GMA Debt-Buster Boot Camp: Meet the Vasquez Family

Nov. 12, 2007 — -- Meet the Vasquez family from Gurnee, Ill. Gil and Tracy have five daughters ranging in age from 7 to 19.

Tracy works as a medical transcriptionist and has started a cookie business called Sugar Beez, which she's just getting off the ground.

Gil has been freelancing in the music business as a consultant after being laid off from a full-time job in the industry last year.

Their oldest daughter, Gina, is in culinary school, and their second oldest daughter, Neva, is in community college. Neva lives at home and works 40 hours a week at a Jamba Juice.

Their crisis: With a mortgage, car payments, college tuition and day-to-day living expenses, the Vasquezes are drowning in debt and can't seem to climb their way out of it.

Tracy wrote to "Good Morning America" for help with the family's mounting money problems: "We seem to be doing a downward spiral. Please help us learn where to cut, how to pay down our debt and just to get back to a comfortable living!"

Special agent Mellody Hobson, "GMA's" financial contributor and president of Ariel Capital Management in Chicago, accepted the mission and set out for Gurnee to turn things around for the family with a financial boot camp.

Tracking Gil and Tracy's Expenses

The Vasquezes earn $70,000 annually. That barely covers the family's two mortgages, four car payments, numerous cell phone plans and 16 credit cards that carry a combined balance of more than $12,000!

"When we have to buy somebody a pair of shoes or a pair of pants, we are literally taking from our bill money," Tracy said. "It's tight. Stressful, very stressful."

During an afternoon, Hobson laid out a game plan for the family:

Step One: Change the family's daily spending habits.

"After a long day, I just don't want to cook," Tracy said. "I'll ask the kids, 'What are we going to do for dinner?' And they'll say, 'McDonald's.' OK. let's go, because it's fast."

For Tracy, Hobson's financial boot camp regimen meant no more eating out several times a week, and no more trips to Michael's for her ultimate weakness: arts and craft supplies.

"I try to hide from my husband, try to sneak off to Michael's and not let him see what I bought, so when you're sneaking, that's a clue that it's probably something you shouldn't be spending on," Tracy said.

Step Two: Bye-bye credit cards!

They committed to stop using all, but two of their credit cards -- those with the lowest interest rates, one being only 2.9 percent.

Hobson invited Gil and Tracy to her office to help them call each of their credit card companies and ask for lower interest rates for their high-interest cards — some of which are 28 percent and 29 percent.

Because Gil and Tracy had so many cards and a poor credit history, they had little luck in lowering the interest rates.

So they did the next best thing. They committed to stop using all but two of their credit cards -- those with the lowest interest rates, one being only 2.9 percent

Step Three: Rethink their goals to pay for their daughters' college educations.

Tracy and Gil took out a $51,000 loan in their name to pay for their oldest daughter's culinary school. Hobson says that for their other daughters, they should consider other options.

"Parents are often stretching themselves for their kids to go to college, not taking care of themselves in terms of retirement in any way or some of the basics like all of these bills," Hobson told them. "So as a result of that, they end up neglecting themselves and ultimately wind up being a burden on their kids one day."

Hobson advised them to let Neva and their other daughters take out their own student loans, because they have much more time to pay them off.

Gil and Tracy also decided that their daughters would have to assume other expenses, including their own cell phone plans and car insurance.

For Neva, who is already working 40 hours a week at Jamba Juice, the situation, though difficult, seems fair.

"They help me out when they can and when I need it, but for the most part I'm fine paying for it," she said.

Step Four: Making a decision as a family to have a new relationship with money.

When everyone was at the table for dinner, Tracy and Gil had a heart-to-heart with the kids about family spending habits — no extra toys when they're shopping at Target, eating out less, saving more.

Gil and Tracy said that though their financial boot camp has been hard in some ways, it's opened their eyes to the reality of their situation.

"Nobody wants to, y'know, get out there and talk to national television and say, 'We're doing bad with our finances, help,'" Gil said. "But this is definitely going to be very helpful to us."

Tracy said it was crucial to get a handle on what their debt was versus their income.

"I didn't realize what our debt load was until they made us put it down on paper," she said. "So thank you 'GMA'!"