I have had the pleasure of working with an employee of a partner employer, whom I will call Julie so as to protect her identity, for several months. From our initial conversation, I learned that her mother had recently passed away and, largely as a result, she wanted to sell her old house so that she could purchase a new one—something small, affordable and in a good neighborhood The more we spoke, the more I realized that she was ready to move on to the next stage of her life, and we framed all of our one-on-one sessions around that goal.
In order to help facilitate her transition, we began by constructing a budget analysis that forecasted what her spending would be after moving into the new house. By looking at her income and expenses, we were able to paint an accurate picture of her inflows and outflows. The outlook was not optimistic, however: her monthly expense exceeded her income by $916.
We worked together to identify opportunities for cost savings, as well as potential ways of increasing her income. On the expense side, she decided to cut back on eating out ($130); gift-making ($70); clothing purchases ($100); and pare down other expenses, such as switching to more affordable internet and cell phone plans ($220). Her total savings came to $520. On the income side, I encouraged her to ask for a raise at work.
At our next session, we did a debt reduction calculation, and jointly agreed that she should prioritize paying off her auto loan, which had an interest rate of 12%. To that end, I suggested that she put a significant portion of her savings toward the outstanding balance. As a result, she would be able to pay off the loan four years earlier and save thousands of dollars in interest.
In the following meeting we looked at her credit report and strategized approaches to increasing her credit score; in so doing, we expected that her next auto loan would carry a much lower interest rate. We also carefully reviewed the mortgage she had been offered, and decided that she should accept it.
During the one-month check in, I was glad to learn that she had closed the mortgage with a 4.25% APR and had therefore finalized the purchase of her new home. On the budget side, she had already realized the $520 in savings and, more importantly, had received a $400 raise! Taken together, this meant that her budget now balanced out; add to that a promised raise of another $200 in a few months, and her financial situation was looking bright!
Moving forward, we will be working to build up her emergency savings, start putting away money for retirement, and continue to keep a close eye on her spending. But what I’m most excited about is that I played a small part in helping her through a difficult time in her life.
In order to help facilitate her transition, we began by constructing a budget analysis that forecasted what her spending would be after moving into the new house. By looking at her income and expenses, we were able to paint an accurate picture of her inflows and outflows. The outlook was not optimistic, however: her monthly expense exceeded her income by $916.
We worked together to identify opportunities for cost savings, as well as potential ways of increasing her income. On the expense side, she decided to cut back on eating out ($130); gift-making ($70); clothing purchases ($100); and pare down other expenses, such as switching to more affordable internet and cell phone plans ($220). Her total savings came to $520. On the income side, I encouraged her to ask for a raise at work.
At our next session, we did a debt reduction calculation, and jointly agreed that she should prioritize paying off her auto loan, which had an interest rate of 12%. To that end, I suggested that she put a significant portion of her savings toward the outstanding balance. As a result, she would be able to pay off the loan four years earlier and save thousands of dollars in interest.
In the following meeting we looked at her credit report and strategized approaches to increasing her credit score; in so doing, we expected that her next auto loan would carry a much lower interest rate. We also carefully reviewed the mortgage she had been offered, and decided that she should accept it.
During the one-month check in, I was glad to learn that she had closed the mortgage with a 4.25% APR and had therefore finalized the purchase of her new home. On the budget side, she had already realized the $520 in savings and, more importantly, had received a $400 raise! Taken together, this meant that her budget now balanced out; add to that a promised raise of another $200 in a few months, and her financial situation was looking bright!
Moving forward, we will be working to build up her emergency savings, start putting away money for retirement, and continue to keep a close eye on her spending. But what I’m most excited about is that I played a small part in helping her through a difficult time in her life.
Will you be rolling this out to other New England states?
ReplyDeleteYes! We just opened a Connecticut office, though I guess that's not considered New England? We are working to become a national organization!
ReplyDeleteThat's great. And I do think of Connecticut as New England.
ReplyDelete