By George Erb
The Seattle Times.
SEATTLE
The Greenway family is living the American dream, with a spacious home, a large family and a good income.
But household finances often leave Matt and Lisa Greenway feeling frustrated and worried, and their emotions intensified by concern over Matt’s progressive lung disease.
After seeking help and working for weeks with a volunteer financial planner, the couple are now feeling more confident, although work remains. “There’s a light at the end of the tunnel,” said Lisa Greenway, 39.
The Greenways have a lot going their way. They live in a large home that’s worth about $299,000, according to Zillow, with about $150,000 left on the mortgage.
They need all of that space to raise their four lively children, two boys and two girls between the ages of 7 and 14.
Matt Greenway, 42, earns about $145,000 a year as a systems engineer in the Skype division at Microsoft. His income is well above Seattle’s average annual wage of $59,130, and it allows Lisa Greenway to stay home with their children.
The family’s breadwinner, however, is struggling with a chronic illness. Matt Greenway’s lungs are deteriorating because of an inherited form of emphysema that also makes him vulnerable to infections. He sleeps with an oxygen supply and has a drawer filled with medications.
Matt Greenway is a full-time employee, working three days a week at Microsoft’s corporate campus and the rest of the time from home.
His condition has clouded the family’s future. He does not know how long he will be able to work, and he wants to leave his family on firm financial footing for when his days as a breadwinner are over.
That uncomfortable truth has heightened the couple’s concerns about money. Their spending was unpredictable and bounced between $6,000 and $9,000 a month.
Lisa Greenway would often spend about $350 with a single shopping trip to Costco, although impulse buys could easily drive the total to $500. Their average grocery bill was about $3,000 a month, well above the federal estimate of $1,547 to moderately feed a family of six.
They were also spending nearly $1,000 a month paying off a car loan and a student loan, as well as a home-equity line of credit. Their monthly mortgage payment was an additional $1,525.
Communication was a challenge. Sometimes either Matt or Lisa Greenway would make noteworthy spending decisions independently of each another. Talking about household finances was difficult.
As a result, despite Matt Greenway’s earning power, the family was running an average of $267 in the red every month. He would shore up the household’s cash supply by tapping his quarterly employee stock purchase plan at Microsoft.
“Our problem wasn’t a money problem. It was a spending problem,” Matt Greenway said. “We didn’t know what we were spending.”
Angela Giboney, a certified financial planner, volunteered to work with the Greenways and help them reach firmer financial ground. She concluded that the best way to reduce the family’s risk would be to “reduce the debt as quickly as possible.”
Giboney urged the Greenways to deploy the so-called “debt-snowball” strategy and pay off all of their nonmortgage debts within three or four years.
Following that strategy the Greenways first targeted their smallest debt, which was the $6,338 home-equity line of credit.
Matt Greenway will pay off the debt this year with his Microsoft stock-purchase plan and bonus. Meanwhile, the family will make only minimum payments on the other debts.
When the line of credit is paid off, the Greenways will redirect the money toward paying down the next-largest debt, in this case a $25,888 car loan. When that’s paid, money earmarked for the line of credit and the car loan can then be used to take care of a $61,000 student loan.
When the student loan is paid, the Greenways will be debt free except for their mortgage, cutting their monthly expenses by nearly $1,000.
Giboney also had the Greenways work from a monthly budget to make them aware of and disciplined about their spending. The budget may relieve some of their stress over money because they agreed to the plan and must consult with each other before straying from their spending targets.
To help the Greenways stay on track, Giboney told them to pick someone they trust who will study their financial plan and check in with them at least once a month for progress reports.
“Any time there is a behavior change, it’s really good to have accountability,” Giboney said.
Once the Greenways’ spending and debts are under control, they can begin working on more long-term objectives, such as saving for retirement, socking away more money for their children’s educations and maintaining a $21,000 emergency fund.
The Greenways say they are embracing all of Giboney’s recommendations and are already seeing a difference.
Matt Greenway, in particular, is more confident that he will be able to leave his family with a sustainable nest egg. “At that point,” he said, “I’ll know that I did my job.”
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HOW TO CURB SPENDING
When clients tell financial planner Angela Giboney that they have a spending problem, she often gives them a counterintuitive
solution: Leave the credit cards at home and buy things with cash.
Studies show that consumers tend to overspend and pay higher prices when they shop with credit cards. A widely cited study by Dun & Bradstreet found that consumers spend 12 to 18 percent more with credit cards than they do with cash.
“You have a different emotional attachment to cash than just sliding a card,” Giboney said. When the cash in your wallet begins to dwindle, “you are very careful how you spend it.”
Giboney tells clients to switch to cash for the types of purchases where they tend to overspend, such as groceries, clothes, gifts or entertainment. She urges clients to create a household budget and then set aside cash for their troublesome line items.
The best approach is to mark an envelope for each category, groceries, for example, and then fill the envelope twice a month with the budgeted amount of money in cash. All of the grocery purchases for that month are paid with the money in the envelope.
“It really helps you be disciplined and stick to your budget,” Giboney said.
