Dancing with debt: after stumbling over expenses for years, the Robinsons move toward a positive net worth.

CREDIT CARDS, AUTO LOANS, AND A mortgage had Valerie and Kenneth Robinson drowning in $50,000 worth of debt in the mid '80s. And with interest rates at that time hovering around 12.75%, it was the worst kind of debt--the expensive kind.

Valerie, 49, had just given birth to Kenneth Jr. (who is now 19). The couple initially decided she would become a stay-at-home morn, mistakenly believing they could rely on Kenneth's salary alone. "We reached a point where we were 'robbing Peter to pay Paul,'" says Ken, a 50-year-old human resources director for three local colleges in Southern California. "There was a lot of worry and fear. We just couldn't tolerate it anymore."

A friend recommended that they seek the advice of a certified financial planner. With help, the Bakersfield, California, couple took three years to turn things around by negotiating with creditors and cutting back on frivolous spending. They turned their $50,000 debt into a surplus of about $8,000 in savings. However, the Robinsons didn't stay in the clear; excessive debt would rear its head again.

In 1992, Valerie, who had returned to the workforce, and Ken were unexpectedly laid off from their jobs. Their unemployment checks didn't cover their living expenses, which totaled about $2,800 a month. With only a small emergency cash reserve, the Robinsons were forced to borrow close to $20,000 from their 401(k) plans and IRAs, resulting in a hefty 10% tax penalty for early withdrawals. They depleted their investments and accumulated credit card debt.

After they secured new jobs, the Robinsons cut up their credit cards and closed the accounts. Then they obtained a home equity line of credit to pay off their $40,000 in debt. It took six months of steady income before they felt like they had stabilized their financial situation again. Today, the Robinsons have no retail credit cards at all. They also have their own ideas about how they should handle their finances, with both short- and long-term goals. The couple reviews the family's investments, insurance policies, and financial budget regularly. "It is a common-sense approach, but it has to be practiced with discipline," says Ken.

The Robinsons, who've been married for 25 years, are a living testament to Declaration of Financial Empowerment Principle No. 4: to engage in sound budget, credit, and tax management practices. By faithfully using money management fundamentals, the Robinsons now have a net worth of more than half a million dollars, which includes investments, savings, and retirement plans. Their only liabilities are a mortgage and a car note totaling about $250,000.

The turning point for the Robinsons came when they began to monitor their monthly income and expenses. That is where the growth really happened, Ken believes. The couple uses Intuit's Quicken financial software to keep track of their bills and discretionary spending. It has been a great tool for them to not only stay on top of their finances, but also to review their understanding of their financial situation. This way, "we can see how much improvement there has been over the years," says Valerie.

The Robinsons even added wealth building to the equation. They began putting 10% of their monthly income into savings. "One of the things that was hard for me to conceptualize at first was getting out of debt and building wealth at the same time," says Ken. But over the past three years the couple has remained relatively debt free and has learned the value of putting their money into appreciating assets such as money market accounts, mutual funds, and retirement accounts.

Staying out of debt and managing credit is something you must do over your lifetime. "It can be deceiving to think that once you pay off your debt that's it, end of story," says Ken. "You have to continue to monitor your spending, live within a budget, and pay yourself first."

To engage in sound budget, credit, and tax management practices

The Robinsons managed to chip away at their debt and build up their assets by using the following strategies:

1. Negotiate with creditors. The first major step the Robinsons took was to stop using credit cards. "We had about seven, including Visa, MasterCard, retail stores, gas--all of which were maxed out," says Ken. The next step was to contact their creditors and make payment arrangements. For instance,says Ken, "I called company XYZ and said my monthly payment is $50. I am trying to balance my budget and make all of my payments on time. Is it possible that I can pay $25?" He is quick to point out that creditors were willing to adjust monthly payments since "they were trying to catch up with US by then. They just wanted to be assured that they were going to get paid."

2. Cut back on unnecessary spending. "Though it was painful at first, we changed our behavior and spending habits," says Ken. "We got on a tight budget which meant no more eating out. We started to prepare healthy meals at home, which resulted in significant SaVings."

3. Build a cash reserve. The Robinsons currently have six months of living expenses saved in a money market account. But they are still building more. "Most financial planners are now recommending saving eight mOnthS to a year [of living expenses], because it is taking longer to find employment if you are laid off," Ken notes.

Declaration Of Financial Empowerment

From this day forward, I declare my vigilant and lifelong commitment to financial empowerment I pledge the following:

1] To use homeownership to build wealth

2] To save and invest 10% to 15% of my after-tax income

3] To commit to a program of retirement planning and investing

4] To engage in sound budget, credit, and tax management practices

5] To measure my personal wealth by net worth, not income

6] To be proactive and knowledgeable about investing, money management, and consumer issues

7] To provide access to programs that will educate my children about business and finance

8] To support the creation and growth of profitable, competitive black-owned enterprises

9] To use a portion of my wealth to strengthen my community

10] To ensure that my wealth is passed on to future generations