Case Study

Jenny

Age 33, divorced, with three children ages 3, 5, and 7.

Jenny and Steve were both raised in church and accepted Christ at an early age. They met during their senior year while attending a Christian high school. After graduation they both planned to get a college degree and begin a career, but they fell in love. They married in their second year of college, and Jenny had their first child a year later. A husband, part-time job, school, and a new baby was too much for Jenny, so she dropped out of college. Steve graduated a year later with a degree in accounting and landed a good job with a local accounting firm. The next five years were a blur. Steve was working lots of overtime; they bought a beautiful new home, a couple of cars, and Jenny had their second and third child, making her a full-time mom. All of that extra money was nice, but the overtime left little time for Jenny and Steve. I don’t need to bore you with the details. You can probably guess what happened. Steve was spending more time at the office and had allowed himself to have an affair. In fact, it had been going on for a couple of years when Jenny got the news. They tried marriage counseling, but in the end, Jenny found herself divorced at 33 years of age with 3 kids ages 3, 5 and 7.

Steve had made a lot of money, but they had also spent a lot of money. The divorce settlement
included alimony of $2,500 per month for two years and $500 per month for each child until each turned age 18. The house was to be placed on the market and sold with any equity being split 50/50. Steve had not saved much money in his 401(k) plan, but Jenny did receive half of the account value, which amounted to about $25,000. Each of them kept one car and assumed the debt for the car they kept. With Steve being an accountant, Jenny had not been very involved with the finances. She really had no idea where to begin. Every day bills showed up in the mailbox; this utility, that credit card bill. It was overwhelming. As it turns out, her attorney was a client of ours and recommended she give us a call.
The first thing we did was give her some homework. She had one week to complete the Income and Expense Analysis and the Assets and Liability Worksheet. We quickly determined that Jenny had to make some changes and make them fast. She admitted she was already using credit cards to pay some of the bills because she didn’t know what else to do. You will recall, Jenny dropped out of college when she had her first child and hadn’t worked in about five years. She had two years at the most to get her finances figured out since her income would be cut by more than half when her alimony stopped. Jenny shared with me that she was raised to tithe but that when she and Steve married, it was never discussed. The Holy Spirit had spoken to her about this, and she wanted to start tithing, but honestly, she didn’t know how she could afford it, especially now. With this in mind, we began to build a budget around 90% of her net spendable income or $3,600.
$2,500 + (3 x $500) = $4,000 x .90 = $3,600
Recommended Budget Housing – 38% $1,368 Food – 12% $432 Auto – 15% $540 Debts – 5% $180 Insurance – 5% $180 Entertainment – 5% $180 Clothing – 5% $180 Med/Dental – 5% $180 Savings – 5% $180 Misc – 5% $180
Actual Expenses Housing – $1675 Food – $600 Auto – $700 Debts – $350 Insurance – $125 Entertainment $0 Clothing – $200 Med/Dental $250 Savings – $0 Misc- $300
At the end of the month, Jenny was in the hole $200 and that was even after she had spent God’s Holy Money. We went to work!
Jenny’s situation could’ve been a lot worse. The biggest problem was that she was already in the red, and there were glaring holes in her budget. She had three small children who would need to go to college, and she wasn’t saving any money. In fact, part of her debt was from student loans, and she didn’t even graduate. She didn’t want that for her kids. On top of that, she had no life insurance or health insurance. Fortunately, Steve had to provide medical, dental, and vision coverage for the children to age 18.
I encouraged Jenny to set up auto tithe with her church for $400. She was scared but stepped
out in faith and said she was committed to making this work, and committed she was. With the house on the market, the first thing we did was roll-over the $25,000 she received in the divorce from Steve’s 401(k) plan to an IRA. Once it arrived, Jenny took a $5,000 distribution. She agreed to pay the 10% penalty of $500 so that she could turn in her leased car at $700/month and purchase a dependable, used car for $4,500. And just like that, she had an extra $700 per month! But it didn’t stop there because when she called her insurance agent to switch the coverage, her premiums dropped to $50/month for a total savings of $775 per month, which more than covered her auto-tithe of $400. I saw a spark come in her eye!
Next, she took her bank statement and went line by line looking for money that was just dropping out of her bank account. She cancelled Amazon Prime, Hulu, a gym membership, a clothing subscription, and two charitable donations for a total of $200. She was able to get a cheaper cell phone plan with a competitor and snagged a promotion with her cable company, freeing up another $75/month. She called the student loan lender and let them know she had registered for classes at the local university so she could finish her degree and get a good job once the alimony ran out. Since she was a student again, her student loan payments went on deferral until six months after her graduation. Another savings of $50. She was on a roll!
By the time Jenny was finished evaluating every expense that she had any control over, she had found $1,400, and the house hadn’t even sold yet. I was so happy for her. I talked to her about Indexed Universal Life (IUL) and how it could fill all the gaps — from a rainy-day fund, to college funds, retirement account, and life insurance, and I explained the accelerated benefit riders. She decided to take $1,000 every month and contribute it into an IUL policy. The benefits for a 33-year-old female making a commitment like that look something like this.
  • Death benefit $950,000
  • Year 11 $143,000 projected cash value she can use for college expenses if no scholarship • Liquid cash available for any need: new car, wedding, new house, etc.
  • Age 65 projected cash value of $1.2 million
  • Tax-free income of $110,000 per year from age 65-100
  • Access to $950,000 of accelerated benefits for chronic, critical or terminal illnesses
Jenny was one determined lady. She committed to making her Holy Money a priority and then made the necessary sacrifices to balance her budget. Within three months the house sold. Jenny had been looking at houses to rent. Her max budget was $800/month. She really wanted four bedrooms, but she could make three work. Two bathrooms would be better, but one would be okay for now. Later that week she got a phone call from a friend at church. The friend had to put her mom into a nursing home, but they didn’t want to sell her house right away so they were looking for a good renter, someone they could trust to take care of the place. It was an older home and needed a little TLC, but it had four bedrooms, two baths, and a fenced back yard. They were asking $750/month. Jenny accepted without even looking at it! She knew God had gone before her and prepared that home for her.