Three years ago, Jim and Laurie were on top of the world, rich in money and spirit. They had done well in the stock market with their 401k plan. They were so confident in their future that they decided it was time to plan for retirement.
They had been researching second homes in the Southeast, and settled on the west coast of Florida—a good value for a waterfront condo. They stretched themselves and spent more than their budget allowed. As a result, they had to refinance their principal residence and take much of the profit that had accumulated. They put more money down on their new vacation home so the monthly payments would be affordable with their current monthly cash flow.
Like so many other couples, they never dreamed the market would plummet and that they would experience the “Great Recession”. They never dreamed they would lose 60% of the wealth they had accumulated for retirement. Moreover, Jim never dreamed that his job would be eliminated—yet Laurie and Jim were indeed hit with this double whammy of financial challenges.
When I met him, Jim had found another job. However, his salary was two-thirds of his former salary and he had the same level of responsibility. He worked long hours, seven days a week.
Jim and Laurie are similar to other American couples who had to digest and adapt to significant losses—both financial and emotional—that they weren’t anticipating. They could no longer afford the lifestyles they were living.
They were faced with the very scary pressures of meeting monthly payments that they no longer could afford. They thought they might lose their home. They were also starting to borrow money on their credit cards and unable for the very first time to pay off their monthly balances. Throughout 18 years of marriage, they had always made a point of paying off monthly balances.
When I met Jim and Laurie earlier this year, they were living with a great deal of financial and emotional stress. Laurie was feeling the effects physically. Jim was just trying to make it through day-to-day with his heavy work schedule; but he, too, was feeling the effects in not sleeping well and not getting any exercise.
Jim and Laurie had options they hadn’t explored. For example, they hadn’t thought of renting their condo, which had the potential of being a great vacation rental. They also hadn’t thought of meeting with their bank and other creditors and asking them to modify their monthly payments so they better reflected their current monthly income..
Although Laurie was initially upset at the thought of strangers living in her home, she quickly adapted to the idea when she learned how much rent their beautiful condo would provide—it would practically pay for itself with just the high-season rent. They would use it themselves, off season, when they could afford to get away. They wouldn’t have to give it up at all.
Jim and Laurie were fortunate in having the focus and persistence to make their new circumstances pay off for them. They took a realistic look at their circumstances, reached out for help, and then applied themselves in achieving the goals that mattered most. Their open and flexible mindsets empowered them to regain control of their money and their lives.