Double job loss disrupts a family’s smooth financial path

By Ronald D. White

Los Angeles Times (MCT)

Published: Monday, June 23 2014 12:55 p.m. MDT

The couple avoided the kind of post-layoff overspending that often results in big credit card debts. They have paid off one car, a Chevrolet Tahoe, and most of their $17,800 in debt is a loan they took out to buy the family’s other car, a Chevrolet Cruze, to replace a 1965 Mustang that Victor reluctantly sold.

“Their debt isn’t bad,” Hartman said. “That is a positive thing. I’ve seen plenty of people just keep spending like they did when they were making more money.”

But the homeownership plans need to be set aside for now, Hartman said.

“They simply don’t earn enough,” Hartman said, to cover a mortgage in a neighborhood like Eagle Rock, much less the additional costs of homeownership.

“They don’t have the money for repairs, property taxes,” Hartman said.

In the meantime, the Macias family should try to enjoy the fact that they are living in a neighborhood they love, on a relatively quiet street and in a reasonably priced apartment that is much safer than the one that was burglarized back in 2005, in another neighborhood. Until the layoffs, that was the worst financial disaster the Macias family had faced, losing Shannon’s jewelry and other valuables in the crime.

Job No. 1, the planner said, is to find higher-paying work or other ways to boost their income, “especially since they are just not spending a lot of money. I don’t see a lot of room for cutting back.”

Victor, for instance, has volunteered with youth baseball and softball programs; he could put his love of sports to work by offering his services as a private coach, Hartman said.

Hartman advised Victor and Shannon, who met two decades ago while working at the Glendale Galleria, to put new resumes together that emphasize their retail experience and strong skills working with other people.

They also need to find time to squeeze in some additional training or other education to bolster their earning potential, she said.

“There are online courses they can take,” Hartman said. “There’s also night school.”

Another reason for supplementing their current income, Hartman said, is that the family has only a small buffer against unexpected debts. They have $190,000 in retirement savings, which they really shouldn’t touch.

Their $2,500 savings account needs to grow large enough to cover at least three months of living expenses.

“Sudden expenses will happen,” Hartman said, “and they need to be better prepared for that.”

On the bright side, their retirement savings “are excellent for this stage of their lives. They are way ahead of the curve. I’ve had clients who make $500,000 a year and haven’t saved a thing.”

Hartman had only one complaint about the couple’s retirement savings so far. They were top-heavy in large-cap stock funds and there was an over-reliance on high-yield but also high-risk bonds.

“I’d like to see them move the money into something more conservative that will still probably provide a good return,” Hartman said, “and charge them lower fees.”

Saving for college should be a lower priority than building an emergency fund and saving for their golden years.

“Financial planners like to say, ‘You can always borrow for college,’ ” Hartman said. “You can’t borrow for retirement. They need to think of themselves first.”

Hartman added that there were other financial concerns the couple hadn’t thought about at all, such as estate planning.

“At the very least, they need wills. The software is not expensive and they can do it themselves,” Hartman said. “God forbid, but if something happens to both of them, they don’t want the courts deciding what happens to their kids.”

Hartman said that included the important task of picking a trusted friend or relative to be their children’s guardian if something happened to both parents. Victor and Shannon also need living wills that outline their intentions if they were unable to make decisions themselves.

Despite the challenges they face, the two have a lot going for them, Hartman said.

“They’re young. They’re smart. They’re personable. They seem to have a lot of skills,” she said. “I think they have great potential.”

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