Many companies featured on Money advertise with us. Opinions are our own, but compensation and
in-depth research may determine where and how companies appear. Learn more about how we make money.

  1. Personal Finance
  2. Budgeting

Twins Stretch Couple's $110,000 Income Thin

Published: Jun 05, 2013 3 min read
Having several seemingly authentic sets of documentation is a must for any operative in the field. Seen here: Soviet identity cards used by Peter S. Deriabin, the highest ranking USSR official to defect to the West. Deriabin worked for the forerunner of the KGB, and even served as Stalin's personal body guard at one point. The CIA called the value of the intelligence gained from his defection incalculable.
Having several seemingly authentic sets of documentation is a must for any operative in the field. Seen here: Soviet identity cards used by Peter S. Deriabin, the highest ranking USSR official to defect to the West. Deriabin worked for the forerunner of the KGB, and even served as Stalin's personal body guard at one point. The CIA called the value of the intelligence gained from his defection "incalculable."
Time & Life Pictures/Getty Images

For years, Rachel Hopper and Josh Williams had hoped for a sibling for their son, Espen, who was born in 2005. So the Minneapolis couple were thrilled when they learned that Espen would have two sisters: twins Elsa and Rory, now 1.

"It's wonderful -- and it's very hard," admits Josh.

The couple's income of $110,000 (Josh is a city planner; Rachel works for Minnesota's Department of Natural Resources) is stretched to capacity. They struggle to cover all their costs, including day care for the kids -- $376 a week -- and a loan for a car that comfortably fits the whole family.

No longer saving for retirement, they have also depleted their cash stash and racked up $7,800 in credit card debt. "We're smart people with good jobs," says Josh, "but we're living paycheck to paycheck."

Time for a new game plan, says Indianapolis financial planner Elaine Bedel: "What may have worked for their family of three isn't working for their family of five."

Three fixes

Squeeze the budget. Over the next two and a half years, Josh and Rachel must focus on eliminating credit card debt and creating an emergency fund -- even at the price of delaying other savings, says Bedel. "They're in a precarious situation," she adds.

They now put $575 a month toward their card debt. Though their budget is tight, the couple should be able to pay down an extra $300 by utilizing Rachel's upcoming raise and trimming some discretionary spending. That would erase the balance in 10 months.

Create a cushion. Once the credit card is zeroed out, that $875 should go toward emergency savings.

Bedel recommends three months of living expenses, or $18,000, knowing that Espen's 529 plan could also be tapped if needed (though they'd incur taxes and a 10% penalty on earnings). This will take about 20 months to build.

Catch up on retirement. In 2016, Josh and Rachel should redirect the $875 to their retirement plans, for annual savings of roughly $13,000 pretax; they should also up their total contribution 2% annually. Combined with Social Security, that should give them $50,000 in annual after-tax income (in today's dollars), provided they retire at 70.

A wildcard: If they stay with their employers, their pensions could provide significant income. But Bedel hopes they will find new jobs. Josh could earn 15% more in the private sector, which would seriously ease the family's budget.