Two dogs, two cats, two turtles ... and $490,000 in debt

The first two years of marriage haven't been a honeymoon for a Lynnwood couple.

Army Staff Sgt. Tony Yates served in Iraq for a year. When he returned last summer, Kairo Ballesteros Yates quit her job in Chicago and joined her husband in Texas.

A few weeks later they moved to South Carolina for further military training. They moved back to Texas, back to Illinois and then to Washington, where Tony is a military recruiter in Everett.

"Since November of 2006 we've been living out of hotels and living out of our car with two suitcases, two dogs, two cats and two turtles," Kairo said. "We have gone through all of our savings and are in debt in the worst way."

Kairo estimates they are $490,000 in debt.

A chunk of that is credit-card debt, but the majority is from the May purchase of a $304,000 house in Lynnwood.

What they want

Now that they have a home, and plan on staying in the area for at least three years, both want to pay off their credit cards and learn how to budget their money.

"We don't want to be financially stupid for the rest of our lives," said 31-year-old Kairo.

"We're both smart, but we haven't had consistent expenditures or income for the last year," Tony, 30, added. His yearly salary is about $63,000.

Kairo worked as the business manager for a hospital operating room in Chicago. She'd like to find similar work in the Seattle area that would pay $45,000.

At the moment she's unemployed except for occasional jobs that "pay the gas money." Ultimately, Kairo wants to complete a bachelor's degree she started and work in the field of veterinary science.

What they have

Their optimistic attitudes and love for each other are about the Yateses' only assets. That doesn't pay the bills, but it does help them get through their financial challenges.

Last year Kairo had about $30,000 in a 403(b) retirement account. She tapped into it, incurring a 10 percent IRS penalty each time. Only $1,600 remains.

The Yateses weren't able to make a down payment on their house and neither of them have a good credit rating. As a result, they ended up with a 7.9 percent interest rate on their mortgage.

Lars Landrie, a certified financial planner with the Everett office of Moss Adams Wealth Advisors, examined the couple's liabilities and spending patterns. Given their current situation, he doubts they could refinance their home loan and get a lower interest rate.

"I think the more important issue is to stop using credit cards for everyday living expenses and learn to live within a budget," said Landrie, who is also a member of the Financial Planning Association.

What they need

Tony and Kairo are spending approximately $1,500 more each month than they are earning. They're funding the monthly shortfall by increasing their credit-card debt. And Tony admitted he has "no clue" where the money goes.

"I'm not coming home with a big-screen TV or anything," Tony said. "It's all the little things. It doesn't click with me how buying the newspaper, a cup of coffee and a Snickers bar every day adds up."

Landrie created a monthly income-and-expense spreadsheet so the couple can see "the negative hole they are digging themselves in." For three weeks, Kairo and Tony should write down every purchase. Whether it's a fast-food meal or a cup of coffee, "they must keep track of everything until they understand their spending habits," Landrie said.

They also need to put themselves on a weekly allowance. Landrie suggested starting with $20 each for coffee, magazines or other incidental purchases. "When it's gone, it's gone. They can't go to the bank machine for more."

Landrie gave them strategies for paying off credit-card debt. He also advised Kairo to get a job even if that means "settling" for work with a salary in the $25,000 range.

What they think

Kairo is now looking for a job. Both plan to stick to a budget and work "day by day and month by month" to pay down their credit cards.

"This was an eye-opener," Kairo said. "It's like a cold shower in the worst way, but it's also good because we need to wake up."