Couple finds way out of a financial disaster

Realistic look at situation, openness to change help in overcoming problems

Dollars & Sense

January 19, 2003|By Kathleen Gurney | Kathleen Gurney,KNIGHT RIDDER/TRIBUNE

Three years ago, Jim and Laurie were on top of the world, rich in money and spirit. They had done well in the stock market with their 401(k) plan, especially their tech stocks. They were so confident of their future that they decided it was time to plan for retirement.

They had been researching second homes in the Southeast and settled on the Panhandle in Florida - good value for a waterfront condo. They stretched themselves and spent more than their budget allowed. As a result, they had to refinance their principal residence and take much of the profit that had accumulated. They put more money down on their new vacation home so the monthly payments would be affordable with their current monthly cash flow.

Like so many other couples, they never dreamed that the market would fall so precipitously after Sept. 11, 2001. They never dreamed they would lose 60 percent of the wealth they had accumulated for retirement. Moreover, Jim also never dreamed that his job would be eliminated - yet Laurie and Jim were indeed hit with this double whammy of financial challenges.

When I met him, Jim had found another job. However, his salary was two-thirds of his former one and he had the same level of responsibility. He worked long hours, seven days a week.

Jim and Laurie are similar to other American couples who had to digest and adapt to significant losses - both financial and emotional - that they hadn't anticipated. Couples who were once secure and confident in their financial futures were facing the fact that they couldn't retire as planned and that they could no longer afford their current lifestyle.

They were faced with the very scary pressures of meeting monthly payments they no longer could afford. They thought they might lose their home. They were also starting to borrow money on their credit cards and were unable for the first time to pay off their monthly balances.

But Jim and Laurie had options they hadn't explored. For example, they hadn't thought of renting their condo, which had the potential of being a great vacation rental. They also hadn't thought of meeting with their bank and other creditors and asking them to modify their monthly payments so they better reflected their current monthly income.

Although Laurie was initially upset at the thought of strangers living in her home, she quickly adapted to the idea when she learned how much rent their beautiful condo would provide. The condo would practically pay for itself with just the high-season rent. They would use it themselves, off-season, when they could afford to get away. They wouldn't have to give it up at all.

Just taking the pressure off in the short term gave them hope about their future. True, they would have to put off retirement, but they would be able to climb out of debt, start saving again and maintain their dream home. They had always had good money-management skills, and they could accumulate wealth again by employing the same strategies. It would require discipline, fiscal discipline that would result in happier lives.

Jim and Laurie were fortunate in having the perspective and persistence to make their new circumstances pay off for them. They took a realistic look at their circumstances, reached out for help and then applied themselves in achieving the goals that mattered most.

Kathleen Gurney, Ph.D., is chief executive of Financial Psychology Corp. and author of "Your Money Personality: What It Is and How You Can Profit from It."

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