Struggling to Live Well

Name: Rachel and John Quinn
Child: Jailyn, 10 months
Jobs: She's a nurse, he's an education enrollment coordinator
Income: $58,000 a year

Rachel and John Quinn have the same seemingly modest goals of many new parents: They'd like to have more children someday and move their expanding family into their own home. Yet with big school loans ($35,000 total), two car payments ($700 a month combined), and about $7,000 in credit card debt, they find it hard to live within their means each month, let alone save for the future. "We both have pretty good jobs, work hard, and don't spend extravagantly, so we shouldn't be struggling so much," says Rachel of their paycheck-to-paycheck existence. "There's got to be a better way."

They almost never go out, she says -- they stay home at night, playing with the baby and getting in a few rounds of cards or video games. Both fitness buffs, they can't afford gym memberships. "We're only 24 and 25 years old," she says wistfully. "It would be nice to have a little fun sometimes."

John doesn't consider his current job -- soliciting students for online college courses -- a career but is unsure about what his next move should be. His college degree is in computer information systems with a minor in business.

The Quinns currently rent one half of a two-family house. They coordinate their work schedules so they don't have to put Jailyn in daycare -- Rachel works weekends, John works weekdays. The baby was born two-and-a-half months prematurely and nearly died, and as a result the couple prefers to look after Jailyn themselves. "She's our little miracle," says Rachel. "We came too close to losing her to leave her with anyone else just yet."

How the Quinns can take charge of their finances:
Drive down car payments. Financial planners tend to think car payments should be no more than 5 percent of a family's pretax income, but the Quinns spend nearly three times that amount for their 2002 Nissan Altima and 2002 Buick Rendezvous, which they bought used. To lower those payments, Kevin McKinley, a certified financial planner in Eau Claire, Wisconsin, and author of Make Your Kid a Millionaire: 11 Easy Ways Anyone Can Secure a Child's Financial Future, recommends selling one of the cars and replacing it with an older used car purchased outright for no more than $2,000. The rest of the proceeds from the sale can be used to help pay down credit card debt and start a fund for the down payment on a house.

Tackle the credit card debt in other ways, too. The Quinns should then dedicate some of the money they save in car payments to pay off their credit cards at a faster rate, says Ginita Wall, certified financial planner in San Diego, author of It's More than Money  -- It's Your Life! and cofounder of the Women's Institute for Financial Education. They should start with the highest-rate cards first -- in their case, a department store card that charges a whopping 24 percent, on which they owe $400. If they increase their current $50-a-month payments on the card by $75, they'll pay it off in about three months, versus nine months, says Wall. If they then apply that same $75 a month to their next high-rate card, a 14 percent account with a $1,000 balance, they'll pay it off in six months rather than nine. Once they've paid off the credit cards, they can start building a house fund.

Look for everyday economies. The Quinns spend $80 a month for their home phone and $150 a month for their cells. Getting rid of one or the other or switching to a lower-cost cell service could free up cash for the "little fun" that they'd like to be able to enjoy.

Consult a career counselor. To explore job opportunities that would make better use of his education -- and perhaps offer a bigger salary and better benefits, like a 401(k) or similar retirement savings program -- John should consider talking to a career counselor, says Wall. Local community colleges often offer low-cost counseling programs.

Buy life insurance. If something were to happen to either of them, the family would go into a financial and an emotional free fall. Since both are young and healthy, they can pick up the protection they need at a relatively cheap price. McKinley recommends they each buy a $500,000, 20-year term-life insurance policy, which would see their daughter through to adulthood. They can get quotes online at such websites as www.term4sale.com and www.insure.com.

Family finance writer Diane Harris is an editor at Money magazine and a mom of two.

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