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Young family struggles on one paycheck

McClatchy-Tribune Information Services

March 9, 2015


FEDERAL WAY, Wash. — The gut-wrenching financial crisis of 2008 and the Great Recession remain fresh memories for Seattle-area couple Meg and Jesse Dutcher.

Meg Dutcher, 30, and Jesse Dutcher, 33, married in 2005, one of the go-go years, and they both had jobs in the booming construction sector, making a combined $68,000 a year. They used their credit card to make down payments on a truck and a vacation-club membership.

Then, in rapid succession, banks crumbled and crashed, the stock market plummeted and millions of jobs evaporated. Construction work dried up. Just like that, the Dutchers were unemployed.

The years since have been a struggle. Although the Dutchers made several good decisions, their pre-recession debts haunt them. Their household budget was frustrating and tyrannical. They were sometimes puzzled where the money went, and they cut so many expenses to make ends meet that they felt like they were living in a financial straitjacket.

"One of the things that I stressed out about the most," Meg Dutcher said, "was money."

But after working with a financial planner, the Dutchers are learning how modest changes in their household accounts, spending and financial approach can lead to big benefits, both immediately and for years to come.

"We can make it better without changing a lot," Jesse Dutcher said. "For me, it was huge. It takes a lot of the stress out."

After the crash, the Dutchers scrambled for jobs. Jesse Dutcher signed on with a series of contractors, only to get laid off again. Meg Dutcher took a job at Starbucks.

In 2010, Jesse Dutcher was accepted by an electrician-apprenticeship program, which he expects to complete this summer. His current pay is about $36 an hour, but the hours are variable, and he works less when he takes classes. His annual income now ranges between $45,000 and $55,000 a year.

To pay down debt and save money, the couple in 2011 moved in with Jesse Dutcher’s parents. They saved about $10,000, more than enough to make a down payment a year later on their home, which they purchased in a short sale for $128,500. Last year the county pegged the home’s assessed value at $182,000. Zillow estimates its current market value at $224,000.

Along the way, the Dutchers had two children, now 4 and 2, and the couple agreed that Meg should stay home and care for them. She occasionally earns money with odd jobs and temporary food-service work.

Meanwhile, the couple continued to struggle with their household finances.

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Debt weighed on them. They owe about $119,600 on their home, and when it needed a new roof, the couple financed it by getting a $10,000 deferred, no-interest loan through the city of Federal Way’s Emergency Housing Repair Program, which assists low- and moderate-income homeowners with emergency repairs.

Especially distressing are the couple’s old credit-card debts, which are now rolled into an outstanding balance of $12,800 in a home-equity line of credit at a credit union.

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As the major breadwinner, Jesse Dutcher’s variable income made it difficult for the couple to get ahead. During the down times, they would defer maintenance and cinch their household budget even tighter.

Financial planner Bobby Reamer was paired with the Dutchers by the local chapter of the Financial Planning Association.

"Their budget was ultratight," Reamer said. He looked for ways to create some wiggle room so the Dutchers wouldn’t feel completely boxed in by their household finances.

Reamer focused on the couple’s fixed monthly expenses to see if the Dutchers could cut some recurring costs. For starters, he suggested combining their mortgage and home-equity line of credit into a single, refinanced debt, potentially saving them between $100 and $200 a month in interest and insurance.

Reamer also showed the Dutchers how to take much of the mystery and emotional stress out of personal finance by reorganizing their household accounts.

Like many families, the Dutchers put all their earnings into a single account and use it to pay every bill.

But it was hard to track the numerous entries, and the system pitted Meg and Jesse against each other when it came to buying items for themselves.

Reamer suggested setting up one household account for recurring monthly bills and a separate account for yearly bills and surprises, such as annual insurance premiums and unexpected repairs. The annual account could backstop the monthly account.

He also advised the Dutchers to allocate some money every month that each of them could spend on personal items, ending their competition over the same stash of household cash.

Reamer examined the couple’s long-term risks, including their estate planning and insurance. He discovered, for example, that Jesse Dutcher has a 10-year, $250,000 life-insurance policy — not enough for a primary breadwinner with young children.

With a little research, Reamer found a 20-year, $500,000 life-insurance policy with a similar annual premium of about $320.

The Dutchers are moving ahead with Reamer’s recommendations. They are also looking forward to this summer, when Jesse Dutcher graduates from his apprenticeship program and attains a higher pay grade — $42 an hour — with more predictable hours.

They expect to see more money coming into the household. When that happens, the Dutchers say they will have more confidence in knowing what to do with it.

"I’m feeling less stressed," Meg Dutcher said. "Now I see I can do something about it."