Stretching dollars further: the Adams family is striving to be more efficient on one income.

OFTEN, LIFE IS ABOUT TRADE-OFFS. Theresa and Tony Adams had to make a tough decision two years ago. Who would care for their infant son, Corey? "I wasn't impressed with what was available for child care for little babies," says Theresa.

Without extended family to turn to for caregiving, the couple, who also have a 10-month-old son, Bryce, was in a bind. Theresa, 36, worked full time as a credit analyst, and Tony, 44, worked full time at night as a supervisor at a packaging company. They decided that Theresa would stay home. "I had to convince Tony that this was the best thing to do. He wanted me to work because we're better off with two incomes," says Theresa.

She felt that they would be able to make it on one income if they were willing to cut back on leisure spending. With their combined $97,000 income, they were able to save $35,000 to help pay for their home and afford luxuries like $80 dinners and $60 on movies each month.

With Theresa as a stay-at-home mom, the results are bittersweet. On one hand, their two children receive quality care. On the other hand, Tony and Theresa really miss the $47,000 salary, plus $5,000 minimum bonus, she earned at Capital One Bank. The Richmond, Virginia, couple has had to stretch Tony's $50,000 salary until it hurts. "We do get by. We can pay our bills, but there's not much left after that. We have food, clothes, the necessities, but no extras," says Theresa.

"I'm the only one working, so I definitely need to find extra income," says Tony.

The couple hasn't been able to save much. Tony has $20,000 in his 401(k). He contributes about 4% of his salary and hopes to increase it to 7%. Theresa has $38,000 in the 401(k) she had at Capital One. They also have $200 in a checking account and $5,000 in a money market account. Fortunately, they don't have much debt. They owe $2,000 on credit cards and $5,000 on a 2004 GMC Envoy. Their 1998 BMW is paid off. They have first and second mortgages on their home that add up to $200,000.

To help out, Theresa has put her skills as a budget shopper to good use. "I do coupons. When it comes to clothes, it's markdowns and clearance sales," she says. "We just use credit for things we absolutely need that we don't have cash for. The card will be used for gas, or Tony's blood pressure medicine."

As the Adams family looks ahead, the goal is to survive without losing critical financial ground until Theresa can return to work full time in two or three years. To increase his income, Tony says," I'm trying to get a management position at my job. I have to be patient." They are both optimistic.

THE ADVICE

We connected the Adamses with Walt Clark, president and CEO of Clark Capital Financial (www.clarkcapital.net) in Columbia, Maryland, who says the couple has managed their financial situation very well considering they now have two children and one income." Clark says the key to their success so far, is their financial discipline. "They maintain very little debt and seem to be quite frugal with their expenses."

With that in their favor, he says they should adopt the following moves until Theresa returns to work.

Consolidate mortgages. Since the Adams plan to remain in their home for the next five years, Clark says they should consolidate the first and second mortgages ($171,000 and $33,000, respectively) into an interest-only mortgage. This strategy is beneficial because, currently, most of the mortgage payment is going to interest, with little accumulating toward principal. With an interest-only mortgage, Clark calculates that they will reduce their mortgage by $170 a month. Since the couple purchased their home for $222,000, and it now has a market value of $300,000, Clark recommends that they cash out $7,000 at settlement to pay off the car loan and credit card debt. "With the savings each month, they will be able to concentrate on building their cash reserves and funding their children's education," he says.

Increase 401(k) contribution. Tony currently contributes 4% of his salary to his 401(k) and plans to go as high as 7%. Clark recommends he shoot for at least 10%, with a goal to reach the 15% maximum. If Tony has concerns about how the increase will affect his take-home pay, he can contact the 401(k) plan administrator and request a detailed contribution table that will show how much will be deducted from his paycheck with each percentage increase. Since his company has an incentive matching program, he would be able to further accelerate his wealth.

Rollover 401(k). Theresa wonders what she should do with the assets she obtained through her previous employer's 401(k) plan. Clark says it's best to roll them over into an Individual Retirement Account. It would be ideal for her to invest in a combination of growth mutual funds and quality stocks.

Buy disability insurance. With some $550,000 of life insurance coverage, Clark says the Adamses are sufficiently protected. However, since Tony is the sole income source, they should purchase a disability insurance policy to cover their expenses, about $],600 per month, in case Tony becomes injured. And speaking of protection, though the Adams family has $5,000 in a money market account, they need to save an additional $3,000 for emergencies. The last thing they need is to find themselves turning to credit cards to bridge financial gaps.

Put the contest winnings to good use. Clark recommends investing the $2200 contest winnings in a Uniform Gift to Minors account. This account will give the couple more flexibility---compared with a 529 Plan--in terms of choosing different investments, such as growth mutual funds, stocks, and bonds. Ali the contest winnings should go toward Corey's account, then the Adamses can establish an automatic investment account for both children through any mutual fund family. "They can invest as little as $25 a month and the money will be automatically deducted from their checking account," says Clark.

Financial Snapshot: Theresa & Tony Adams

HOUSEHOLD INCOME

Gross Income         $50,000

ASSETS

Checking                $200
Money Market           5,000
(401k) Tony           20,000
(401k) Theresa        38,000
Value of Home        300,000
Value of Car *        14,000
Total               $377,200

LIABILITIES

Mortgage            $171,000
2nd Mortgage          33,000
Car Loans              5,000
Credit Card Debt       2,000
Total               $211,000

NET WORTH           $166,200

* ACCORDING: TO KELLEY BLUE BOOK