Eric and Debra Stillwell liked to live for the moment.
Before they were married, the Burbank couple--individually and together--traveled whenever and wherever they wanted, bought what they liked and thought nothing about saving for a home or retirement.
They were living high on a middle-class income. Their indulgences, along with a failed business venture by Eric, left them owing a combined total of more than $60,000 on credit cards and loans by the end of 1995.
They've managed to climb most of the way out of the hole since then, and now the couple want to make plans for a secure future.
Eric discharged about $25,000 of debts in a bankruptcy forced on him by a creditor. After the couple, who are in their 30s, were married in July 1996, they took steps to aggressively pay down more debt. Now, they owe less than $8,000 in loans and credit card debt, and about $1,800 on a car.
Inspired by Debra's feelings about approaching the age of 40, the couple started thinking even more seriously about the future, including buying a home and saving for retirement.
"We started off the marriage in a financial mess," said Eric, 35. "We decided that in 1997 we were going to get our act together."
Indeed, the Burbank couple were well along the right track by the time they spoke to Linda Gadkowski, a fee-only certified financial planner on Cape Cod in Massachusetts who reviewed the Stillwells' finances for Money Make-Over.
"I applaud you in taking the first steps in pulling yourselves together financially," the planner told the couple. "You're not in great shape, but you've set goals and you're saving."
Despite their financial setbacks, the couple do have time on their side. But they will face two obstacles in meeting their goals: namely, the repercussions of Eric's bankruptcy, which could make a housing loan harder to get and more expensive, and Debra's preference for part-time work.
Debra, who normally earns about $29,000 a year as a part-time nurse at St. Joseph's Hospital in Burbank, acknowledges that working full time would help their finances, but she feels the advantages in flexibility and reduced stress are worth the financial sacrifice. "I don't want to burn out," she said.
Nonetheless, Debra sometimes works more shifts and brings in more money some months.
In September, Debra took an important step toward financial security when she began contributing 4% of her pretax pay to the hospital's 403(b) retirement program, which began matching half of her contribution this year.
The biggest single chunk--about $700 most months--of Debra's paycheck goes to paying off her credit card debt. If she keeps up that pace and doesn't add new charges, she'll have the balance paid off--and that $700 a month available for saving--before the end of this year.
Eric, who has worked for Paramount off and on since 1987 in a variety of administrative support jobs, earns about $43,000 annually now. He became eligible to participate in the company 401(k) tax-deferred retirement-saving plan this month and contributes 6% of his pretax salary, and the company matches 50% of that.
About $200 a week is automatically deducted from Eric's pay to repay an $8,000 credit union loan he took out in 1996 to pay off a chunk of his and Debra's debts. That loan, which has an interest rate of 7.5%, will be paid off by May.
An additional $150 is automatically withdrawn from his checking account every month to go toward an individual retirement account he opened in September with Putnam Investments, which he is considering rolling over into a Roth IRA.
"I guess neither of us really wanted to grow up," Debra admitted of the way she and Eric used to spend money. "I know I didn't."
Debra had leaned heavily on credit cards from the time she arrived in the United States from her native Canada in 1991 to attend nursing school. During one period--from July to November 1994--when Debra was not working, she lived almost entirely off her credit cards, using them to pay for groceries and rent, and also to buy furniture and airline tickets for trips to visit family and friends in Canada and Florida. Until last year, Debra generally was paying only the minimum payment required on each.
Gadkowski called that practice fiscal suicide. "By paying only the minimum, every time you buy something new on your credit card, you may as well tack on another 10% or 15%, depending on the interest rate," Gadkowski said. "Plus you're still paying interest on the previous purchases. It's ridiculous."
Eric, for his part, has had some weighty financial problems of his own. From 1987 to '92, Eric did various administrative jobs for the TV series "Star Trek: The Next Generation" for Paramount, earning a salary but no benefits. In 1992 he left Paramount to take a job helping to organize Star Trek conventions.