Sunday, September 28, 2008

The Holmes Family

Age: Amber, 38. Trenton, 39.

Background: Amber is a paralegal specialist for the federal government and a part-time makeup artist. Trenton is an Air Force aircraft mechanic and tech sergeant. He's served 18 years in the military and reports to Andrews Air Force Base. They earn about $135,000 a year.

Goal: Pay off consumer debt. Cut expenses and adhere to a budget.

Progress:"We are still paying off bills but not as fast as we'd like," Amber said.

Since June, the Holmeses have paid off $2,800 in credit card debt. They've made great progress, though they still have about $6,000 in credit debt. Amber says much of that will be paid over the next month.

Amber has about $55,000 in deferred student-loan debt, and the couple has a home-equity loan balance of about $27,000.

They've also boosted their emergency funds tremendously.

New developments: Trenton needed to replace two tires on his vehicle. If they hadn't taken part in the challenge, they would have had to charge the $800 for the tires. Instead they had the cash.

"Thank God we've been doing what we've been doing," Amber said.

Still, a persistent drain on their income has been the mortgage on a second home. They have renters in the house but still have to chip in about $1,000 every month. An additional expense on the second home is the annual property tax.

I urged the couple to try to sell the second home, even if they had to take a loss. They finally put the home on the market, and their current tenants want to buy it. A contract was drawn up this month.

Unfortunately, with housing prices down, the offer is $125,000 less than the mortgage on the home. So the Holmeses have to try to get their lender to agree to a short sale. That's when you sell the home for less than what you owe.

The couple is still waiting to hear whether the bank will accept the tenants' offer. It may be a tough negotiation since the property isn't the Holmeses primary residence.

How the economic crisis is affecting them:

The housing crisis has hit this couple more than either of the other two families. Like many people, they wanted to move up to a bigger (and better) home. They had planned to keep their first home and collect enough rent to cover the mortgage and taxes. But that didn't happen. They are now upside-down on the mortgage for their investment property.

"Our intent was to have the additional property as investment, but we did not prepare for the house being empty," Amber said.

She's not blaming anyone but herself for taking on too much debt. And she and her husband have suffered.

Next step: The biggest challenge and financial drain is the investment property. They need to continue concentrating on reducing their consumer debt.