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Client Spotlight: Bob

Bob’s story is one that reflects a lot of normal issues that people have with their money. His isn’t a story of heroic sacrifice under extreme circumstances to overcome huge adversity, like some of my clients I have profiled in the past. Yet his financial problems were very troubling to him and were causing him a good deal of stress. He also needed some guidance on some career decisions, which are always entangled with personal finance.

Bob (not his real name) actually has worked for many years in corporate finance of various types. It might surprise people that I have clients who work in finance, but corporate finance and personal finance are two very different things. In fact, I’ve coached a number of CPAs in my time as well. Some of the terminology in their world overlaps the personal finance realm, but sometimes the words have slightly different meanings. The word “budget” for example. So Bob and I talked a good bit about how the approaches differ.

Bob is a middle-aged divorcee with grown children who has been on his own for many years now. His original financial state when we started looked like this:

  • Take home pay of about $4,500/month on a salary of about 85Kish.

  • A little over $12,000 in consumer debt between his car and a credit card

  • $27,000 left on his mortgage

  • $10,000 in savings plus about $6000 in stock from a profit sharing plan at an old job

  • $325,000 in retirement savings

  • He had several different bank and credit card accounts which he was constantly juggling with transfers and automatic payments

  • A whole life insurance policy with about $1300 in cash value. (

The priorities for coaching in the shorter term were

  • Consolidating accounts and simplifying his processes for paying bills

  • His fear of using his savings to pay off his debt (this is SO common)

  • Possible impending job change, either voluntarily or involuntarily. His job was underpaying him and demanding impossibly long hours, which caused him endless stress.

  • Learning a new budgeting habit to help him gain a sense of control

Bob’s ultimate goal was to get the house paid off as soon as possible. We talked at length about the 7 Baby Steps to Financial Peace, and why they are in that particular order. He came to understand why getting rid of his other smaller debts should come first, and we talked about scenarios to make that happen as quickly as possible.

The needed job change came to pass fairly quickly, within about a month, and without all that much effort, thankfully. The new job actually paid slightly less but was only half the hours of the old one, with the possibility of going full time in the not too distant future, at a commensurately higher rate. The shorter hours provided Bob a much needed break from the rat race he had been in for so long, which helped him focus a bit better on the changes we were making in his personal financial affairs.

Bob’s most difficult change was in letting go of his savings in order to pay off debt. Between cash in the bank, the stock that he could sell, and the cash value of the life insurance he no longer needed (because nobody else depends on his income),

he could easily pay off his car and credit card, which would get him out of baby step 2, and still have enough to fund his baby step 3 emergency fund with at least one month’s expenses.

But the security of cash in the bank is hard to get past for many people. So we didn’t push things too quickly, and once we got his bank accounts consolidated and simplified, and Bob had a few months of budgeting experience under his belt, he started to feel more in control. The security of the new job, combined with his new budgeting skills, gave him the confidence he needed to start using his savings to throw some big payments at his debts.

Bob had a little more trouble deciding to sell the stock. There was always that nagging fear that its value would go up dramatically right after he sold it, which would cause him a lot of regret. We worked through this fear by discussing the Sunk Cost Fallacy. You can read more about that here in this old blog article of mine:

But here’s the short version. I challenged him to consider this scenario:

Instead of his current situation where he has debt, plus $6000 in stock that he could cash in, I asked him to consider what he would do if he had NO debt, and NO stock available. Would he take out a loan for $6000 in order to invest that money in this particular stock?

Think about that for a second.

The answer was obviously no, of course not.

But how one ends up in a particular situation should not change the decision on what path to take going forward. If you wouldn’t purposely put yourself into these exact circumstances, then you should do what it takes to get out of them. So Bob sold the stock and finished paying off his car, which made him debt free except for his mortgage.

The next baby step is number 3, so Bob’s next task was building up his emergency fund to 3 to 6 months of expenses. He hadn’t drained it down to $1000 to begin with, so he had a head start already. Because Bob is single and a job loss would mean a complete loss of income, his ultimate goal was to have a full 6 months of expenses in savings, or about $25,000.

When Bob started the new job, it was part time, and because he was still working on paying off debt, funding retirement in the new company’s 401(K) had been put on the back burner for a short time. But he was able to build his emergency fund up to about $13,000 (3 months of expenses), right about the time that he was able to start working full time at this new job.

So he started putting a full 15% of his now roughly 6 figure salary into the company Roth 401(K), thereby starting on baby step 4. However, he still had plenty of wiggle room in his budget to keep adding to his emergency fund to get to a full 6 months worth of expenses.

Before we finished our coaching arrangement, we worked on a few details of budgeting to ensure he would be good to continue on without my help. Part of this was making sure he was saving in a sinking fund


for all the big ticket items that can bust a monthly budget when not planned for. Being debt free allowed Bob to add more items to that list, which, while not necessary for some of the items, allows those to be put onto “autopilot”, knowing the money will be there when those bills come due. This provided him even more in the way of “financial peace”.

Bob checked back in with me after a period of months to let me know how he was doing. His strong savings instinct led him to favor building his emergency fund and sinking fund a bit higher as opposed to paying off his house faster. So his emergency fund now stands at $30,000, and his sinking fund at $10,000. He still paid off his house, in only 4 or 5 months longer than we had originally talked about. But that’s all fine….Bob is making great decisions on his own now, after considering the pros and cons of all the options and his own personality and inclinations.

Next on Bob’s list is some home renovation work. He had the discipline to follow a plan and delay that project until his more important goals were complete. Now he has the satisfaction of planning and shopping for a contractor to do just what he wants, with the confidence that he can pay for it in cash. That’s got to feel SO good.

If you can see yourself in some of Bob's story, then let's talk about how you can make the kind of transformation that Bob made. Schedule a spot on my calendar here:

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