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Single mom struggles to manage debts

McClatchy-Tribune Information Services

March 6, 2017


SEATTLE — Kiera Mann is a hardworking professional who loves her job as an operations manager at the office of an international logistics and transportation company.

She is also a single mom with a son in college, two children at home, credit-card debt and lingering financial fallout from a divorce.

Mann, 38, desperately wants to get off her cash-flow treadmill and start saving for the future.

"I’m not there yet," she said over coffee at a shop in her hometown outside Seattle. "But it feels attainable."

Angela Giboney, an area financial planner, offered to examine Mann’s household finances and advise her for free. What she saw was the financial profile of a working professional with a good income but few assets who was bogged down by large, recurring expenses.

Giboney congratulated Mann for keeping the household going by controlling her spending on discretionary items, such as entertainment.

"She needs to be praised for managing the day to day and keeping the expenses down," Giboney said.

Research has long shown that the economic consequences of divorce tend to fall more heavily on women than on men.

That’s partly because women typically earn less than men. Courts are also more likely to award children to mothers than fathers. As a result, compared to men, divorced women tend to form larger and more expensive households that are based on less income, according to studies by the City University of New York Institute for Demographic Research.

Mann can relate to that scenario. Her divorce, five years ago, left her with debt and the custody of the couple’s three children. Her oldest son is a freshman at the University of Washington; the other kids are 9 and 10. She receives no child support.

Fortunately for the family, Mann has a good salary. Her take-home pay is about $5,600 a month after taxes and withholding.

The money goes quickly, however.

She pays $2,630 a month to rent the family’s home; utilities are not included.

Monthly payments on the family car, a Dodge Journey SUV, are $405. Mann also pays at least $500 a month on about $18,000 worth of credit-card debt.

She is helping her son pay for his education at the UW. That commitment costs her about $10,000 a year.

Her live-in boyfriend helps Mann by contributing to the household, but it’s often just enough to break even.

Mann has few assets. She carries about $2,000 in two bank accounts and savings. She signed up for her employer’s 401(k) retirement savings plan, but she’s unsure about the account balance and her monthly contribution.

One of Mann’s financial weights is the home she once shared with her former husband.

Her ex-husband got the house with the divorce, but Mann’s name remains on the $250,000 mortgage.

Both of them have been underwater on the property since the collapse of the housing market in 2008. Zillow’s estimated market value for the unoccupied house is about $242,000.

They are now trying to unload the property in a short sale with a listed asking price of $219,900. It may sell soon.

The ordeal damaged Mann’s credit rating. Her score, once in the mid-700s, is now in the mid-500s, she said.

Mann reached out for help, and the Financial Planning Association of Puget Sound connected her with Giboney.

Giboney said separating spouses often leave their names on mortgage documents for the family home after a divorce. But they run the risk of getting dragged into costly mortgage nightmares that damage their credit.

Her advice: Insist on a provision in the divorce agreement that says the spouse who keeps the house must refinance the property in his or her name only, and if the house isn’t refinanced by a specified deadline, it must be sold.

Giboney’s most pressing advice for Mann was to cut her expenses and increase her income.

Mann says she can boost her earnings with sales commissions for getting new customers, and she plans to do so.

Giboney also advised Mann to systematically pay off her credit-card debt, starting with the card that has the smallest balance. When one card is paid off, the freed-up money can be added to payments for the next largest balance, and so on.

Mann has adopted that strategy and is paying off a $1,800 credit-card bill. When that debt is gone in about three months, Mann will turn her attention to paying off the next-largest card, with a balance of $3,300.

She also plans to become more engaged with her 401(k) retirement plan and — at Giboney’s urging — see if she can reduce the amount of pay her employer withholds for federal income taxes.

Mann is also helping herself. She paid off $6,000 in credit card-debt before her first meeting with Giboney. And she continues to aggressively manage her cash flow, which she does with the help of spreadsheets and direct deposits.

Once she gets her monthly cash flow predictably in the black, Mann wants to learn how to save money and build assets.

"I feel like I have a good plan in place to where I can start building wealth," she said.