Alaska. Until the money is paid back, their wages are being garnished $856 a month. To cover household expenses and emergencies, the couple depleted half of their $13,000 in savings.
The Parkses, who have a 13-year-old son, Brandon, and a 6-year-old daughter, Jamesse, have done very little investing. At one point, they were contributing $1,000 a month to a money market account, but more recently, it’s been about $300. Beverly has $1,200 in a thrift savings plan at work. And over the last two years the couple has saved $100 a month for Brandon’s college education. They own a three-bedroom home in Augusta, Georgia, which they are renting out to a single mother of two for $605 a month. The mortgage, taxes, and maintenance costs, however, add up to $645 a month.
One thing working in the Parkses favor is that James is in line for a pension from the Army that will pay him about $1,500 per month for life under the joint and survivor payout option. This could mean some $500,000 in income for James if he retires at 40 and lives to age 76. (His wife would receive the payouts if he dies.) And if Beverly reaches her goal of becoming a registered nurse, she expects a salary hike from $29,000 to $40,000.
“I have been in the service for 17 years. I only have three years left and then I can retire,” says James, who is currently enrolled in courses at Thomas Edison State College and eventually wants to work in sports medicine. Once Beverly finishes college, she hopes to put more money toward her children’s education and her retirement. “In the next three to five years, we are hoping that the only debt we’ll have is the mortgage on our home,” she says.
THE ADVICE
The Parkses are making good money, and they have