Wela Financial Advisors on what we saw, what we learned, and what we should do on this week’s episode of Life or Debt on Spike.
Gina and Ernie Peleaz have found themselves with an Income problem more so than a Spending problem. They seriously need to get their cash flow in line but it may not be possible to cut spending any more than they already have. The solution often lies in a lack of income…and therefore we need to find ways to remedy this! Of course, 11 out of every 10 people surveyed would say they want to increase their top line income. This may be easier said than done.
The Peleaz’s are committed to taking the necessary action to get their situation under control. Total debt hovers around $250,000 with about half of that being owed to family members. They’ve trimmed their discretionary spending to bare bones and are operating on a very tight budget. Ernie is working around the clock and Gina is going to work as a substitute teacher in order to bring in more income. They do have personal assets, including a good bit of equity in their home, which may come in handy to help pull them out of debt.
Increasing income from the restaurant is a must. They need to generate $38,000 more each year than what they’re currently earning to fill their spending gap and start paying down debt owed to family members. That comes out to revenue of $105 more per day. If this doesn’t happen, drastic measure may need to take place. This is where their assets come into play. Selling the house and renting for cheaper may be a move to tap equity in their home to start paying down debt. Moving the kids from a private school to a public school will help cash flow tremendously. Tuition expense is 12 times their annual property taxes!!
They’ve already made some pretty tough cuts in their budget but more drastic action may be necessary if top line income doesn’t improve. If they can’t get the restaurant’s revenue numbers up, then it may be time to close shop and find a different job. One that improves household income in order to make ends meet and pay down their debts. And when push comes to shove, it may be time to start driving an Uber at night!