Following our face to face meeting last week, I sent Leah a rough draft of her cash flow and her Net Worth statement. The cash flow is my focus; it shows a monthly deficit of about $2,000 a month. Interestingly it is also the amount of Leah's unemployment she is currently receiving (she just had received notice of and additional, 20 weeks at $535/week, and she has around 15 weeks of that left.
As I told Leah in a previous email, the unemployment is a God-send! She needs to figure out a way to put all of it towards repaying debts, because when it runs out, they need to be able to live on Eric's income exclusively. If things work out as I hope and pray, the following will happen:
1) Via the military help services, Leah can work with a credit counselor who will ideally renegotiate some of the debt, reducing some of what she owes.
2) Leah will be able to pay down debt with her unemployment money, get another extension, and be mostly out of debt within a year.
3) From our conversation about our upbringing and our relationship with money, Leah will learn some new skills allowing her to never have this situation happen again!
Their major challenge will be paying bills and growing their savings on Eric's income. $44K a year isn't that much for a family. Leah asked me some great questions: What do you do when unexpected bills come up? How do you know exactly what you spend when you use a debit card? The answer to the first question is simple: work some savings into the monthly budget for the unexpected stuff that ALWAYS comes up in life!
It will take awhile for the military credit counselors to help, but we agree it's worth the wait and the hassle because it is free. Leah suggested having Eric's pay go to one checking account for basic bills and her unemployment check to another account from which they'll pay their debts. I told her this was a FANTASTIC idea! I also suggest that for a while she carry a small tablet to write down ALL expenses by category so we can really get those budget numbers accurate!