Taking steps toward financial independence: our 2003 financial fitness contest winners are reaching their goals with solid fiscal planning

Black Enterprise, Dec, 2004 by Sheryl Nance-Nash

WHAT A DIFFERENCE A YEAR MAKES.

Anyone who is seriously committed to getting his or her financial act together can make significant strides by taking advantage of the wisdom of a financial adviser. A brighter financial future is on the horizon for anyone willing to seize the opportunity.

BLACK ENTERPRISE'S 2003 Financial Fitness Contest winners have improved their prospects for building wealth in a relatively short time. They've designed a well-crafted plan, received encouragement from their adviser, and started to make smart money moves. Here's a look at what happened to four of our winners from last year.

WINNERS

Jacqueline & Kim Jackson

The Jacksons are emerging from a very complicated financial situation in fine fashion. For starters, thanks to raises, bonuses, and Kim's overtime, the couple has bolstered their household income from $85,000 to $106,700.

They refinanced their home this summer, going from an 8% adjustable-rate mortgage with prepayment penalty to a 7.5% fixed-rate mortgage with no prepayment penalty. With the new mortgage, their payments have increased from $928 a month to $1,012 because they took out cash to put toward the down payment for a new home they are building, which will be finished in February or March of next year. When that happens, they are planning to rent their current home and refinance it to an interest-only mortgage.

The Jacksons also refinanced the home equity loan they had taken out to renovate a third house they inherited from Jacqueline's father. The renovation caused a $12,000 shortfall, which they've rectified by using savings and their $2,000 contest winnings to trim some of the debt before they increased the loan amount from $39,000 to $77,000. The Jacksons also went from a 9.5% ARM to a 4.9% Option ARM, which gives them four different payment options to select from each time they make a payment. The Option ARM will help them in the event it takes awhile to find a renter, because it gives them the option of making a lower payment.

By refinancing their debt, the Jacksons have gained about $330 more a month to work with, which they are putting toward the down payment of the home they are building. While they are proud to soon be the landlords of two properties, the Jacksons still have challenges. The family has been affected emotionally, as Jacqueline's father passed away this year, and the new house will cost double their current $139,000 home. They've also bought a $24,000 car and a time share in Orlando, Florida, for which they pay $169 a month and have a $7,500 balance.

But the couple is optimistic. "We feel as though we're on the right track," says Jacqueline.

Tiffany Hall used to read articles about people who earned less money than her, but seemed to be better off financially.

These days, she likes her own story. For one thing, she paid off her Lexus RX300 SUV six months ago. She had nearly $20,000 left on her loan, and started paying $2,000 a month to help it disappear. By the time she was down to $8,000, Hall charged the balance to a zero-interest credit card and kissed it goodbye. While she still owes $5,000 on that credit card. she incurs no interest until September 2005, by which time there will be so little left that she'll withdraw money from her savings to pay it off. The $125 she pays on the credit card bill is a far cry from the $415 car payment. She took the planner's advice and opened a tax-exempt money market account, to which she applies the difference of what she would have paid--$290, monthly.

Hall is also feeling good about her salary. With the cost of living increases and step raises, the contract attorney's moved up from $70,260 to about $80,000. The jump has given her saving power. Hall increased her contribution to her 403(b) from 5% to 10%, and is putting in a total of $1,000 a month into her money market account.

"Having that car paid off is a big thing off my back. I've found that I'm a good saver and I'm pretty much debt free now," she says proudly.

Since we last talked to Hall, her mother has changed her mind about wanting to move to a condo and will stay in her own home. Consequently, Hall, 33, is now focused on saving for a home of her own instead of buying her mother's. The fact that she only pays $400 rent to her mother will give her the ability to build funds quickly. "I'm not going to rush; I want to move out in style--do it right."

Married life agrees with the Worleys.

As planned, their special day took place in September 2003. They even managed to save enough cash to pay for half of the $15,000 shindig and honeymoon cost. Their parents paid the rest.

To say the least, their marriage is off to an eventful start. By October's end, Kim, 30, was expecting. Eric began graduate school in September, working toward a master's in education administration so he can land a better position, stop working two jobs, and make more than the 555,000 he earns now.

Although Kim will soon have to start repaying the 550,000 she owes in undergraduate and graduate school loans, their debt picture has greatly improved. Eric recently refinanced the mortgage like the planner suggested. While the reduction from a 7.5% rate to 6.7% didn't change the monthly payment much, Eric took out money and paid off the remaining 57,000 in old credit card debt that was haunting him. His student loans are in deferment since he's in grad school, which gives him breathing room. The Worleys also spent 54,000 of the money from their refinancing to remodel the basement to accommodate Eric's home office and otherwise enhance the space. The bedroom he was using for his office will now go to the baby.