James & Anna

James is an architect and Anna is a teacher. They have two young children with a third on the way.

A few years ago they lucked out and bought a fixer-upper at a fraction of the price that most homes in the area go for. This couple only had two debts when they moved into their home. But two maternity leaves, several unplanned expenses, over-budget renovations to their fixer-upper, plus two car loans they were “approved” for, and their debt has grown by bounds.

They are feeling strapped every single month and feel like they really need to do something before they get in over their heads.

• $12,688 net average monthly income (gross $200,000 annual combined)
• $10,000 net average monthly expenses
• Their home is worth $1.2 million
• Mortgage: $600,000 (30-year amortization)

Total Debt:

• Mortgage – $600,000
• Credit 2 – $7,500
• Credit 3 – $4,000
• Line of Credit – $9,000
• Car Loan 1 – $18,000
• Car Loan 2 – $16,000
• TOTAL DEBT: $654,500

Wondering how two people with a combined gross income of $200,000 per year feel so strapped and are $654,500 in debt? Plenty of people are in this situation, aren’t they? After they had their mortgage in place they borrowed on credit cards, which they always meant to pay off, and purchased two cars they were convinced they could afford. As you can see, it’s a lot more than they can really handle. When they decided to get a Cash Flow Plan, over $2,980/month of their income was going toward debt repayment.

When it came down to it, even though the clients got an amazing deal on their fixer-upper, they were still in a home that they couldn’t really afford. So here’s what we did:

“UNIFY THEIR DEBT! UNIFICATION IS KEY.”

• They refinanced their home for $620,500 and they follow their Cash Flow Plan to avoid racking up credit card debt.
• They are now on track to be debt free in 15 years instead of remaining on the debt treadmill they were on!
• They’ve left the car loans outside of their mortgage refinance.
• They started saving $1,000 per month towards short and long term goals.
• They were able to start taking a vacation again and do so using saved funds to the tune of $4,200/year
• Thanks to the changes in their debt and my Cash Flow Planning formula, we were able to get their total expenses down to $4,585/month, and reach the goals most important to them.

The results of these changes also saved the client over $150,000 in interest and have them on track to be debt free in 15 years rather than a cycle of permanent indebtedness. Over the course of this plan, they’ll put away over $152,000 and have $500 a month to cover their insurance needs.

Meaning, a Cash Flow Plan found $3,700 a month to help these clients fund their plan, but the total found money would be closer to $650,000.