Saro and Lerna Shirinian. (Courtesy of Saro Shirinian)

After six years of marriage, Saro and Lerna Shirinian would love to have a baby.

They have steady jobs, a two-bedroom house in Los Angeles and plenty of family nearby to help out. But between nearly $20,000 in credit card debt, $140,000 in student loans and the $320,000 left on the mortgage, they can’t see a way to make it happen right now. “We’re just trying to figure out if we’re on the right path,” Saro says. “Based on our financial status, is having a family and growing a possibility, or is it too scary right now?”

At 34 and 35 years old, the Shirinians are like many young couples struggling with debt. Loans have helped them meet some major milestones, such as earning a college education and buying a home. (That has paid off so far, as their home equity has grown substantially.)

Still the couple would like to free up room in the budget to spend on diapers and day care. They would also like to start a college fund so their kids won’t need to incur the kind of debt they have.

The Post shared details of their finances with two financial experts, Tony Wykes, a financial adviser with SunTrust Private Wealth Management and Jonathan Pond, founder of SmartPlanner.com, a financial planning software company.

Where their money is going

With a combined household income of about $112,000, the Shirinians can pay the bills – but there is not much left over to build savings or to make extra debt payments. Although they don’t need to become completely debt-free before having a child — many parents have a mortgage and student loan debt — they should have extra cash on hand and pay off as much of their credit card debt as possible, the advisers say.

“They’ve done some things right,” Pond says, adding that if they increase their emergency fund, which is large enough to cover about a month’s worth of expenses, it can double as a baby fund.

At the moment, their monthly housing expenses — including the mortgage, property taxes and mortgage insurance —add up to roughly $2,200, or about 30 percent of their take-home pay.

Their combined student loan payments, which total about $1,200 a month, take up about 16 percent of their take-home pay. The couple is also paying $600 a month to lease two cars, about $230 on gas and another $200 a month for auto insurance. Credit card payments add up to $600 a month. They spend $140 on utilities, $130 on cable and $165 a month for their cellphone bills. Together they spend $500 a month on entertainment, $500 on groceries and home supplies and $285 for short-term disability
coverage and supplemental health insurance.

Both Saro, who works with the Los Angeles County Sheriff’s Department, and Lerna, who works for the California state assembly, have jobs that make them eligible for pensions, an increasingly rare benefit that could bolster their security in retirement. Saro also contributes 4 percent of his income to a retirement savings account.

But with retirement still decades away, adding to their savings will also help prepare for the possibility that their pensions will be reduced or that one of them decides to change jobs before qualifying for the full pension, Wykes says. “A lot can happen in 30 years,” he says.

Waiting on a break

Starting in January 2018, the Shirinians will get a break on their biggest monthly expense: housing. By then, they should no longer have to pay mortgage insurance on their FHA loan, which will reduce their monthly payment by $300 — although their property tax bill could grow if their home continues to gain value. Before then they need to find more creative ways to free up cash so they can pay down their credit card debt as soon as possible, the advisers say.

Saro says they piled on the debt over the years to pay for house renovations and to help out family members. In February, they settled with a collection agency on the debt and agreed on a payment plan that would have the cards paid off by 2019 — but at a steep 19 percent interest rate.

One small place to cut down: They pay $70 a month for a gardener. If they cut their own grass, they could put that cash toward their credit cards, Wykes says. (Saro says he has the time to do the work himself but estimates it would take seven months to break even on the estimated $500 they would spend for the lawn mower and other tools.)

The couple may also find an opportunity to save when the leases on their cars expire next year. Instead of taking out two new leases, they could consider taking out one and buying a used car that can be financed and paid off in two or three years, Pond says. Once that car is paid off, they would free up another $300 a month or so.

Over the next few months they should also track their spending to see if there is any way to cut down on groceries or entertainment, Wykes says. (They recently repackaged their cable and cellphone bills to a lower amount.)

A drop in expenses

Based on the changes the Shirinians are expecting and the suggestions from the advisers, the two could see their monthly expenses drop by about $1,200 by 2019. (That assumes a $300 reduction to the monthly mortgage, a $300 cut to their car payments and $600 a month that is now going to credit card payments – if they don’t add on any more debt.)

The trick for the couple will be to make sure that the money is saved or used to pay down debt and not spent on unnecessary items. (Though if the baby comes before then, the money could help them cover those very necessary costs.) The funds, as they become available, could be split toward their three main goals: paying down mortgage or student loan debt; saving more for retirement; and setting up an emergency fund that could make them feel more secure about starting a family.

For instance, say they are able to reduce their monthly bills by about $1,000, a feat that may feel more feasible after their credit cards are paid off. About $600 could go to making extra student loan payments, Pond says. Another $200 could go to their retirement account, and $200 could be added to their emergency savings.

The allocation can change based on how their priorities change. Once they build up their emergency savings fund to cover between three and six months of expenses, they can focus on making more aggressive payments toward their debt or starting a college savings plan for their child, Wykes says.

Before that big break in 2019, the couple may have other options for easing their debt payments. For instance, in a year, they might try again to use a home equity line of credit to refinance their credit card debt to a lower interest rate, Wykes suggested. (The rate on the line of credit, which could be around 4 percent, depending on where interest rates are then, would be lower than the 19 percent they’re paying now.) Saro says he applied with a few banks this summer but was denied because their debt settlement is too new and their debt-to-income ratio is too high. After a year or so of making on-time debt payments, he may have a better chance at qualifying.

And until then, they can take small steps to increase their savings. Saro can up his retirement contributions by one percentage point each year, Pond suggests. Lerna can open an account now where she is saving about one or two percent of pay and gradually increase that over time, he says.

Saro said he wonders at times if they should sell their home to get rid of their student loans. “But then where do we live?” he says. The investment, made with help from family members and from money the couple saved while living with family, has paid off financially so far. And emotionally, it is the home in which they hope to raise their children one day.

The advisers agreed that the two should stay in the house and make changes elsewhere to get rid of their other debts. “They do have some time to get things in order,” Wykes says. But “they need a plan of action.”

In Finance Lab, we pair frustrated readers with financial advisers. Want to participate? Tell us your story or e-mail us at money@washpost.com.

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