Young people starting their careers are often in the negative-wealth category. Among them are Jenni and Sean Gritters of Seattle. They moved to the Seattle area, where Jenni grew up, after earning bachelor’s and master’s degrees in Boston.

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Anyone who has ever been an adult under the age of 30 may have experienced a period of negative net worth.

Net worth is one of the most intuitive measures in the personal-finance playbook. It consists of subtracting a household’s total liabilities from its total assets. If the result is in the black, the household has positive net worth. If the outcome is in the red, the household has negative net worth.

About 15 percent of households nationwide have a net worth of zero or less, according to a study of 2015 data by the Federal Reserve Bank of New York.

Many things can plunge a household into the red zone, although a major contributor is the rising tide of student debt, coupled with slow repayment rates on student loans, the New York Fed concluded. Student loans accounted for 40 percent or more of the debt carried by households with the lowest net worth, which ranged from minus $12,500 to a negative $520,000.

Young people starting their careers are often in the negative-wealth category. Among them are Jenni and Sean Gritters of Seattle. They moved to the Seattle area, where Jenni grew up, after earning bachelor’s and master’s degrees in Boston.

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The Gritters owe about $125,000 on four student loans, resulting in a negative net worth of $93,500. Without student debt they would be in the black by $31,500, which is above the national median for their age bracket.

The debt weighed on them. Sean in particular was concerned about how their student loans posed obstacles to other financial goals, such as saving money for a home and children. His word for it was “scary.”

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Sean, 28, is a nurse at Swedish Medical Center’s Cherry Hill campus in Seattle. He earns about $71,000 a year in salary and overtime before taxes.

Jenni, who was born on the same day as her husband, became a freelance journalist in March 2018 after losing her job in a layoff at Wirecutter, an online product-review site owned by The New York Times.

Since then, Jenni has become a freelance writer and editor for various outlets. She specializes in stories about health and the outdoors.

Most of Jenni’s revenue comes from writing and editing for the REI Co-op Journal and Medium, an online magazine. Her revenue from those two clients is rarely uniform, however; it can vary between $1,000 and $12,000 a month.

Her work also appears in Experience magazine, which is affiliated with Northeastern University, and mindbodygreen, an online wellness site. She writes one-off stories for other publications, such as The Guardian and Outside magazine, and at times juggles as many as 15 projects a month.

Jenni expects to earn about $100,000 a year before taxes, based on her freelance payments since March 2018. She plans to report $102,000 in earnings to the IRS for tax year 2018, a period that includes the final weeks of her time at Wirecutter.

Being young, the Gritters have a simple balance sheet. They have checking- account balances of about $7,500 and savings-account balances of about $19,000.

Both of them have taken advantage of workplace retirement plans. Sean has about $7,500 in his 401(k) account, while Jenni socked away about $13,500 in her 401(k). Upon becoming self-employed, Jenni opened a Roth individual retirement account that now has a balance of about $5,300.

Their only other debt besides student loans is about $15,000 that they owe on Honda CR-V.

After settling down in Seattle for the long haul, the couple discussed getting a handle on their finances. “It was time to talk to someone about a good plan going forward,” Jenni said.

They applied for free financial advice through The Seattle Times’ Money Makeover program. Working with The Times, the Financial Planning Association of Puget Sound put the Gritters in touch with Jennifer Baick and Frances Smith at Mercer Advisors, a Bellevue wealth-management firm.

After examining the couple’s finances, Baick and Smith delivered an assessment that surprised the Gritters for being so upbeat.

The couple’s work income, when paired with their frugal lifestyle, resulted in a monthly cash surplus of about $3,900, despite the debt. That gave Jenni and Sean a lot to work with.

The first order of business, the financial planners told the Gritters, was to build a $50,000 emergency fund, in part because of Jenni’s variable income. They arrived at $50,000 because that would cover the Gritters’ living expenses for at least six months.

Baick and Smith urged the couple to put $3,000 a month from their cash-flow surplus toward the emergency fund.

Since Jenni and Sean already have $19,000 in savings, they should hit the $50,000 mark in about 10 months. At that point, they could save for a down payment on a house by pouring the $3,000 a month into a high-yield savings account or certificate of deposit. The planners advised them to save $100,000 as down payment on a $500,000 house.

Baick and Smith next advised the couple to adopt a different strategy for paying off their student loans.
The couple’s most expensive loan, at an interest rate of 6.49 percent, was $56,000 that Sean borrowed to help pay for a second bachelor’s degree in nursing at Northeastern University.

Before meeting Baick and Smith, the Gritters were paying $523 a month on the loan. At that rate, they might not retire the debt for years, perhaps not until after 2030. Baick worried that the debt would “forever be a ball and chain for them.”

Baick and Smith urged the Gritters to apply the remainder of their cash-flow surplus to the loan, and the couple agreed. They increased their monthly payment to $1,000, which could retire their most expensive student loan in about five years. Meanwhile, they’re making minimum payments on the other college debt.

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Although the Gritters are in their 20s, the planners told them to begin aggressively saving for retirement — now. “It’s crucial that they increase their retirement savings,” Smith said.

By doing so, the couple could take full advantage of several decades of compounding interest, in which the interest on their saved money also earns interest, thereby accelerating the growth of their nest egg.

Baick and Smith advised Sean to put $19,000 a year into his workplace 401(k) plan, the maximum allowed by the IRS. His employer offers a 3 percent match. The planners also told Jenni to contribute the maximum $6,000 a year to her Roth IRA.

The couple have done so, although they are waiting to see how it affects their cash flow. “It’s a big financial impact,” Sean said.

At the planners’ suggestion, the Gritters are also managing their household finances together, rather than leaving those tasks to Jenni, who has a head for numbers. At the end of every month the couple now go to a coffee shop with a laptop computer and review their finances. “We’re on the same page,” Jenni said.

Baick and Smith are optimistic about the Gritters. They are young, and their peak earning years are likely ahead of them. Borrowing when young, then repaying and saving with age, is also a common life-cycle model.

“They’re both at the beginning of their careers,” Baick said. “There’s so much opportunity.”