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Maxed Out 2008-03-10 09:56:25

Maxed Out: A Lesson in Financial Independence

This episode of Maxed Out features Nicola and Jason, a couple in their 30s with two children who are financially dependent on their family members. With a combined income of $30,000 they can't afford the mortgage on their home, so Nicola's mother pays the mortgage for them. Nicola came up with the term "ostrich financing" to describe their way of handling their money — they just bury their heads and hope it will go away. They have no idea how much debt they actually have, but financial guru Alison Griffiths comes along to calculate their debt and come up with a plan to get their financial lives in tact. See how Alison helps Nicola and Jason when you

Their biggest issue is a cash flow that just isn't enough. Jason is a computer programmer but is working in landscaping earning $11 an hour, and Nicola has many small business ideas but is spreading herself too thin and can't focus on making money. Alison figures that without family contributions, Nicola and Jason are almost $1,000 short each month. Their total debt is $36,600 on top of their mortgage, and at the rate they're going it will be $66,217 in just five years.

Nicola and Jason are able to get on the road to financial independence by taking control and keeping track of their spending. Jason is on his way to getting a new job in computer programming that would double his income, and with that increase they'd no longer rely on family to pay the mortgage. I think the biggest lesson from this episode is that while your debt may seem manageable now, if you don't do anything to change your habits your debt will just continue to compound making it increasingly overwhelming.

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