I first touched base with Leah, the mom who’s been assigned to me as part of Family Budget Boot Camp, two weeks ago. I really loved her; she's funny, talkative, and energetic! As she shared her story with me, I got the feeling that anyone could really end up in her financial shoes.
I have previously assumed that people who get into bad financial situations are simply not good with money, but as it turns out, Leah is a sale-shopping queen and, prior to having her daughter, worked two jobs at a time. So it really had nothing to do with that.
During an emotional time following her divorce, Leah bought a home so she could stop living with her ex-. It was modest, only $160K. The problem was, Leah didn’t have steady income -- she’d been let go from her job -- and her mortgage broker encouraged her to do a "no doc" loan.
Leah is remarried now, but she and her husband haven’t been able to keep up with the house payments. She is trying to short-sell the house, but the bank is stalling this over $1,000 dollars that they want Leah to pay. She simply doesn’t have the money.
I am worried about a short sale, as my understanding is it creates a tax liability for the amount of loan forgiveness, and Leah just doesn’t need more debt. But I also understand that the stigma of bankruptcy and hit to her credit could be a worse burden.
Once she gets past the sale of her house, though, my biggest concerns for Leah going forward is how a family adjusts from an income of $108,000 -- which is what she and her husband Eric had until the summer of 2008 -- to one in the low $40's, which is what they have now. I want them to make the most of the military benefits available to them now that he’s joined the Army, and I want to work on repairing their credit. We’ll also look at doing some fine tuning to their insurance.
So far, my contact with Leah has been by phone and email, but I look forward to our first face-to-face meeting. I can't wait to meet her and her one-year-old daughter and husband!
I really hope and pray that Leah and I working together can put this family back on track financially! I also welcome the opportunity to learn from the host of resources and experts that Parenting magazine has put together and made available to us.