Theodis and Rochelle Williams are just starting out in life. Their mission is reducing debt and saving for their child's education. Here's what they learned in their WSFA 12 News Financial Makoever.
TJ is three years old. Theodis and Rochelle want to start saving for his college tuition. But with credit card debt and two mortgages, they can barely make ends meet.
"My main concern was that I didn't want to go into my retirement or my wife's retirement to pay for my son's education," Theodis said.
So WSFA 12 News enlisted CPA Jerry Grant of Bern, Butler, Capilouto and Massey to help. He recommended a state sponsored 529 plan.
A 529 plan allows you to make after-tax deposits, then withdraw them later tax free.
For example, if we put a thousand dollars into that account, it then grew until, in this case the Williams' son was going to college, he could withdraw that original investment, plus any earnings it had made, as long as that money was spent on qualified educational expenses," Grant explained.
But right now, the Williams' don't have the necessary money to save. So finding it is priority one. Grant told the Williams to do three things.
- Consolidate their credit card bills in order to reduce high interest costs.
- Refinance one of their mortgages to get a lower payment.
- Learn to live within a budget. The goal is to keep their expenditures the same even as their income rise.
"What we hope will happen is that we're capping off those expenditures, so that any additional cash flow in the future can be diverted into these savings programs."
The Williams admit that the process will take some time.
"I wanna say six months to a year," Rochelle said.
But by reducing their debt, increasing their cash flow, and saving in the right way, the Williams are in the driver's seat.
The initial comment we made was that we needed a road map and Mr. Grant has laid the road map out to us," Theodis said. "But it's up to us to get behind the wheel and stay on that path.