ó Jason Newquist had a good job with a six-figure
salary, and Kristin Mueller was building her
mental-health counseling practice, but something was
amiss with the coupleís household finances.
were running in the red every month, and the cash-flow
deficit was getting deeper.
covered the shortfalls by tapping the familyís
savings. At first, he could make ends meet by
transferring $500 a month. Then he needed to move
$1,000. When the monthly subsidy from savings hit
$1,500, alarm bells went off.
an engineer, reached a troubling conclusion: Weíre
coupleís household finances ran the risk of getting
swamped when a drop in their income coincided with a
mountain of debt bigger than they realized.
the advice of a volunteer financial planner, the couple
charted a course that should ease the cash-flow crisis
and put them on a stronger footing for the future.
experience taught Newquist, 38, and Mueller, 42, that
household finance is about much more than spreadsheets.
Itís also about communication and awareness of the
different ways people think about money.
really do have to have two brains on it," Newquist
said of the familyís finances.
the surface, Newquist and Mueller are living the
earns about $102,000 a year before taxes as an
electrical engineer with the engineering firm of Gray
& Osborne in downtown Seattle.
income includes an annual bonus he puts into the familyís
is working part time as a mental-health counselor for a
Bellevue clinic while she establishes her business, Work
and Play Therapy, in West Seattle.
expects to earn about $30,000 this year before taxes and
expenses. Thatís down from the $38,000 she earned last
year, when she worked more hours at the Bellevue clinic.
couple and their 3-year-old daughter live in a West
Seattle town house worth about $430,000, on which they
owe about $285,000. They have a net worth of about
the familyís finances also contained time bombs that
were more serious than the couple realized.
didnít curtail their spending to match their reduced
income. Newquist and Mueller also had separate
credit-card accounts and were unaware of each otherís
credit-card debt ballooned. They currently have
outstanding balances totaling about $26,000 on four
lurking was an even bigger debt bomb: outstanding
earning a bachelorís degree from Washington State
University, Mueller enrolled in a doctoral program at
Argosy University. She didnít earn the doctorate,
although she did graduate with a masterís degree in
was an expensive degree. Mueller accumulated four
student loans from banks and 15 student loans from
federal programs. Combined, her outstanding student
loans add up to about $208,000.
is paying $400 a month on her private student loans. Her
federal loans, which total about $156,000, are in
means she doesnít have to make payments for now,
although the interest on the debt continues to
paid little attention to the loans and admits her casual
approach to money made it difficult to see the
who is more practical, also knew about the loans,
although he underestimated the size of the projected
the credit cards, student loans, the mortgage and a car
loan, the coupleís monthly debt payments add up to
about $3,700 a month. The debt, combined with diminished
income, was dragging them down.
and Mueller took the initiative by sitting down with
scissors on their living-room sofa and cutting up their
credit cards. They even deleted their credit-card
information from shopping websites.
was uncomfortable for a couple of weeks," Mueller
Amy Shappell, a certified financial planner with Juetten
Personal Financial Planning, reviewed the familyís
finances and came up with several recommendations.
Easing the coupleís cash-flow crisis was her first
with Shappell, the couple agreed to borrow money at a
lower interest rate to pay off their high-interest debt,
saving money in the process.
the plan, Newquist and Mueller will borrow $50,000 with
a home-equity line of credit on their town house at an
estimated interest rate of 4.75 percent. Theyíll use
$40,000 to pay off credit-card debt, an auto loan and a
private student loan. The average interest rate for all
that debt is 12 percent.
the couple will put the remaining $10,000 into their
savings account, where it will provide a cushion until
they can stabilize their finances. Newquist and Muller
will pay off the home-equity loan in five years.
increase their household income, Newquist will reduce
his 401(k) contribution at work to 3 or 4 percent from
14 percent, boosting his take-home pay. Mueller,
meanwhile, will continue to build her practice; she
expects it to be self-supporting next year.
couple are also looking for ways to cut their spending.
They used to spend about $600 a month on groceries. At
Shappellís suggestion, the family is trying to hold
the monthly bill to $400 or less.
work remains. After they fix their cash flow, the couple
will work with Shappell on a plan for paying off the
student debt and building their retirement savings,
among other things.
this point, Newquist and Mueller are determined ó and
(Shappell) brought to light a problem that I was only
vaguely aware was happening," Mueller said. "Iím
grateful that there is a solution."