No Longer Drifting: 'We Have a Plan of Action'

Sunday, December 23, 2007

Ages: Tania, 40; Carl, 39

Background: Married with two children, Myles, 6, and Sydney, 3. The family lives in Maryland. She is a school counselor. He's a systems consultant. Together, they earn about $141,000 a year.

Their 2007 New Year's resolutions: Pay off $14,400 in consumer debt and build up an emergency fund.

Struggles: The Chandlers, like many consumers, had trouble with budgeting and with an impulse to indulge themselves. They're a hardworking, loving couple who occasionally gave in to their wants.

They've made great strides in paying down their debt but they could have gone further. The purchase of furniture for their family room and a $600 PlayStation 3 console limited their overall success in reducing their debt.

I specifically counseled them to avoid any unnecessary expenditures. While they acknowledged that buying the furniture wasn't wise, Carl Chandler firmly stands by his PlayStation purchase.

"I'm entitled to a little something," he said.

I'm still concerned they don't have enough of a cash cushion to cover even one month of their living expenses.

Setbacks: What often derails people from reaching their debt-reduction goals are everyday expenses. During the year, there were several other expenses the Chandlers hadn't saved for that diverted funds earmarked to pay down their debt.

Successes: The Chandlers were successful in several ways. They may not have paid down as much debt as they could have, but they still made a good dent in the $14,400 they owed on credit cards. They've gotten the debt down to $10,800. That's a 25 percent reduction.

"Our debt is better than when the year began," Tania said. "At least we have a plan of action."

They've also managed to put $4,000 into an emergency fund.

New Year's resolutions for 2008: The couple still aims to save at least three months' worth of expenses. In addition, as soon as they get clear of their credit card debt, they want to start saving for their children's college education.

Final thoughts about their performance in the challenge:

I'm most impressed with how much the Chandlers have reined in their spending. They hardly go shopping anymore.

They get it now. They get that it's not how much you make that matters but how you make do with what you have.

"We've learned to consider a lot," Carl said. "You've made it evident to us how much we spend. We were just wandering along."

"We have a plan now," Tania said. "I think overall we did well, although there is still room for improvement."

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