Getting it all together: Jacqueline and Kim Jackson are squashed between their family's finances. (Family Finances).JACQUELINE JACKSON IS PART OF THE "SANDWICH generation Sandwich Generation The generation of middle-aged individuals who are pressured to support both aging parents and growing children. Notes: Those of the sandwich generation are caught between the obligation to care for their parents--who may be ill, unable to perform ," a generation squeezed between the demands of their children and the responsibility they feel to their aging parents. She and her husband, Kim, both 37, have a household income of $85,000 and own a home in Powder Springs, Georgia Powder Springs is a city in Cobb County, Georgia, United States. The population was 12,481 at the 2000 census. Census estimates for 2005 show 14,507 people living in Powder Springs. , Jacqueline works as an underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. consultant for Aetna Insurance Co. and Kim serves as a field engineer for Fuji Medical Systems. Whereas many couples in their situation fail to plan, the Jacksons have strong financial goals for their family, which include building an emergency fund (six month's worth of living expenses) and financing a college education for their 8-year-old daughter Paris. But when Jacqueline's parents, who lived in Nashville, Tennessee “Nashville” redirects here. For other uses, see Nashville (disambiguation). Nashville is the capital and the second most populous city of the U.S. state of Tennessee, after Memphis. , became ill, the Jacksons' financial plans were sidetracked. "My mother was already in a nursing home, having suffered a stroke. My father, who had been living in the family house where I grew up, started having health problems. We moved him into assisted living as·sist·ed living n. A living arrangement in which people with special needs, especially older people with disabilities, reside in a facility that provides help with everyday tasks such as bathing, dressing, and taking medication. ," says Jacqueline. "Because I am an only child, he deeded the house to me." Jacqueline's father had begun renovating his home and was in the process of adding two additional rooms. In order to complete the project, the Jacksons secured a $39,000 home equity loan on the 40-year-old house, $27,000 of which was used to make renovations. The couple has since completed a bedroom, bathroom, and two-car garage. Since the home was paid for, Jacqueline planned to rent it out for extra income. The couple used the remaining $12,000 to pay off their credit card balances. in addition to their monthly mortgage of $928, they now have a $360 monthly payment on their home equity loan. Until they find a boarder, they must also pay utilities on the family home. Another added burden: Jacqueline's father's $7,000 car note. "To reassure my father that he wouldn't spend all of his Social Security on his living expenses, we took over the loan on a new truck he purchased last year." says Jacqueline, whose mother passed away in October 2002. Further complicating matters, the home repairs have actually cost $39,000, which means the Jacksons have a $12,000 shortfall. Jacqueline says she may have to dip into dip into Verb 1. to draw upon: he dipped into his savings 2. to read passages at random from (a book or journal) Verb 1. her father's savings for half the money and will sell her stock options, which are valued at $3,700, only if she absolutely has to. She is adamant about not borrowing against her 401(k), which is currently valued at $12,000. She has $3,700 in stock options, a $1,195 stake in an investment club, and shares of Home Depot The Home Depot (NYSE: HD) is an American retailer of home improvement and construction products and services. Headquartered in Vinings, just outside Atlanta in unincorporated Cobb County, Georgia, Home Depot employs more than 355,000 people and operates 2,164 big-box and Aetna stock that are valued at $1,000. Kim has almost $15,000 in his company's profit-sharing plan Profit-Sharing Plan A plan that gives employees a share in the profits of the company. Each employee receives into an account, a percentage of those profits based on their earnings. Also known as "deferred profit-sharing plan" or "DPSP". , but he won't be fully vested until August 2003. "We have two households to take care of," says Jacqueline. "Like most people, family circumstances took a toll on our finances." THE ADVICE To help get their financial plan back on track, BLACK ENTERPRISE asked Sterling Laylock of Atlanta-based Sterling Financial Advisors to consult with the couple. In addition to suggesting that the couple add their $2,000 contest award to their emergency fund, which has dwindled down to $4,600, Laylock recommends the following: * OBTAIN AN INTEREST-ONLY MORTGAGE The couple's first mortgage of $126,500 has an 8% Adjustable Rate Mortgage This article is about the US mortgage type. For an international perspective, see Variable rate mortgage. An adjustable rate mortgage (ARM) is a mortgage loan where the interest rate on the note is periodically adjusted based on an index. (ARM) rate. The home equity the on their inherited home has a 9.5% ARM rate and a $39,000 balance. To maximize their wealth, the Jacksons will have to faithfully make payments on their first mortgage and home equity loan (currently $928 and $360, respectively, per month) until August 2003, when their credit score should improve enough for them to refinance Refinance 1. When a business or person revises their payment schedule for repaying debt. 2. Replacing an older loan with a new loan offering better terms. Notes: When a business refinances they typically extend the maturity date. both loans to interest-only mortgages. Interest-only mortgages allow borrowers to pay interest, but no principal, through the life of the loan, which is usually 15 years. The result: lower monthly payments. Should they meet the credit score requirements for this option, the Jacksons' two mortgage payments will total approximately $690 per month. The downside to an interest-only mortgage? If the Jackson's property lost value, they would have to make up the loss against the original mortgage if they wanted to sell the property (but they'd have to do the same with a traditional mortgage). * USE POSITIVE CASH FLOW TO INCREASE SAVINGS If they are able to reduce their total mortgage payments from $1,448 to approximately $690, the Jacksons will have positive monthly cash flow equal to $758 (or $9,096 per year). Were they to invest that money at 8% over the next 20 years, the Years, The the seven decades of Eleanor Pargiter’s life. [Br. Lit.: Benét, 1109] See : Time value would be $551,000. This would enable the Jacksons to begin contributing $250 a month to a Roth IRA Roth IRA An individual retirement plan that bears many similarities to the Traditional IRA. Contributions are never deductible, and qualified distributions are tax-free. A qualified distribution is one that is taken at least five years after the taxpayer established his/her first and to add to the 529 college savings plan they opened for Paris in September 2002. They could also contribute regularly to their savings account Savings Account A deposit account intended for funds that are expected to stay in for the short term. A savings account offers lower returns than the market rates. Notes: . Laylock suggests that when the Jacksons refinance their inherited home this summer, they should take out additional funds to eliminate Kim's $16,000 student loan, Jacqueline's father's $7,000 car note, and any remaining home-repair costs. * RESTRUCTURE INSURANCE The couple is paying $1,535 annually for a $539,000 insurance policy for Jacqueline, a $321,000 policy for Kim, and a $20,000 policy for Paris. They should reduce those costs by getting a combination of permanent and term life insurance policies. The Jacksons should also begin considering some form of permanent life coverage. Jacqueline's father cashed in his life insurance six years ago, which has left him with no coverage. The Jacksons also have $150,000 in life insurance to cover their mortgage in the event of their death. Laylock advises getting a term-life policy because, in most cases, the death benefit of the credit insurance is reduced with the balance of the mortgage; once the mortgage goes away, so does life insurance coverage. In order to increase the deductibles on their auto and homeowner insurance policies, Laylock suggests that the couple increase them to $1,000. They can then purchase a $500,000 umbrella policy Umbrella policy Insurance for exports of an exporter whose issuer handles all administrative requirements. (at about $65 per year), which will protect them in case of a lawsuit due to accidents. * DRAFT LIVING WILL AND OTHER LEGAL DOCUMENTS The Jacksons only have a simple Power of Attorney to protect Jacqueline's father's wealth, which she can inherit. In order to avoid probate probate (prō`bāt), in law, the certification by a court that a will is valid. Probate, which is governed by various statutes in the several states of the United States, is required before the will can take effect. and its inherent financial costs (court costs court costs n. fees for expenses that the courts pass on to attorneys, who then pass them on to their clients or, in some kinds of cases, to the losing party. , legal fees, travel expenses, and time off from work), Laylock suggests that the following legal documents be prepared by an attorney: a Pour-Over Will A pour-over will is a testamentary device wherein the writer of a will creates a trust, and decrees in the will that the property in his estate at the time of his death shall be placed in the trust. , which identifies any assets outside of your Trust: a Living Will which outlines your wishes should you be placed on line support; as well as at Durable Power of Attorney durable power of attorney A legal document conveying authority to an individual to carry out legal affairs on another person's behalf. for Healthcare and a Durable Power Attorney for Assets, which designate medical and financial decisions for you. Financial Snapshot: Jacqueline & Kim Jackson HOUSEHOLD INCOME Gross Income $85,000 ASSETS 1st home $145,000 2nd home 125,600 (Market value after improvements are completed) Person items 29,000 Retirement plans 27,611 Autos 25,000 Stocks 5,915 Savings 2,900 Total $360,426 LIABILITIES 1st Mortgage $124,009 Home equity line 39,000 Student loan 16,000 2nd home repair costs 12,000 Auto loan 7,000 Total $198,009 Net Worth $162,420 |
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