— Joel and Lisa Hamilton have steady jobs, a suburban
home and three lively daughters that they worked very
hard to bring into the world.
their desire to pay for their children’s college
educations, save for retirement and maybe fix up the
house collided with financial realities.
the help of a volunteer financial planner, the Hamiltons
made some hard choices that reduce the odds of them
running out of money in their old age. To do so,
however, they had to give up something dear for the time
being — paying for their daughters’ college degrees.
would like to put money away for our kids’ college,
but it’s just not possible," Lisa Hamilton said.
couple’s story underscores the challenges that face
many middle-class families. Parents must manage the
expenses of raising children, saving for college and
paying off mortgages while still socking away money for
retirement. It doesn’t always pencil out, no matter
how hard they try.
Hamilton, 42, earns $60,000 a year before taxes as
customer-service manager at Full Circle Farm, a Seattle
company that provides local, organic produce to
customers in five western states.
Hamilton, 39, is a part-time, third-grade teacher. Last
year she earned about $37,000 before taxes, although she
expects to earn about $50,000 in the current school year
by working more hours.
both have retirement accounts. Lisa Hamilton has about
$72,000 in her teachers pension and a 403(b) retirement
savings plan. Joel Hamilton has about $86,000 in a
401(k) account. The Hamiltons also have about $7,000 in
savings and no credit-card debt.
is a larger issue. Like many others, the Hamiltons were
swept up in the housing bubble and the problematic
lending of the previous decade.
2006, near the peak of the housing bubble in the Seattle
area, the Hamiltons sold their house and bought a home
for $361,000, property records show. The couple were
ready to start a family, and they wanted a larger home
in a community with good schools.
new house fit the bill, and the Hamiltons took out an
additional home equity line of credit to replace the
roof and windows, along with other projects.
home prices began collapsing the following year,
however, and in 2008 a lender persuaded the Hamiltons to
refinance with an interest-only loan.
made only interest payments for nearly two years, until
a friend in the mortgage business urged them to switch
to a conventional 30-year mortgage.
now owe about $369,000 on their mortgage and the line of
credit. Zillow currently estimates the home’s value at
$382,823, which would put the Hamiltons’ equity in the
property at about $13,800.
addition to the housing debt, the Hamiltons have about
$20,000 outstanding on a car loan. Payments on the home
and car loans add up to about $26,270 a year.
is tight. They sometimes raid their savings account to
make ends meet.
a constant struggle," Joel Hamilton said. "You
think you get ahead, and the car breaks down."
Bouchand, director of financial planning at Seattle-area
accounting firm Clark Nuber, volunteered to examine the
Hamiltons’ finances and offer advice.
cash-flow projections, based on the family’s finances
and plans, showed that the Hamiltons could finish three
out of the next five years in the red. More worrisome,
Bouchand’s projections also showed that the couple
could run out of cash in their early 80s, or sooner,
although they would still have their home.
the Hamiltons had to make some hard decisions.
first urged the couple to begin tracking their expenses.
you know where you’re spending the money, you can make
choices about whether you want to spend or not,"
also suggested ways for the Hamiltons to cut expenses,
such as buying a car every nine years instead of every
then focused on the couple’s retirements. The
Hamiltons are eligible for full Social Security benefits
when they turn 67. Bouchand advised each of them to work
until he or she is 68. That would give them more time to
save and increase their Social Security benefits.
protect the Hamiltons’ retirements, Bouchand told the
couple that they shouldn’t try to pay for their
daughters’ college educations, although that could
change if their financial picture brightens.
Hamiltons, who put a priority on college for their kids,
are still coming to terms with that scenario.
the meantime, the couple plan to begin itemizing all of
their expenses and, as Lisa Hamilton said, "face
the truth of what we’re spending our money on."
the sobering advice, the Hamiltons say they are more
confident about their household finances.
might as well do what we can today," Joel Hamilton
said. "It’s nice to have that road map."
finance can seem complicated, but Rachele Bouchand keeps
it simple. She tells her clients to know where their
can’t make any changes until you know where the
spending is," said Bouchand, director of financial
planning at Clark Nuber, a Seattle-area accounting firm.
that get a handle on their expenses can more readily
identify their discretionary spending and make concrete
decisions about what they’re spending their money on.
As a result, they are more likely to change their
spending habits, Bouchand said.
for families, technology is making it easier to keep
track of household income and expenses. The drudgery of
handwritten spending logs has long since given way to
online and desktop money-management programs.
suggests the personal-finance products offered by
Quicken and mint.com. Increasingly, she said, banks are
adding personal-finance tools to their online banking
Bouchand, however, the money-tracking technology her
clients choose is almost beside the point.
don’t care if it’s pencil or paper as long as they
do it," she said.