Financial makeover: Young teachers get a lesson in money management

Troy and Maryna Welker are like a lot of young couples, not long out of school and feeling overwhelmed by their lives stretching out before them.

More than anything, they want to start off on the right foot.

There's a little problem with money, however.

Both Welkers are teachers in Snohomish County. Troy, 29, works full time as a special-education teacher and makes $45,500 a year.

Maryna, 26, teaches English as a second language part time and tries to piece together extra tutoring hours. Her annual pay is $11,975.

At the same time, they have $30,000 in student loans from Troy's graduate school and a $13,500 car loan for their 2008 Honda Element.

They also recently consolidated $3,000 in credit-card debt into a 6.5 percent, five-year bank loan.

They rent a one-bedroom condo in Ballard for $1,000 a month, and after they've paid their monthly bills, they have about $600 left over for groceries, gasoline and entertainment.

And they're spending $600 a month on gas alone.

"By the time we've paid our bills we're kind of forced to use the credit card," said Troy Welker.

Help sought

Both Troy and Maryna Welker are outgoing and cheerful in a way that doesn't show their worry.

But they knew they needed help. In filling out an online survey to The Seattle Times to participate in a free financial makeover, Maryna wrote, "It will help my husband and I learn how to budget and learn how to live a normal life within our means."

The Welkers want to buy a house within a few years, preferably closer to work. And the Welkers want to start a family. And have one or both of them go back to school for a doctorate.

Maryna added that she tries to budget but isn't sure where to begin.

More than anything else, she said, she wants "not having to stress every month."

In putting together a financial plan, the key for the Welkers is reining in their discretionary spending, said Matt McKellar, president and co-founder of Bellevue-based ICON Consulting and a certified financial planner and a member of the Financial Planning Association's Puget Sound chapter.

Budgeting is a word with negative connotations, McKellar said, especially for younger people, so his plan for the Welkers took as its first steps consolidating their expenses and setting up separate spending accounts for each.

That way, McKellar said, the Welkers would have "the freedom not to budget."

Where the money goes

The Welkers do not live outlandishly.

They enjoy going out, but have cut back on dining out in the past year.

They live across the street from a grocery store, so they tend to shop more frequently than they believe they should.

Troy estimates he spends $8 per day on coffee at work — Maryna thinks it's more than that — and his biggest indulgence is $120 per month on jazz guitar lessons, which he is passionate about and not willing to give up.

Maryna recently took up photography, but hasn't invested any money into the hobby yet.

"I want to, but the finances won't allow for it," she said.

And they want to travel. Maryna is originally from Ukraine, and hasn't visited her family in five years.

They're planning a trip this summer — paid for by their parents — but she would prefer to visit them at least once every two or three years.

So far their only plan to improve their bottom line is to, as Troy put it, sell off their old hobbies: bicycles, ski equipment, baseball cards.

As a result of meeting with McKellar, the Welkers already realize the first step they need to take: move closer to work, which will cut their expenses for gas, car maintenance and groceries.

"By not moving and having to live the way we live right now and having to spend the money we're spending, in a year we're about $35,000 in the hole," Maryna Welker said.

By moving sooner, they will actually come out about $4,200 ahead.

Within a day of meeting McKellar, the Welkers started looking at houses to buy in Snohomish County, and will be meeting with a real-estate agent.

"We're going to move as soon as we find something," she said.

Buying a house now, McKellar said, will actually go a long way toward getting them off on the right foot.

It also makes sense to buy a house now, he said, because Maryna's part-time status allows them to qualify — under lower-income requirements — for a loan with a low interest rate and no down payment offered by the U.S. Department of Agriculture to buy a house in a rural area.

It also makes sense for Troy to start his doctorate program this fall. McKellar said it will pay off greatly in the added income — about $15,000 a year — plus the additional money they can invest and make in their retirement plans over the course of Troy's working career. McKellar calculated all of that as adding up to $670,000.

"It makes the $50,000 cost of that Ph.D. program a very nice investment in their future plan potential," he said.

Starting with the assumption that the Welkers do nothing to change their habits, McKellar gradually added into the plans he made for them a number of elements to improve their financial future.

McKellar said that the series of steps he suggested, taken promptly, can make a huge difference.

Those steps include:

• Setting up discretionary spending accounts and consolidate expenses.

• Moving closer to where they work.

• Purchasing a home.

• Maryna getting a full-time teaching contract after the home purchase.

• Putting surplus cash income into savings.

Excited about the future

The plan gives the Welkers the flexibility to make changes over the years, such as having kids, adjusting their spending on things like travel, opting to retire early or anything else.

"It's less about retirement and more about financial independence and control and you calling the shots," McKellar said. "It's a process of bringing the future into the present so we can do something about it now."

The Welkers are excited about their new plan, because it allows them to stop worrying as well as see how their future will shape up.

While they had originally despaired at not being able to buy a house for another five or 10 years, they now see that dream to be much closer than originally intended.

"We're so glad this is happening to us," Maryna Welker said.